Print Edition - 2014-07-11 | MONEY
Manufacturing sector growth to sink to 5-year low of 1.8pc
- economic survey 2013-14
Jul 10, 2014-
Things have been a little bumpy for the manufacturing sector in the last half-decade, with the growth rate fluctuating from 2.96 percent in fiscal 2009-10 to 4.09 percent in fiscal 2010-11, to 3.63 percent in fiscal 2011-12 and to 3.7 percent in fiscal 2012-13. The fiscal years 2007-08 and 2008-09 saw a negative growth rate.
According to the survey, the main reason for the low projection is a sharp fall in the output of major products like sugar, aluminium goods, vegetable ghee, paper, soap, biscuit, processed tea and beer, among others. However, the study report said that the production of vegetable oil, resin, chocolate, plywood, bakery products, electric wire and cable and hume pipe was expected to swell.
The country’s manufacturing sector has been stymied by lack of a favourable climate in the industrial sector, energy crisis, labour issues, political transition, inadequate infrastructure, failure of the government to amend acts and polices on time, delayed budget, syndicate system in the transportation sector and failure to win the confidence of the private sector and foreign investors. Industrial growth in the past five years was recorded at a mere 3.2 percent.
“Due to lack of adequate energy, industries have been compelled to operate under capacity. Less than 50 percent of the factories are operating at full capacity,” said Pradeep Jung Pandey, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).
Pandey added that the manufacturing sector had performed poorly as no new enterprises had been launched. “The government should bring an amended version of the Industrial Enterprises Act and lower the cost of doing business to boost investor confidence and create a positive outlook in the sector.
The dismal performance of the manufacturing sector has also decreased its contribution to the country’s Gross Domestic Product (GDP). Manufacturing is estimated to account for just 6.5 percent of the GDP compared to a high of 8.5 percent in fiscal 2001-02.
“Ballooning manufacturing costs, power crisis, lack of a conducive environment for industrial growth and labour unrest have made it difficult for the private sector to invest more in the manufacturing sector which has hit the overall economy of the country,” said Hari Bhakta Sharma, senior vice-president of the Confederation of Nepalese Industries (CNI). The current trend and indicators suggest that the country is going through a process of deindustrialization, he added.
As per the survey, the overall industrial sector is expected to grow 2.7 percent in the current fiscal year. Besides manufacturing, the industrial sector includes mining, electricity, gas, water and construction.
In the last fiscal year, the growth rate of the industrial sector stood at 2.5 percent. The growth rate of the non-agriculture sector in the past five years reached 4.7 percent. “Though there is nothing much to boast about this growth, we should take it in a positive light and work harder to increase it,” said Pandey.
In the current fiscal year, mining and the extraction sector is projected to grow 3.7 percent, up from 3.3 percent in the previous fiscal year. The sector has been posting a growth rate of 3.1 percent for the past five years.
As per the survey, a total of 45,941 industries offering 716,557 jobs have been registered in the first eight months of 2013-14.
In fiscal 2012-13, a total of 144 enterprises in the manufacturing sector, 102 enterprises in the tourism sector, 95 enterprises in the service sector, 70 enterprises in the industrial sector, 54 enterprises in the agro sector and 10 enterprises in the mining sector acquired operating licences from the government.
They have pledged a combined investment of Rs 11.59 billion and are likely to provide employment to 28,505 individuals.
With regard to foreign direct investment (FDI), the fiscal year 2012-13 witnessed a growth of 39.6 percent. A total of 317 industries with FDI acquired operating licences. “This is a positive indication. However, an environment should be created for FDI commitments to be converted into actual investments,” Sharma said.
According to the data of the first eight months of the current fiscal year, the energy sector received the largest share of FDI commitments of 79.7 percent followed by the service sector with 10.2 percent, tourism with 4.5 percent and manufacturing with 3 percent.
Meanwhile, a total of 1,541 trademarks were registered during the first eight months of the fiscal year.
Published: 11-07-2014 09:30