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ENTREPRENURES IN NEPAL : An Empirical Study

Dr. Fatta Bahadur K.C.


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I.

Introduction

Entrepreneurs are individuals or group of individuals who invest capital, organize and direct business and industrial units. An entrepreneur assembles, coordinates and directs various factors of production namely land, labor, capital and other materials. "An entrepreneur initiates ventures, employs workers, organizes production, develops markets and influences the development of managerial thoughts" (Shrestha, 1982:11). As stated by Higgins "Entrepreneurship is meant the function of seeing investment and production opportunities, organizing an enterprise to undertake a new production process, raising capital, hiring labor, arranging for the supply of raw materials, finding a site and combining these factors of production into a going concern, introducing new techniques and selecting top managers for day to day operation" (Higgins, 1966:88). Entrepreneurship is thus, characterized by the dominant element of innovation, a streak of creativity and ready for risk-bearing. An entrepreneur could be a trader, a technician, an educated unemployed or the like. The elements common to all of them are the desire for breaking away from traditional ways of doing things, face the organizational and technical problems in decision-making process and measure up to the risks which are implicit in the process (Joshi, 1977:40). Entrepreneurs can be divided into three broad categories i.e., Private Entrepreneur, Government Entrepreneur and Institutional Entrepreneur (K.C., 1989:1819). In capitalist system of economy, private entrepreneurs have been actually playing dominant role in all sectors of the economy mainly industry, trade and the like. But government controls all economic activities and performs entrepreneurial role in socialist countries. Since Nepal has adopted a system of mixed economy both private and Government sectors have been performing entrepreneurship function in the process of industrialization. Private entrepreneurs have promoted many industrial units such as biscuit and confectioneries, bakeries, flour mills, modern rice mills, sugar, soap, tanneries, cotton and textile, solvent extraction plants, iron rod, corrugated sheets, plastic pipes and utensils, light engineering units, breweries, television and radio assembly, hotels, etc. In the absence of entrepreneurial ability and lack of adequate capital in the private sector, Government also acts as an entrepreneur in developing industrial projects. In Nepal, Government has set up jute, sugar, cigarette, leather, timber process, agro-lime and agricultural tools, brick and tile, cement, dairy, textile, herbs and drugs, paper spinning industries etc. The development banks, investment trusts, and other financial institutions also act as entrepreneurs. In Nepal, Nepal Industrial Development Corporation (NIDC), Employee Provident Fund (EPF), Rastriya Beema Sansthan (RBS) and other financial institutions are the examples of institutional entrepreneurs. NIDC, as an industrial development bank, has been playing important role for the promotion of industries in the private sector. It assists private enterprises by providing medium and long-term loans, equity participation, guarantees as well as technical and managerial advice. It also promotes industries on a priority basis as guided by the National plan.

Reader, Nepal Commerce Campus, Tribhuvan University, Kathmandu.

II. The Objectives and Methodology of the Study


The basic objective of this study is to carry out a small research on entrepreneurs in Nepal. However, the specific objectives are: To present the role of entrepreneurs To identify the barriers and problems faced by Nepalese entrepreneurs To analyze the prospects of entrepreneurial motivation in Nepal The required data for the research were collected through primary source i.e, questionnaire. For it only three questions were developed and distributed to 10 businessmen, entrepreneurs and 15 academics including university teachers. The responses there from were collected and tabulated for analysis. In order to present and analyze the tabulated data, the statistical tools like the mean value and the ranking were used.

III. Role of Entrepreneurs


An entrepreneur, who is also known as a risk-bearer, is the central figure in this modern era of business. Economic development of any country cannot be initiated without the pioneering efforts of entrepreneurs. Many economists including Joseph Schumpeter glorified the role of the entrepreneur and regarded him as the key figure in the process of economic development. He identified that the ultimate determining factor of the rate of economic growth is the availability of dynamic entrepreneurship in the country concerned. Nepal is a least developed country. More than 32 percent of population lie below the poverty line and the annual per capita income is not more than U.S.$ 370. The pace of industrialization in Nepal has remained very slow. The industrial sector contributes around 8 percent to GDP and provides employment to about 2 percent of economically active population. Nepal has been experiencing unemployment and acute under-unemployment problem. In a case study conducted by Nepal Rastra Bank, the percentage of unemployed in the total labor force was estimated at 3.1 percent. Similarly the under-employment rate worked out to 46.4 percent and 33.6 percent in rural and urban Nepal respectively (Nepal Rastra Bank: 1988:64, 75). Therefore, entrepreneurs have important role to play in the process of industrial as well as economic development. They could assist to generate employment opportunities, to raise income and to break the vicious circle of poverty. In the literature of economic development, an entrepreneur has been heralded as the innovating man, the path-breaker and the pace-setter of economic and industrial growth (Joshi, 1977:39). In a developing country like Nepal, an entrepreneur has to play multi-dimensional roles. He could be worked as the promoter, the financier (investor) and the manager in the process of industrial development. An entrepreneur conceives the idea of a business (industrial) enterprise, analysis its prospects, works out the tentative scheme of organization, brings together the requisites like men, materials, machines, money and managerial ability and floats the new enterprise. At the same time he has to act as the financial manager, the production manager, the marketing manager and the personnel manager in an existing concern. He has taken all important decisions and implement these decisions for obtaining the predetermined objectives of his organization. So it can be stated that an entrepreneur has to act both as a mother and as a mid-wife, because it is he who faces various problems to bring the new enterprise to existence and brings it up into a successful venture. The table below presents the role of entrepreneurs that they can play in the process of industrial and economic development of Nepal.

Table 1: Role of Entrepreneurs Businessmen, Academics Entrepreneurs Role Capital formulation and mobilization Employment generation Industrial growth Human resource development Balanced regional development Mean 1.20 2.21 3.75 4.32 3.47 Rank 1 2 4 5 3 Mean 2.35 3.31 2.49 1.67 4.64 Rank 2 4 3 1 5

Overall Mean 1.76 3.26 3.12 3.00 4.06 Rank 1 4 3 2 5

As shown in the table, Nepalese businessmen viewed that entrepreneurs can contribute to the formation and mobilization of capital required for economic development of the country followed by employment generation and balanced regional development. Academics perceived that assist in human resource development and capital formation were the key roles played by entrepreneurs. Overall ranking of the roles stood as capital formation, human resource development, industrial growth, employment generation and balanced regional development showing the mean values 1.76, 3.00, 3.12, 3.26 and 4.06 respectively.

IV.

Why Nepalese Entrepreneurs are Shy?

Private entrepreneurs in Nepal have traditionally remained very shy to come forward for investment in industrial ventures due to various reasons such as limited financial resources, lack of proper entrepreneurial education and training facilities, low rate of return from industrial investment, conservative lending policy of banks and financial institutions, lack of adequate protection to investors, unstable and unsuitable economic and industrial policies of the government, wide-spread corruption in the public sector and the aspiration of many people in the private sector to be rich overnight instead of putting efforts to the industrial development (K.C., 1989 & 2003). They have been actually channelising their resources on nationally unproductive sectors like acquisition of land, amassing of gold and silver, construction of building, luxurious imports and other speculative motives, etc. In the following section, an attempt has been made to identify the barriers and problems that are being experienced by Nepalese Entrepreneurs Table 2: Barriers to Nepalese Entrepreneurs Businessmen, Entrepreneurs Barriers Limited access to capital Low level of confidence Low return from industrial investment Lack of education and training Political instability Lack of favorable policy Mean 2.32 3.83 3.24 4.83 2.61 3.92 Rank 1 4 3 6 2 5 Academics Mean 3.83 2.20 3.67 4.76 1.60 4.80 Rank 4 2 3 5 1 6 Overall Mean 3.08 3.02 3.46 4.80 2.11 4.36 Rank 3 2 4 6 1 5

As mentioned earlier, Nepalese entrepreneurs have been facing so many barriers in the way of creation of new ventures and smooth operation of the existing ones. Nepalese businessmen and entrepreneurs have viewed that their main barriers include limited access to capital, political instability, low return from industrial investment, low level of confidence and lack of favorable policy of the government. Academics viewed the political instability, low level of confidence and low return from industrial investment are the major causes responsible for poor entrepreneurial motivation in Nepal. Overall ranking also indicates the similar results. It can thus, be concluded that political instability, low level of confidence and limited access to capital are the main problems of Nepalese entrepreneurs. It is realized that the slow pace of industrialization in Nepal is deeply rooted with the lack of sufficient capital in one hand and the problem of proper mobilization of available (limited) resources in this sector on the other. It is, thus, very appropriate time at present to review such activities and discourage such unproductive investments through the effective policy changes for reduction of high premium and return which these pursuits are commanding.

V.

The Need of Entrepreneurial Motivation in Nepal

It is well known that entrepreneurs have key role to play in the process of industrial development in the country. So, it is required to motivate entrepreneurs especially in the private sector. Motives, abilities and congenial environment all combine to promote entrepreneurship. The stronger are the motives and abilities, congenial environment will be less necessary. It is especially important to encourage more people to be long term entrepreneurs interested in permanent business, rather than short term speculators. First of all, attitudes and motives of the people in the private sectors to become rich overnight must be diverted to mobilize their resources in productive sector. The entrepreneurial ability and talent could be improved by organizing entrepreneurship development program for present and potential investors. Again, adequate institutional services and effective policy changes will help to create an environment which is conductive to induce industrial investment. Table 3 attempts to present the remedial measures to solve the problems and support the entrepreneurs. Table 3: Measures to Support Entrepreneurs in Nepal Measures Creation of investment-friendly climate Extension of institutional services Easy access to finance Favorable government policy Provision of education and training Mean 2.62 3.98 1.72 2.59 4.03 Rank 3 4 1 2 5

The table reveals that easy access to finance and favorable government policy are the two most important measures to motivate entrepreneurs in Nepal. It is also found that other supportive measures include creation of investment-friendly environment, expansion of institutional services and provision of training and education. Here, some suggestive measures are presented to motivate entrepreneurs as well as to induce industrial investment in Nepal.

i)

Provision of Adequate Capital: It is essential to provide adequate financial facilities especially to meet the fixed and working capital requirements of the concerned industries. So, the lending policy of development banks, commercial banks and other financial

institutions should follow more liberal and practical policies. Similarly, procedural simplification is required while investing in productive sector.

ii)

Protection to the Investors: It is especially important to provide adequate protection to the industrial investors. Most industries have failed to protect their industry from the competition of foreign products. Now Government should adopt an appropriate and realistic policy to protect and develop industries within the country. Suitable Government Policy: Only clear and consistent economic and industrial policy can help to induce entrepreneurs. Government should formulate clear, liberal and attractive economic and industrial policies. Expansion of Institutional Services: The adequate institutional services are required to encourage entrepreneurs. The concerned agencies, both the financial an d development institutions should be directly involved to encourage potential investors for investing their funds in productive sectors. NIDC and NPEDC (National Productivity and Economic Development Centre) should launch appropriate entrepreneurship development program. As an industrial development bank, NIDC has to identify and motivate the potential investors by providing financial assistance and technical, administrative as well as managerial guidance and advice. The activities of the Department of Cottage and Village Industries (DCVI), the Cottage Industries Development Board (CIDB) and Industrial Enterprise Development Institute (IEDI) be further improved to encourage small entrepreneurs. Similarly, Women Development Section, Women Training Centre and Nari Shilpakala Kendra should conduct appropriate programs to induce women entrepreneurs and to bring them into meaningful and remunerative job.

iii)

iv)

Due to the lack of sufficient capital, technical and managerial expertise in the country, the recently formed first republican government should adopt to have a liberal policy to attract foreign investors. Because foreign capital in the form of collaboration may impart training to Nepalese entrepreneurs and promoters as well.

Conclusion
Economic development cannot be initiated without the pioneering efforts of entrepreneurs. Entrepreneurs have key role to play in the process of industrial development in particular and economic development in general. But entrepreneurs in Nepal are very shy to invest capital in industrial sector. Therefore, it is essential to induce entrepreneurs to mobilize their resources in industrial sector. Government should implement an appropriate policy to motivate the entrepreneurs and to develop industries in the country. Finally the attitude of the people to become rich overnight must be changed through effective policy reforms.

Selected References Higgins, Benjamin (1966), Economist Development Problems, Principles and Policies. Joshi, Navin C. (1977), "Developing Entrepreneurship in Nepal", Nepal Industrial Digest 1977, NIDC, Kathmandu. K. C., Fatta B. (1989), "Entrepreneurship in Nepal" (in Nepali) Nepalese Journal of Government AuditingIssue 7m, Vol. 3, June 27, Department of Auditor-General. K.C. Fatta B. (1989), "Unemployment in the Development Perspective of Nepal", Nepalese Journal of Government Auditing Issue 7, Vol. 4, Oct., Department of Auditor-General. K. C., Fatta B. (1989), Role of Entrepreneurs in Industrialization of Nepal, Nepalese Economic Review, Vol. 12, No. 2, Kathmandu. K. C., Fatta B. (2003), Entrepreneurship and Economic Development, Mirmire, Vol. 32, No. 212, Nepal Rastra Bank, Bankers' Club, Kathmandu. Nepal Rastra Bank (1988), Multipurpose Household Budget Survey, Nepal Rastra Bank, Kathmandu. Pyakural, Ramesh C. (1984), "Role of Development Bank in Entrepreneurship Development", Nepal Industrial Digests 1984, NIDC, Kathmandu. Shrestha, Juddha B. (1982), "Role of Entrepreneurs and Managers in Nepal", Emerging Concepts in Nepalese Management, CEDA, Kathmandu. Singh, B. P. and Chhabra, T. N. (1981), An Introduction to Business Organization and Management, Allahabad: Kitab Mahal, India.