Agribusiness in Nepal: Challenges and Opportunities (PDF Download ...

Agribusiness in Nepal- Challenges and Opportunities Sujan Piya, Achyut Luitel, Gehendra Gurung

Practical Action

Objectives of paper

• Discuss on present status of agribusiness in Nepal • Discuss current challenges and opportunities in agribusiness sector

Current Status of Agribusiness in Nepal

Agribusiness growth in Nepal 4000 3500

3000 2500

Non-agrienterprises (No) 2000

Agri-enterprises (No)

1500 1000 500 0 1996/97

2001/2

2006/7

Source: Tiwari, 2010(basedonCBSdata)

Investment trend in agro enterprise 120000

100000

80000

Investment on non-agrienterprises( m.) 60000

Investment on agrienterprises( Rs Mil.)

40000

20000

0 1996/97

2001/2

2006/7

Source: Tiwari, 2010

Share of agricultural export by different commodities (%) (data series from COMTRADE) Products

Beverage

1970-74 1975-79 1980-84 1985-89 1990-94 1995-00 2001-05

0.21

-

-

-

0.04

0.33

5.85

Total cereals Total cereal preparation

64.00 5.13

48.8 13.78

20.7 14.88

5.01 13.7

0.83 11.91

1.00 14.85

0.17 10.72

Vegetables, roots & tubers, fresh or dried

4.71

7.36

30.61

24.93

38.72

22.64

8.72

Industrial crop Dairy product Animal and vegetable oils

6.28 12.85 -

14.16 5.95 2.65

14.51 2.88 3.99

18.21 2.19 17.69

15.66 0.63 9.59

11.72 1.08 31.17

19.47 0.86 45.29

Oil seeds and oils Live animals

5.16 0.52

5.64 0.56

6.92 0.84

12.06 1.38

17.39 3.36

9.93 2.01

0.55 0.38

Share of agricultural export by different countries(%) (data series from COMTRADE) 1970Country 74 India 95.07 China 0.00 Other South 1.11 Asia Developed 3.46 country Others 0.06

197579 72.63 0.24 3.69

198084 64.74 0.00 7.72

198589 52.57 7.60 20.06

199094 53.98 1.51 27.67

199599 71.36 7.17 9.78

200005 89.67 3.65 2.14

14.72 24.16

18.65 15.05 10.68

2.30

8.72

1.12

2.24

3.37

1.79

1.02

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

1973

1972

1971

1970

Geographic Concentration Index of Agricultural Export Geographic Concentration Index

120.00

100.00

80.00

60.00

40.00

20.00

0.00

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

1973

1972

1971

1970

Product Diversification Index of Agricultural Export Product Diversification Index

80.00

70.00

60.00

50.00

40.00

30.00

20.00

10.00

0.00

Agricultural Export Orientation Variable

1970- 1976- 1981 1986- 199175 80 -85 90 95

Export 5.84 3.90 Orientation

2.36 1.76

1.98

199600

200105

4.01

5.03

Agribusiness Policy in Nepal • High priority on diversification, modernization, commercialization and promotion of agriculture sector • Important role of private sector to promote commercial farming. • Promotion of internal and external markets • Agri-business service centers establishment for quality agriculture inputs and services • Emphasis on special economic zones for agro-industry development- Commercial, Organic and Export Areas • Infrastructure development for processing and marketing as a foundation for commercialization and diversification • Promotion of partnership approach between government and the private sector for agriculture development • Private sectors involvement for the export of quality goods and market network. • Focused on Market oriented and competitive agriculture

Major constraints Agricultural Production Input: • Insufficient input service providers • Lack of proper distribution and extension channel • Lack of knowledge • Inadequate and inefficient firm – production quality, competition Enabling Environment: • Lack of good infrastructure- storage facilities, market center roads, telecommunication and irrigation networks • Policy constraints, • Weak governance

Production (throughput) • Scattered and small production units • Obsolete and inefficient technology • Lack of farm managerial skills • Difficulty in accessing financing support • Lack of different business services • Inadequate linkage and coordination • Fragmented land, small land size • Policy level constraints • Lack of information services

Marketing: • Farm market is close to perfectly competitive while marketing firms are oligopolistic or monopolistic – less bargaining power of farmers • Poor marketing facilities and sales networking • High transportation and distribution loss • Inadequate marketing infrastructure • Inadequate market information system

Processing: • Unreliable supplies of raw materials in terms of quality and quantity • Inadequate technology • Quality standardization • Access to finance • High competition due to import of cheap products • Frequent load shedding • Labor disputes RESULTS: • Subsistence agriculture with low productivity, higher production cost, • Low competitiveness of agricultural sector • Stagnant agricultural production, increasing food imports

Agribusiness promotion in Nepal-approach • System approach: product specific market system analysis and assess the key blockages in the system Enabling environment Key actors in value chain and its function Supporting services (Business services)

Opportunities • Demand of quality food will be much stronger as the middle income group growsthe agro-industry sector is expected to expand further. • Differing socio-economic development and the effect of globalization- diversified lifestyles and food preferences- demand for processed food • Export structure change from raw material to processed industrial goods • Introducing modern technology and management system from developed countries. • Opportunity to establish joint ventures with foreign companies • Growth of financial institute in Nepal • Government’s priority area • Diversified agro climate and resource base • Technology adaption – technical potential to increase yield • Organic products • Higher competitive of niche products

Agro-based industries suitable for foreign investment • • • • • • • • • • • • •

Vegetable processing Floriculture Fruits Flower seeds Vegetable seeds NTFP processing Tea Sugarcane Spices Livestock industry Animal feed Aquaculture Oilseed processing and oil extraction

Prospects for agribusiness • Dairy: Diversification from raw milk to value added product • Tea: Value addition, Organic, green tea • Coffee: High demand in international market, High mountain specialty coffee, product branding • Cardamom: High demand in export market • Spices: High demand in international market • Apple: product diversification from raw apple • NTFP: Processing and value addition • Seeds: Appropriate agro climate • Citrus fruits: High demand in the international market

Thank You!