As discussed earlier, the evolution of business in Nepal also can be divided into two parts: (1) evolution of industry, and (2) evolution of commerce.
(1) EVOLUTION OF INDUSTRY IN NEPAL
Industrial development is the key to rapid economic progress of a country. Handicrafts and cottage industries have been in Nepal since ancient time,but industrial development is still in its infancy. Historically, the industrial development process began after 1936 with the establishment of Biratnagar Jute Mill. It was the first joint stock company of Nepal established under the Company Act, 1936. This act has been revised in 1957, 1964 and 1997 (2053 Chaitra). Nepal Bank Limited was also established in 1937 for the development and growth of industry and trade.
In between 1936 and 1949 a number of industries, particularly in the fields of cotton textile, sugar, match, hydro power, rice and oil mills, and cigarettes were set up in the south eastern and eastern Terai region. Between 1945 and 1949, the prevailing war-time inflatory conditions and scarcity of goods in the market provided a rare opportunity to these enterprises to make high profits. After the Second World War, the demand for the goods produced in Nepal went into decline along with the profits which resulted fall in confidence in industries and shutdowns.
The total number of public limited companies and proprietorship firms registered before 1950 reached the figures of 59 and 299 respectively.
In Nepal, development plans were implemented only from 1956(2013 B.S.). The First Five-Year Plan was implemented in 1956-61. In order to encourage and assist the development of private industry, an Industrial Development Center was established in 1957 which was converted to Nepal Industrial Development Corporation in 1959. In the same year, Nepal Factory and Factory Workers Act was also passed to allow industrial development. In the plan period Private Firm Registration Act, 1957 and Industrial Policy, 1960 was announced. Balaju Industrial District was also established in the plan period.
In the Second Three Year Plan (1962-65) eleven public enterprises were established i.e. Birgunj Sugar Factory, Janakpur Cigarette Factory, etc. In the private sector sugar, metal, handicraft, hotel, soap, biscuit and sweets industries, etc. were established. Patan and Hetauda Industrial Estates were established in this plan period.
The Third Five Year Plan (1965-70) recognized industrialization as an essential component of economic growth and gave it third priority. In this plan period, Bansbari Leather and Shoe Factory, Agriculture Tools Factory, Himal Cement Company, Nepal Tea Development Corporation, Dairy Development Corporation, etc. were established.
The Fourth, Fifth, Sixth, Seventh and Eighth Five Year Plans also emphasized the need to attract private sector investment i industries.
During Eight plan HMG adopted privatization, economic liberalization and open market policies. Keeping in mind the condition of public enterprises, HMG initiated privatization efforts from the Eighth Plan. The new revised industrial policy (1992) has been greatly liberalized and made transparent. Foreign Investment and Technology Transfer Act (B.S. 2050) was reviewed to attract foreign investment and to emphasize the transfer of advanced technology and efficient management. The Ninth plan (1997-2001) continued to emphasize on privatization and economic liberalization. The core objectives of the Tenth plan (2002-2007) is to accelerate the pace of industrialization through increased participation or private sector and to create additional employment in both rural and urban areas to reduce poverty.
(2) EVOLUTION OF TRADE IN NEPAL
Trade plays an important role in the economic development of a country. In the early stage of economic development, Nepal's trade was limited with India and Tibet alone. During that period the major exports from Nepal comprised rice, timber, herbs and medical plants, and handicrafts, and the major import items were cloth, salt, medicines and kerosene oil.
The year 1923 was a momentous year for the country. A 'Treaty of Peace and Friendship' was concluded between the Government of Nepal and the Government of Great Britain. As per the treaty, Nepal could carry on import trade free of duty via India. Thus, this treaty was a landmark for Nepal to diversify its foreign trade.
India and Tibet, autonomous region of China are the traditional trading partners of Nepal before 1950. With the formation of democratic government, Nepal and India signed a trade treaty in 1950. Nepal's trade with overseas countries started only from 1956 after the implementation of First Plan. As modernization was ushered in the country after democracy development of trade also grew tremendously. In order to promote exports an exporter's exchange entitlement scheme was introduced in 1961. Under this scheme, raw jute was exported to a third country for the first time.
Nepal pursued trade diversification policy since early 1960s, which got momentum from Fourth plan. Nepal has been successful to diversify the trade at least country wise. In fiscal year 1974/75 India's share in total trade of Nepal was 82.2 percent, while that of other countries was mere 17.8 percent. But in fiscal year 1997/98 India's share in total trade was mere 31.o percent while the share of other countries increased to 69.o percent. However, in 2000/2001, India's share in total trade of Nepal came to 41.6 percent while the share of other countries remained to 58.4 percent.
Since Eight plan, Nepal turned to open market economy and then adopted the policy of liberalization of foreign trade. In Nepal, new Trade Policy 1992 has been implemented. It aims to achieve dynamic growth in the trade sector through the creation of more income and employment opportunities, attain favorable balance of payment situation by increasing exports and earning more foreign exchange.
At present Nepal has trade agreement with seventeen countries. However, it is trading with more than 80 countries of the world. The volume of trade has been constantly increasing due to development of transport and communication, participation in international trade fairs, membership of international organizations, liberal policy of third countries towards Nepal.
(1) EVOLUTION OF INDUSTRY IN NEPAL
Industrial development is the key to rapid economic progress of a country. Handicrafts and cottage industries have been in Nepal since ancient time,but industrial development is still in its infancy. Historically, the industrial development process began after 1936 with the establishment of Biratnagar Jute Mill. It was the first joint stock company of Nepal established under the Company Act, 1936. This act has been revised in 1957, 1964 and 1997 (2053 Chaitra). Nepal Bank Limited was also established in 1937 for the development and growth of industry and trade.
In between 1936 and 1949 a number of industries, particularly in the fields of cotton textile, sugar, match, hydro power, rice and oil mills, and cigarettes were set up in the south eastern and eastern Terai region. Between 1945 and 1949, the prevailing war-time inflatory conditions and scarcity of goods in the market provided a rare opportunity to these enterprises to make high profits. After the Second World War, the demand for the goods produced in Nepal went into decline along with the profits which resulted fall in confidence in industries and shutdowns.
The total number of public limited companies and proprietorship firms registered before 1950 reached the figures of 59 and 299 respectively.
In Nepal, development plans were implemented only from 1956(2013 B.S.). The First Five-Year Plan was implemented in 1956-61. In order to encourage and assist the development of private industry, an Industrial Development Center was established in 1957 which was converted to Nepal Industrial Development Corporation in 1959. In the same year, Nepal Factory and Factory Workers Act was also passed to allow industrial development. In the plan period Private Firm Registration Act, 1957 and Industrial Policy, 1960 was announced. Balaju Industrial District was also established in the plan period.
In the Second Three Year Plan (1962-65) eleven public enterprises were established i.e. Birgunj Sugar Factory, Janakpur Cigarette Factory, etc. In the private sector sugar, metal, handicraft, hotel, soap, biscuit and sweets industries, etc. were established. Patan and Hetauda Industrial Estates were established in this plan period.
The Third Five Year Plan (1965-70) recognized industrialization as an essential component of economic growth and gave it third priority. In this plan period, Bansbari Leather and Shoe Factory, Agriculture Tools Factory, Himal Cement Company, Nepal Tea Development Corporation, Dairy Development Corporation, etc. were established.
The Fourth, Fifth, Sixth, Seventh and Eighth Five Year Plans also emphasized the need to attract private sector investment i industries.
During Eight plan HMG adopted privatization, economic liberalization and open market policies. Keeping in mind the condition of public enterprises, HMG initiated privatization efforts from the Eighth Plan. The new revised industrial policy (1992) has been greatly liberalized and made transparent. Foreign Investment and Technology Transfer Act (B.S. 2050) was reviewed to attract foreign investment and to emphasize the transfer of advanced technology and efficient management. The Ninth plan (1997-2001) continued to emphasize on privatization and economic liberalization. The core objectives of the Tenth plan (2002-2007) is to accelerate the pace of industrialization through increased participation or private sector and to create additional employment in both rural and urban areas to reduce poverty.
(2) EVOLUTION OF TRADE IN NEPAL
Trade plays an important role in the economic development of a country. In the early stage of economic development, Nepal's trade was limited with India and Tibet alone. During that period the major exports from Nepal comprised rice, timber, herbs and medical plants, and handicrafts, and the major import items were cloth, salt, medicines and kerosene oil.
The year 1923 was a momentous year for the country. A 'Treaty of Peace and Friendship' was concluded between the Government of Nepal and the Government of Great Britain. As per the treaty, Nepal could carry on import trade free of duty via India. Thus, this treaty was a landmark for Nepal to diversify its foreign trade.
India and Tibet, autonomous region of China are the traditional trading partners of Nepal before 1950. With the formation of democratic government, Nepal and India signed a trade treaty in 1950. Nepal's trade with overseas countries started only from 1956 after the implementation of First Plan. As modernization was ushered in the country after democracy development of trade also grew tremendously. In order to promote exports an exporter's exchange entitlement scheme was introduced in 1961. Under this scheme, raw jute was exported to a third country for the first time.
Nepal pursued trade diversification policy since early 1960s, which got momentum from Fourth plan. Nepal has been successful to diversify the trade at least country wise. In fiscal year 1974/75 India's share in total trade of Nepal was 82.2 percent, while that of other countries was mere 17.8 percent. But in fiscal year 1997/98 India's share in total trade was mere 31.o percent while the share of other countries increased to 69.o percent. However, in 2000/2001, India's share in total trade of Nepal came to 41.6 percent while the share of other countries remained to 58.4 percent.
Since Eight plan, Nepal turned to open market economy and then adopted the policy of liberalization of foreign trade. In Nepal, new Trade Policy 1992 has been implemented. It aims to achieve dynamic growth in the trade sector through the creation of more income and employment opportunities, attain favorable balance of payment situation by increasing exports and earning more foreign exchange.
At present Nepal has trade agreement with seventeen countries. However, it is trading with more than 80 countries of the world. The volume of trade has been constantly increasing due to development of transport and communication, participation in international trade fairs, membership of international organizations, liberal policy of third countries towards Nepal.
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