After our first month in Myanmar, we spent the following month in Nepal investigating social business opportunities. This blog gives you our perspective of this beautiful country. It definitely is not a scientific study, but reflects our thoughts in our thought process to define where to start our business activities, either in Nepal or Myanmar (see our previous blog about Business in Myanmar)
From a business perspective there are many similarities between Nepal and Myanmar. Business activities are growing in the main cities while the rural areas are lagging behind. There are many good things to mention and overall GDP (Gross Domestic Product ) is growing steadily. Still, there are many struggles. Business education is available but is not practical ('textbook knowledge' without building up real world experience) and many struggle after they set up their businesses. Infrastructure is lagging behind and (lack of) quality infrastructure hinders business growth. Furthermore, the country is struggling with corruption and complex government decision making and administration. However, after the elections last year, the new government installed earlier this year has a strong majority in parliament, allowing for reformation and improved legislation. Nepal does allow for foreign investors and there are good opportunities to invest in the country and support local population. We have explored the rural areas of Nepal where we see the biggest need, but also the good business opportunities in the domains of agriculture and tourism. This concludes the summary, you may drop off now, or continue reading if you are interested :-)
After the earthquake in 2015, Nepal has been supported by global governments, United Nations and NGO's to rebuild the country and support population both in the urban and rural areas. The earthquake was devastating and the impact is still very visible. In Kathmandu many houses are still supported by wooden poles to prevent collapse, many landmarks and temples have been destroyed and are still under restoration and dust is everywhere (although that was also the case before the earthquake). And this is not limited to Kathmandu, everywhere you see construction activities to recover from the earthquake. At the same moment you also see many, many construction sites where construction started but actual work seems to have stopped. Has the country run out of money? Or is this a result of corruption, lack of skills or change of focus? Probably all of these are true.
Nepal is about four times the size of The Netherlands and has close to 30 million inhabitants. Overall GDP (Gross Domestic Product) was 24.47 Billion USD in 2017, or 728 USD per capita, and has been growing with 6-8% over the last few years (after a serious hit in 2015 due to the earthquake). The country is predominantly Hindu (81.5%), followed by Buddhism (9%), Muslim (4.5%) and Christian (1.4%). To make it more complex, there are about 125 ethnic groups in the country and a total of about 120 different languages. 50% of the population is younger than 25 years. Nepal has only two neighboring countries, India and China, has no sea ports and is fully dependent on the roads and airlines for import/export (there is no railroad in the country). Only 64% of the population can read and write (est. 2015). (CIA World Factbook).
We have not seen any of the global chains in Nepal - no Starbucks, McDonalds or Burger King. Although we expect business legislation will not stop them from entering Nepal, the average income in the country is at such a level that the business opportunity for global chains is limited (see data about the average income in the bullet points at the end of this blog).
The education system is growing. But, as far as we have heard, the country is not benefiting from it yet. It seems that especially the higher educated are not able to find meaningful employment and many are leaving the country (causing a loop which the country has not been able to break free from yet). The unemployment is at such a level that an estimated 2 million Nepali have left the country and are working abroad, mostly in the Gulf States and Malaysia. It is really necessary to generate meaningful jobs in the country to keep skills in the country and keep families together.
We see clusters of the same business activities with little or no diversification. Success seems to be contagious, and is copied easily, but leads to lack of business for everybody. There is a strong copycat culture where business success is copied fast - if one shop or business activity is successful, the neighbor decides to do exactly the same activity. We see 8 stalls that try to sell oranges to the passersby or you see 4 pharmacies at an intersection, they all sell exactly the same product.
Nepal is a beautiful country - 7 out of 10 of the highest mountains in the world are in Nepal, attracting mountaineers, risking their lives to climb the mountains. But many more people, more than 200,000, trek around these beautiful peaks, every year.
Next to the high mountains, the lower mountains are beautiful with very nice rivers flowing through the valleys surrounded by really nice rice fields and untouched nature.
The beauty of nature has a very positive influence on the economy of the country. Where we have not seen many tourists in Myanmar, Nepal has a good inflow of tourists from the richer parts of the world. The bus, at the start of our visit to Nepal, from Kathmandu to Pokhara, had a good selection of nationalities on board with visitors from Switzerland, Ukraine, Belarus, The Netherlands and the UK. As tourism is one of the focus points for government, there are many business options in the tourism industry.
The tourism industry is well developed in the main tourist centers like Kathmandu and Pokhara, as well as the base camps in the high mountains. In Pokhara there are many, many guesthouses (probably too many) which offer rooms at very (too) low prices. Also shops selling trekking equipment (clothing, backpacks, sleeping bags, etc) are widely available, offering goods at low prices (probably not all original products). However, overall quality is really poor - in general the guesthouses offer low quality rooms, low quality food and services which do not support further growth (although there are a few very positive exceptions). There are no hygiene codes and many of the (public) bathrooms we have seen were really gross and causing serious health risks.
On the other side, we have met with a tour guide who organizes trekking tours to the remote areas of Nepal, not discovered by the mainstream tourists yet. In those remote areas there is a need/opportunity for quality hotel/guesthouse capacity with respect for nature and local culture.
A few other thoughts:
Nepal is one of the poorest countries in Asia with a GDP per capita of 728 USD per annum (which is about 50% of GDP per capita in Myanmar). Many in Nepal are in the agriculture sector, living from their own land.
In 2018, the minimum wage of domestic laborers was increased by 38% to Rs13,450 per month (118USD); previously, the minimum wage was Rs9,700 per month (85USD). However, many do not have this level of income and many, especially in the rural areas, still live from their land without any meaningful additional income. Most people work 6 days a week. Only 1 million, out of 30 million people, have an average income of 20 USD or more per day. Most Nepali people (about 70%) live from agriculture.
On paper the unemployment rate is low. However, many have difficulty to find meaningful work or work that allows them to get out of the poverty cycle. As a result, about 2 million Nepali men live and work in the Gulf States or Malaysia, trying to save money to send home. Unfortunately many earn just enough to stay alive with limited options to send money home and no forecast to ever return home.
Foreign investments are allowed and private-public partnerships are welcome. It is possible for foreigners to be 100% owner of a company without limitations.
Roads are in a terrible state currently and there is no railway infrastructure. The Nepalese government is planning to invest significantly in infrastructure, connecting the main cities, allowing for tighter collaboration and exchange of goods, and connecting Nepal with India and China. When (if) this happens, the county may develop fast and economic growth may lead to new business opportunities.
In the World Bank index on simplicity of doing business (Worldbank, "Ease of Doing Business" index), Nepal is ranked 105 out of 190 countries, not simple but at the same moment not impossible to do business in the country (for comparison: Netherlands 32/190, USA 6/190, Myanmar 171/190; lower is better). The new government, installed earlier this year, is expected to help improve this position dramatically.
And yes, Nepal is also suffering from corruption. In the World Corruption Perception Index, the country is ranked 122 out of the 180 countries compared (for comparison: Netherlands 8/180, USA 16/180, Myanmar 130/180).
In Nepal we visited the rural areas; we climbed the mountains and travelled by bus and jeeps for many, many hours to visit farmers and villages where no tourists ever come. In the mountains we have met with the poorest people and at the same moment the friendliest people we have ever met. We have seen them fight poverty by working extremely hard and by embracing new technologies and external help. The coffee farmers were eager to learn and accept training and coaching. The tea plantation was beautiful and allows for further growth by installing new farmers and expanding both the plantation and tea factory. A trekking tour guide showed us many opportunities for expansion in the tourism sector.
We see many options to help develop the country, create employment and support people in the poorer, rural regions. Business opportunities are available in the agriculture sector, growing coffee, tea or starting a complete other type of plantation (e.g. Moringa or other type of super-food). At this moment, Nepal is importing a serious portion of agricultural products, leading to opportunities for the Nepali farmers.
Next to the agricultural sector, the tourism sector is a sector where demand is growing, where new regions will become accessible to tourists (when the new roads become available) and where serious quality improvement is needed.
References:
Nepal Market Study, Rijksdienst voor Ondernemend Nederland (RVO), May 2018
Foreign Investment Opportunities, Government of Nepal, January 2009
CIA World Factbook Nepal, The World Factbook. Washington, DC: Central Intelligence Agency, 2018
KPMG Growth Promise Indicators, KPMG, January 2018
Doing Business 2019: Training for Reform - Nepal, Worldbank, October 2018
Top 12 Best Treks in Nepal, Bookmundi, November 2018
UNDP Nepal Annual Report 2017, United Nations Development Program, May 2018
Ease of Doing Business, Worldbank, November 2018
Corruption Perception index 2017, Transparancy International, 2017
Asia Pacific corruption barometer, Transparancy International, March 2017
Destination Nepal, Lonely Planet,
Travel and Tourism, Economic Impact 2017 Nepal, World Travel & Tourism Council, March 2018
Minimum wage raised to Rs13,450 per month, Kathmandu Post, July 10, 2018
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