- September 17, 2020
- White Paper
Small and Medium Enterprises (SMEs) in Nepal are crucial to the country’s economic growth; creating 2.36 million jobs and contributing to 22% of the country’s GDP. SMEs operating in the agricultural and tourism sectors are acutely suffering from the economic fallout of COVID-19.
Nepal’s projected growth has dropped from 7% to just 2.5% during the COVID-19 crisis, due to slowed regional and domestic demand, a nosedive in remittance income, a complete standstill in tourist arrivals, and shrinking domestic and global investment.
With the recent lifting of Nepal’s lock down, it will be important to support key sectors towards economic recovery in a manner to crowd in investment and bolster trade in transformative growth sectors like agriculture and tourism. Nathan Associates and Ecorys have updated a 2018/2019 analysis of these two key sectors in Nepal and provide key recommendations for supporting Nepali agriculture and tourism SMEs to survive in the wake of the COVID-19 pandemic through:
- Adaptability: the ability to use market information to pivot, manoeuvre systems, processes and accessibility to get products to their consumers
- Linkages: understanding the market and adapting their production to new realities
- Liquidity: ability to ensure cash flow despite reduced revenue from the drop in tourist numbers.
Although the recent fiscal budget laid out an ambitious platform for investing in Nepal’s economy, specific policies and incentives to businesses will need to be provided so that Nepal can capitalise on every opportunity to bounce back quickly from the economic fallout of COVID-19, and reposition itself in sectors with transformative economic potential.
The COVID-19 crisis will require a redoubling of effort from the government and private sector to support SMEs. This will likely require closer dialogue between the private sector and the Government of Nepal to ensure what works is promulgated across these sectors.