Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S2010education is strengthened and engineering services exports also require enhanced manufacturing capabilities.For example, even if certain engineering services in the automobile industry could be offshored from, say,Germany, then it is hard to imagine that these services could be offered successfully by countries that do nothave automobile manufacturing capabilities themselves. The main competitors for engineering offshoring areseen in large developing countries, such as China, Vietnam and Nigeria, but for complex tasks, China and Indiaare expected to capture most of the market.Where does Nepal fit in that emerging market? We expect that could have a potential as an offshore destinationfor Indian firms, similar to the IT and BPO industry (where this offshoring from India to Nepal has also nothappened on a large scale yet). But for Nepal to become an ‘independent’ exporter of engineering services,Nepalese firms would have to find niche markets where engineering capabilities can compete at global level.This is difficult to imagine, given the lack of advanced domestic manufacturing industries. There might besome potential in specialized engineering and construction services, e.g. those related to hydropower.Index 3: Domestic Supply ConditionsThe Nepalese Engineering Sector: There are more than 400 consulting firms officially registered in Nepal. Ofthis, 64 professional architectural and engineering firms are members of SCAEF, which, according to industrysources, makes up for 90 per cent of the sector in Nepal. Nepalese consulting firms have acquired skills andknow-how by working with expatriate firms in the projects financed by multilateral and bilateral fundingagencies, and some have developed and acquired the needed professional experience to meet internationalstandards. According to industry sources, construction projects in most areas, except those requiring verycomplicated technology, can now be handled by Nepalese consultants. SCAEF member firms are involvedin projects with total project cost of US$464 million and recently Nepalese consultants have been givenopportunities by the government and donors to act as lead firms in association with expatriate firms (BusinessInitiative 2006).Quality of Service: According to industry sources, Nepal is able to provide high quality engineering services.However, no neutral assessment is available for the sector.Availability and Quality of Labour Force: Industry sources rank the availability and quality of workers in theindustry as medium. Brain-drain is a problem, as many engineers are working abroad, though this also showsthat they are successful in ‘exporting’ their skills. The quality of engineering education is considered good, inparticular that of TU (Institute of Engineering). 134Labour Cost and Overall Production Cost: Lower labour cost but not significant advantage in terms ofproduction cost due to high costs of some components like equipment and machineries (mostly imported)and high energy cost.Domestic Demand: There is high demand from government sector for infrastructure projects.Government Initiatives and Donor Involvement: Consulting Services Development Act jointly with the privatesector is in progress.134See http://scaef.org.np/conference/conference/pdf/Session-4/8.per cent20Engineeringper cent20Educationper cent20inper cent20Nepalpercent20prospectsper cent20andper cent20challengesper cent20PPT.pdf for a discussion on current technical education in Nepal.116NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT