Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S2010Productivity: The companies have installed modern technology with high productivity. But infrastructuralconstraints like power cuts, labour strikes, and short supply of water are constraining productivity.Availability and Quality of Labour Force: According to interviewed companies, there are no significantproblems related to the availability of workers or labour productivity. Experienced foreign investors areproviding technical know-how to some units. Most companies are equipped with a market research teambacked by managerial efficiency to promote their products in the market.Labour Cost and Overall Production Cost: There is some labour cost advantage compared to othersuppliers.Level of Processing Technology: All units are using modern technology and some of them are using state-ofthe-artJapanese machinery with very high efficiency. Moreover, some companies are employing one of themost cutting edge production technologies in Nepal.Cost and Quality of Infrastructure: Infrastructure is ranked low by interviewed companies, whereas costs areon average side compared to the competitors.Efficiency of Domestic Supporting Industries: A large number of domestic industries are supplying rawmaterials, in particular wheat flour. Nepal is a wheat surplus country. There are more than 15 big wheatflour mills, producing around 130,000 MT of wheat flour per year. These mills also supply wheat flour tonoodles factories. Also, one of the noodles companies has its own wheat flour mill. But some wheat flour isimported from India due to price and quality differences. Imports from India are duty-free and easy as well,but sometimes India restricts the export of wheat flour. The noodles factories then have to import the wheatflour from other countries, which is more difficult and costly. The industry depends on imports of some rawmaterials like chemicals, seasoning, palm oil, and preservatives. Overall, the present level of efficiency ofdomestic support industries is high and the prospect is also high.Business Environment: The overall business environment of this sector is considered good to very good.Industry sources did not state particular problems with the macro-economic environment, administrativeservices, judicial services or the tax system.Government Initiatives and Donor Involvement: The government does not have any specific strategy or policyfor the sector, except during the bilateral trade talks and agreements where this product is included as a majorexport item. No donor agencies have been involved in the sector. It is entirely driven by the private sector.Prospect for Domestic Supply Conditions: There is good prospect for increasing the production. Industrywatchers say that the noodles industry has been growing at a steady rate of 15 to 20 per cent in recentyears. Besides, the industry was running at less than 60 per cent production capacity during 2004/05, which isexpected to increase over the years. Now the noodles market has become so sophisticated that manufacturersare bringing in new products targeting special segments of the market like noodles solely targeting schoolkids.Index 4: Socio-economic ImpactCurrent Employment and Job-Creation Prospect: Total FTEE for the year 2006/07 is estimated at 4,800workers. 2222Source: Industrial Statistics 2006/07.54NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT