International Cooperation in Commercialization ... · Concern Society Nepal (ACoS-Nepal) conducted one day seminar on November 25, 2013 on “InternationalCooperation in Commercializationand

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International Cooperation in Commercialization & Industrialization of Nepalese Agriculture...

International Cooperation in Commercialization & Industrialization of

Nepalese Agriculture: From Policy to Practice

25th November, 2013 (Monday, Marg 10, 2070)

Organized by :Institute of Foreign Affairs (IFA)

Project for Agriculture Commercialization and Trade(PACT)Agriculture Concern Society Nepal ( ACoS-Nepal )

Published By

Institute of Foreign Affairs (IFA)Kathmandu, Nepal

Phone 977-1-4266954 977-1-4266955Fax 977-1-4266956E-mail [email protected] [email protected] www.ifa.org.npISBN 978-9937-8459-6-0

© Institute of Foreign Affairs

First Published IFA, March 2014 500 pcs

Printed at Heidel Press Pvt. Ltd. Dillibazar, Kathmandu, Nepal. 977-1-4439812, 4441712

T.U. Central Library of Nepal Cataloguing - in -

Publication Data Seminar on commercialization and industrialization of

Nepalese agriculture. Kathmandu, 25th Nov, 2013 International cooperation in commercialization of

Nepalese agriculture : from policy to practice. - Kathmandu, 2014.

95p. ISBN : 978-9937-8459-6-0 1. Agriculture and state - Nepal. I. Title

338.18095496 Ae52 dc 22 201403600

Contents

1. Preface ....................................................................................................

2. Concept of the Seminar ........................................................................ 1

3. Welcome address by, Mr. Yogendra Kumar Karki Project Director,

ProjectforAgricultureCommercializationandTrade(PACT) ...............7

4. Keynote address by Hon. Minister for Agricultural Development

Mr.TekBahadurThapaGharti ............................................................. 10

5. ClosingremarksbyDr.RishiRajAdhikariExecutiveDirector

InstituteofForeignAffairs(IFA) ........................................................... 14

6. PaperPresentationon“CommercializationofNepaleseAgriculture

andExternalCooperation”ByMr.DeependraBahadurKshetry

FormerViceChairman,NationalPlanningCommission ......................17

7. CommentsonthePaperbyDr.GaneshRajJoshi,Secretary,

MinistryofForest&SoilConservation .............................................. 33

8. Comments from the Chair Dr. Rishi Raj Adhikari

ExecutiveDifrector,IFA ..................................................................... 36

9. PaperPresentationonExistingPoliciesGaps,Challengesand

WayForwardforEffectiveMobilizationofInternational

CooperationtowardsCommercializationandIndustrialization

ofNepaleseAgriculturebyMr.GaneshK.C.,FormerSecretary,

Ministry of Agriculture Development .................................................. 38

10. Comment by Dr. Champak Pokhrel, Former Member,

NationalPlanningCommission ............................................................ 63

11. Comments from the Chair Mr. Leela Mani Paudyal, Chief Secretary,

GovernmentofNepal .......................................................................... 69

12. ClosingRemarksbyDr.PremBahadurThapa,Chairperson,

ACoS Nepal .......................................................................................... 71

13. Summary of the Seminar..................................................................... 73

14. ListofParticipantsintheSeminar ....................................................... 82

PrefaceMost of the tillers in Nepal are partially engaged in production orientedagriculture, which is subsistent in nature. It restricts them to benefit byeconomy of scale and enhanced livelihood and prosperity.

It is oftenopined that it is important to develop agriculture sector rapidlyfor the economic revolution in Nepal. To start with the engagement andinvolvement of large number of people in agriculture will massively increase their employment. It will reduce the burden of sending youth outside as migrant workers and free Nepal from the dangerous dependency on unsustainableremittances.

Industrializationandvalueadditionofcrops,livestock,plantations,herbsandmedicinal plants will boost livelihoods of the farmers.

TherecentventuresoffewNepaleseindividualsoncommercializationofnewavenuesofagriculturesuchaskiwifruits,olive,avocado,ostrich,troutfish,tomatoes etc. are very encouraging and must be supported by the government and private sectors.

Landreformandcommercializationofagriculturemustbeintertwined.Theactualtillersshouldbetheownersoftheland.Governmentshouldsupportcommercialization and industrialization of agriculture by promoting andsupportingestablishmentofprocessingindustries(valueadding)basedonthelocallyproducedrawmaterials.Thetillersworkparttimeasfactoryworkers.They along with erstwhile landlords should be encouraged to becomeshareholdersofsuchindustries.Thiswaythetillers,whomakeupthebulkofpoorpeopleinthecountry,willbeengagedfulltimeandbenefitthreeways,astillersoftheir land,asfactorywageearnersandfinallytheshareholdersearning as owner of the factory. This way it is highly expected that theirlivelihoodincreaseswithoverallpositiveimpactatthenationaleconomy.Itis highly recommend that government must support with appropriate policy, technology,marketing of products of farmers by facilitating their national,regionalandinternationallinkageandinfrastructuresuchasroads,transport,electricity, storage etc.

Realizing the importance ofmodernization of agriculture with a paradigmshiftbyreplacingitssubsistentcharacteristicsInstituteofForeignAffairs(IFA)insupportofProjectforCommercializationofAgricultureandTrade(PACT)under the Ministry of Agriculture Development (MOAD) and Agriculture

Concern Society Nepal (ACoS-Nepal) conducted one day seminar onNovember25,2013on“InternationalCooperationinCommercializationandIndustrializationofNepaleseAgriculture:FromPolicytoPractice”.

Ithanktwopaperpresentersasfollow:

1. Commercialization of Nepalese Agriculture and External Cooperation,by Mr. Deependra Kshetry, former Vice Chairman, National PlanningCommission.

2. Existing Policies, Gaps, Challenges and Way Forward for EffectiveMobilization of International Cooperation Towards CommercializationandIndustrializationofNepaleseAgriculture,byMr.GaneshK.C.,formerSecretary, Ministry of Agriculture

IFA is grateful toChiefGuestHon.Mr. TekBahadurThapaGharti,Ministerfor Agriculture Development for his Keynote speech, and Chair person of oneofthesessionsMr.LeelaManiPaudel,ChiefSecretary,GovernmentofNepal.IFAthanksPACTanditsProjectDirectorMr.YogendraKumarKarkiforfinancialsupporttothisimportantseminar,forbeingajointorganizerandforhis welcome speech.

IFAexpressesitsthankstoDr.PremBahadurThapa,Chairperson,ACoS-Nepalfor his closing remarks and for being a joint organizer the Seminar.

Dr.GaneshJoshi,Secretary,MinistryofForestryandSoilConservationandDr.ChampakPokhrel, formerMember,National PlanningCommissiondeserveappreciationfortheirexcellentcommentsonthetwopapers.

Ialsowish to thankMr.KhushN.Shrestha,DeputyExecutiveDirector, IFA,andSanuRajaPuri,Librarianfortheiroverallcontributiontotheseminarandpublication.Ms. Snayha Basnyat deserves our appreciation for editing thepublication.Theinstitutewelcomescomments,suggestionsandfeedbackssoastorefinethefuturepublicationsofIFA.

Dr. Rishi Raj AdhikariExecutive Director

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Concept of the Seminar on International Cooperation in Commercialization and

Industrialization of Nepalese Agriculture: From Policy to Practice

Background

Agriculture is the mainstay of the people’s livelihood and socio-economic development as majority of the people in the world still depend on it.However, there has been a limited progress worldwide towards agricultural development and food security. A large number of people in countries like ours derive minimal benefits from this sector, and they face numerousproblems and challenges due to its subsistence nature. Both internal andexternalshockscoupledwithextremepovertyfurtheraggravatethesituation.A majority of people living in extreme poverty is compelled to spend nearly 70 per cent of their income on food, and around 40 per cent of children in Nepal sufferfrommalnutritionandstunting.

Nepalese Agriculture employs two third of the country’s labor force and contributestomorethanonethirdofGrossDomesticProduct(GDP),andisthe main source of food, income and employment for the majority, especially for the rural population. However, it is associated with poverty renderingNepal as an underdeveloped country with very modest economic growth rates. The central challenge for the development in Nepal is to shift fromsubsistence to a commercial economy.

Since the Fifth Five-Year Plan (1975–80), agriculture has been accordedthe highest priority in Nepal because it was determined that the economic growthwasdependentonbothincreasingtheproductivityofexistingcropsand diversifying the agricultural base for use as industrial inputs.

However, Nepal’s agriculture is largely based on low-value cereals and subsistenceproduction,withamere13percentofoutputtradedinmarkets.Despite an increasing reliance on remittances, the absence of economicopportunities outside subsistence agriculture keeps most Nepalese poor.Improvingagriculturalproductivityandshiftingpeopleawayfromagricultureis essential for taking out people from extreme poverty and hunger. Thegreatest challenges faced in the development of agriculture in Nepal are low

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productivityrates,traditionalfarmingmechanisms,lackofcommercializationandindustrialization.

It is widely believed that the livelihoods of vast majority of farmers cannot beimprovedwithouttransformingtheagriculturalactivitiesintoenterprisessoitneedstobetransformedasbusinessenterprisesthatcanattractyouthin agriculture sector including production, processing, manufacturing andmarketingwhichcanleadtotransformthecountrytowardsoveralleconomicgrowthandprosperityofthepeople.Thisisquitepossibleaswehave(i)highlyexperienced, diligent and laborious farmers, and (ii) we have comparativeadvantages of producing high value agriculture and NTFP commodities. Inaddition, the youth can be attracted in agriculture sector, country can bemadeself-sufficientonmainagriculturalcommodities,numberofhighvaluecommodities canbeexported toneighboring and friendship countries andagricultural sector can be transformed into an employment generating,economically strong andprestigiousbusiness, if agriculturemechanization,commercialization as well as industrialization are started with new vision,missionandgoal,andifdueattentionisgiventoenhancetheinternational/bi-lateralcooperationandpartnershipformarketingand/ortradeofimportantagricultureproductsthatareofmutualbenefits.Wehavemanyhighvaluecommodities that have huge comparative advantages such as off-seasonvegetable crops e.g. tomato, carrot, cauliflower, cabbage, broccoli, spicecropse.g.cardamomandginger,organic/orthodoxteaandcoffee,vegetableseeds, variousmedicinal andaromaticplant species such as Yarchagumba,Panchaule,Jatamansietc.

Agriculture Policy Review

Nepal is on the threshold of a new socio-cultural, political and economicchange, and reshaping agricultural policies and strategies could play a vital role in economic development.

Therehavebeenanumberofpoliciesandprogramsforthedevelopmentoftheagriculturesectorsince1995.Theadoptionof the20-yearAgriculturePerspective Plan (APP) in 1997 and recent endeavor of another 20 yearsAgricultureDevelopmentStrategy(ADS)andcurrentgovernmentsproclaimedpolicyofdoublingthebudgetallocationinagriculturereflectstheemphasisthegovernmenthasgivenontheagriculturalsectoranditscommercializationand industrializationwiththetargetofeconomicrevolution inthecountry.However,APPdidnotsucceedasplannedandADSisbeingcriticizedfornotbeingrealisticandtohavebypassedtheconsultationofmainstakeholders,thefarmers.Therefore,agreatdeal inthisregardsremainstobereviewedand accomplished.

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Some of the policies such as National Agriculture Policy-2061, Agri-business Promotion Policy-2063, Commercial Agriculture Policy-2064 andTrade Policy-2065 have considered some aspects of commercialization,industrializationandtradepromotionofagriculturecommodities.However,these policies are not enough and also not implemented properly though they are in the mutual benefits of Nepal, its neighboring countries andother friendly countries. Therefore, it is strongly felt that it is essential toreviewtheexistingpolicies,strategiesandprogramsandprojectsrelatedtocommercializationandindustrializationofagriculturesectorandinternationaltradeandmarketingof agricultural commodities includingmedicinal herbsandNTFPs.Thereisneedtoanalyzethepolicygapsanddevelopnecessarysuggestions that can provide important feedback for planners and policymakerssoastorevisethepoliciesandstrategiesrelatedtocommercializationand industrialization of agriculture sector in Nepal and to promote theinternationaltradeandtraderelationsandpartnerships.

Nepal attaches high importance and pursues a policy of developing theagriculture sector into an industry, as stated in the Interim Constitution of Nepal, 2007. In view of the paramount role played by agriculture in the economy, The Three Year National Plan 2010/11- 2012/13 lays emphasis onenhancing thecontributionofagriculture sector in foodandnutritionalsecurity, employment generation and poverty reduction and improvingbalanceof tradebymeansofmodernizationandcommercializationof thissector.

Importance has been realized about the transfer and use of appropriate, affordable,sustainableandclimateresilientagriculturaltechnologytowardsindustrialization and commercialization of agriculture that combine localknowledgeaswellassupportivetointernationaltraderules.

Agriculture and Economic Development

Therolethatagricultureplaysinthetransitionoflessdevelopedcountriestohigherlevelsofeconomicdevelopment,throughprogressiveindustrializationandgreateremploymentoflabourwithhigher(real)wage-levels,transcendssimply by diverting capital, labour, and other productive resources fromagriculture to industry. This has beendemonstratedby thewide failureofthe import substitution-based strategies for industrialization pursued bymany less developed countries during the 1950s and 1960s. A wider sharing of agricultural income growth leads to a greater incremental consumptiondemand for the labor-intensive products of rural industries. Rural industry

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growth in turn further increases in agricultural productivity, leading to amutuallysupportivecycleofagriculturalandindustrialgrowth.

It has been observed that agricultural demand-led industrializationoutperformedexport-ledindustrializationoverthefifteenyearperiod1964-78, owing mainly to the prominence of agriculture and the greater labor intensity of agricultural output than industrial output in South Korea during the early 1960s. It is found that for each 1 percentage point increase in the growth of exports the rate of industrialization (GDP growth) increases by0.3 percent, but that for each 1 percentage point increase in the growth of agriculturaloutputtherateofindustrialization(GDPgrowth)increasesby1.3percent.

Obstacles to commercialization of agriculture

The exodus of youth from rural areas, growing rural-urban gap, loss ofagriculturalland,weaksmallholderfarmerorganizations,andlackofadoptionof improved technology are some of the key challenges to transform the agriculture sector that includes broader areas from crops to livestock, forestry andfisheries,production, trade,processing tomarketing,andspansacrossdifferentministriesandagencies,andincludesnotonlygovernmentagenciesbut farmers, private sector enterprises, cooperatives, NGOs, and serviceproviders.

A mountainous terrain and poorly developed road network restrict access tomarkets, constraining agricultural growth and diversification into highervalueaddedandnon-farmactivities.Weakandpoorlyintegratedinstitutionsandinadequatetechnicalsupportforsupplychaindevelopmenthavefurtherlimitedmarketingopportunities.

Untilnow,agricultureinNepal,toalargeextent,isbeingsimplytraditional,ritual and as a part of culture; not been the business enterprises. Economic transformation of any developing countries like Nepal is possible onlywhenagriculture sector is commercializedand industrialized. Japan,China,South Korea,Malaysia etc. are good examples in this regardwhose initialeconomywasrootedthroughthecommercializationofagriculturesectorandindustrializationwaspossibleonlyafterthecommercializationofagriculture.A wider sharing of agricultural income growth leads to a greater incremental consumptiondemandforthelabor-intensiveproductsofruralindustries.Ruralindustrygrowthinturnprovidesadditionalstimulusforfurtherincreasesinagriculturalproductivity,leadingtoamutuallysupportivecycleofagriculturalandindustrialgrowthwhichofferthepromiseofincreasingaccesstomanyprivately provided services, such as banking and retailing of consumer goods, in rural areas.

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Conclusion

Nepal'seconomic revolutionmustbe focused topromote rapid, sustained,and inclusive economic growth that will lessen the potential for conflict,reducepoverty,and improve lives. It isoftenopinedthat it is importanttodevelopagriculturesectorrapidlyfortheeconomicrevolutioninNepal.Theengagement and involvement of large number of people in agriculture will massively increase their employment. It will reduce the burden of sending youth outside as migrant workers and free Nepal from the dangerous dependencyonunsustainableremittances.

Industrializationandvalueadditionofcrops,livestock,plantations,herbsandmedicinalplantswillboostlivelihoodsofthefarmers.TherecentventuresoffewNepaleseindividualsoncommercializationofnewavenuesofagriculturesuchaskiwifruits,olive,avocado,ostrich,troutfishetc.areveryencouragingandmustbesupportedbythegovernmentandprivatesectors.Thefarmersshouldbemadeownersofthelandtheytillandshareholdersoftheagriculturalindustriesandcooperativesintheruralareassothattheycanhaveownershipover the economic development process of the country.

Aim and objectives of the seminar

Overallaimoftheproposedseminaristoreviewexistingpolicies,strategiesandprogramsrelatedtocommercializationandindustrializationofagriculturesectorandtheroleinternationalstakeholderscanplay.Itwillalsoanalyzeandproposeappropriatepoliciesandstrategiestopromoteinternationaltradeofagriculture products so that the agriculture sector can be transformed into various business enterprises.

Following objectives may need to be achieved to fulfill the aim:

Review existing policies, strategies and programmes related to (i) commercialisation and industrialisation of agriculture sector, andinternational cooperation including international trade of agriculturecommodities;

(ii)Analysethepolicygapsbetweenpolicyandpracticeanddevelopnecessaryguidelines for the commercialisation and industrialisation of agriculturesector.

Organization of the Seminar

TheseminarwillbeonedaylongfromthemorningtillafternooninAnnapurnahotel. It is proposed that the agriculture specialists of Nepal will present two papers on relevant topics.

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Thepaperswilldealwith reviewofpastpolicies focusingon the reviewofinternationalcooperationandproposeinnovativewaysofcommercializationandindustrializationofNepaleseagriculture.

Therewillbethreesessions,staringwithInauguralandoneforeachpaper.Therewillbeatleastonecommentatorandonechairforeachpaperandateam of rapporteurs.

Theoutcomeoftheseminarwillbedisseminatedbyoverwhelmingpresenceofthemediaandrelatedindividualsandorganizationsatpolicy-makinglevels.Later the papers, discussion points and comments will be published in a form of book, which will be widely disseminated.

The seminar is proposed to be a joint activity of IFA, PACT and ACoS-Nepal

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Welcome Remarks by Mr. Yogendra Kumar Karki, Project Director, Project for Agriculture Commercialization and Trade (PACT)

ChairpersonDr.RishiRajAdhikari,ExecutiveDirector,InstituteofForeignAffairs(IFA),ChiefGuestHonourableMinisterforAgriculturalDevelopment,Mr.TekBahadurThapa,Secretaries, Excellencies Ambassadors, Diplomats,HeadandRepresentativesofDonorPartners,JointSecretaries,DepartmentHeads,Chairman of Agriculture Concern Society,DistinguishedGuest,Delegates,MediaPersons,LadiesandGentlemenAVeryGoodMorningandNamaste

First of all I would like to express my sincere thanks and welcome to Honourable Minister for Agricultural Development Mr. Tek Bahadur Thapa. Similarly, Iwould like towelcome to all the distinguished guests, delegates, resourcepersons and participants of this seminar on “International Cooperation inCommercializationandIndustrializationofNepaleseAgriculture:FromPolicytoPractice”.ItisindeedagreathonourforustohostthisseminarjointlywithInstituteofForeignAffairs(IFA),ProjectforAgricultureCommercializationandTradewhich is popularly known inNepal as PACTandAgricultureConcernSociety(ACoS-Nepal).

Themain purpose of this seminar is to share experiences, success storiesand lessons learnt from various agriculture systems in developing countries. Overallaimofthisseminar is toreviewexistingpolicies,strategiesandtheprogrammes regarding to commercialization and industrialization in theagriculturesectorsandtherolewhattheinternationalstakeholderscanplay.It will also analyze and propose appropriate policies and strategies to promote internationaltradeofagricultureproductssothattheagriculturesectorscanbe transformed into various business enterprises.

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Before Ipresent theobjectivesandmodalitiesof theseminar,allowmetospeakverybrieflyaboutagricultureandtheprojectPACT.Agricultureistheengine of development of Nepalese economy. It is the single largest sector in theeconomyaccountingtoabout32%ofGDPandprovideemploymentto two third of the labour force. Performance of the agriculture sector is therefore crucial for improving livelihood of Nepalese people which is possible throughcommercializationand industrializationoftheagriculturesectorofthe country.

In this endeavour, it gives me a great pleasure to say publicly in this august gatheringthatProjectforAgricultureCommercializationandTrade(PACT)isprobablythefirstagricultureprojectofNepalimplementedbytheMinistryofAgriculturalDevelopment(MoAD)withtheassistanceofanydonororfundingagencies to cover all the 75 district of Nepal and successful in receiving the additional financing to the extent of double of what it was originallyagreed and it is expected to play a leading role for the development of commercializationandindustrializationofoverallagriculturesectorofNepal.Theoverallobjectiveofthisprojectistoincreasethecompetivenessofsmallholderfarmersandagribusinesssectorsofselectedvaluesandcommoditiesof this country.

Chairperson, distinguished ladies and gentleman, let me go through theseminar objectives andmodalities. Aswe know the themeof the seminaris 'International Cooperation, Commercialization and Industrialization ofNepaleseAgricultureSectors',letmenowreadtheobjectivesoftheseminar.Ithasfourobjectives:-

1. Review existing policies, programmes and strategies regarding tocommercialization and industrialization of Nepalese agriculturesector.

2. ThesecondobjectiveistoanalyzethepoliciesgapbetweenpolicyandpracticeanddevelopnecessaryguidelinesforcommercializationandindustrializationofagriculturesectorofNepal.

3. To solicit the ideas in assisting the emerging agribusiness inconforming and establishing norms of international trade. Andfinally,

4. To support national, regional and international policy makers onthe role of public-private-partnership (PPP) andways to improvebusiness environment and their sustainability and also measure to address the technical barriers of trade agreements.

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In this seminar, there will be two sessions, apart from this opening session. For this opening session, we have invited few distinguished speaker whowill talk on potential challenges of international cooperation in agriculturecommercialization and Industrialization. And then in the working session,there will be two papers. The first paper is Commercialization andIndustrialization of Nepalese Agriculture and External Cooperation. Thispaper will be presented by Mr. Deependra Kshetry, Former Vice Chairman ofNationalPlanningCommissionand thepaperwill be commentedbyDr.Ganesh Raj Joshi, Secretary ofMinistry of Forestry and Soil Conservation.We have equally very important second paper by our veteranMr. GaneshKC, Former Secretary ofMinistry of Agricultural Development on "ExistingPolicies, Gaps, Challenges and Way Forward for Effective Mobilization ofInternational Cooperation Towards Commercialization and Industrializationof Nepalese Agriculture" and this paper will be commented by Dr. Champak Pokharel,FormerMemberofNationalPlanningCommission.

After theendof the seminar,we intend toproduceproceedingwhichwilldocumentallthepresentationandrecommendationforgeneraluse.

I on the behalf of the organizers sincerely thanks chief guest, delegates, resource persons and participants who have kindly participated in thisimportantseminaronshortnotice.Finally,letusmakecommercializationandindustrializationofNepaleseAgricultureasamomentofinteractionofdesire.

Thank You.

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Keynote Address byMr. Tek Bahadur Thapa Gharti

Hon’ble Minister for Agricultural Development

Chairperson,HonorableVice-Chairperson,NationalPlanningCommission,ChiefSecretaryoftheGovernmentofNepal,Secretaries of the government ministriesDistinguishedParticipantsandrepresentativesfromdevelopmentpartnersMedia Persons,LadiesandGentlemen,

First of all, let me thank organizers of this seminar for providing me the opportunitytospeakonthemostpertinentissueofalltime-theagriculture,which feeds the world.

If agriculture goes wrong, nothing else can go right. This quote from arenownedscientistfromourpartoftheworldrightlycapturestheimportanceof this sector for all of us. Agriculture is the cultural endeavor for a majority of our populace. Without doubt, agriculture has been the backbone of our survival as a country, as a community and as a person. For us, agricultural development is the prerequisite to achieve our broader developmentalaspirations. Our policies, past and present, reflect this insight during ourdevelopmental discourse. We have devised a number of policies and strategies for agricultural development. State of agriculture today is the outcome of our previous policies and investments in the sector.

CommercializationofagriculturehasbecomeakeyagriculturaldevelopmentalagendasincetheinceptionofAgriculturePerspectivePlan(APP)inmid-90s.With respect to commercialization, past policies including APPweremorefocusedonthecommercializationofhighvaluecrops.Consequently,wehave

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achievedsomepositiveresultsasagriculturalsub-sectorssuchaspoultry,milk,tea,cardamom,fish,fruitsandvegetableshavenowbeencommercializedtocertainextent.Thisstateofcommercializationhas,though,beenfragmentedand has not been transcended to all sub-sectors of agriculture. Cereal crops, which comprise more than 50 percent of the total agricultural output, are yet toreachastateofcommercialization. So is thestateof livestocksector ingeneral.Clearly,ourpastpoliciesandeffortswerenotinstrumentalenoughto realize potentials of agricultural commercialization in the country. it isfair to say that the extent of agriculture commercialization inNepal is notsufficienttodriveagriculturalbasedeconomictransformationinthecountry.

Agricultural development is systemic in nature; a pluralistic,multi-prongedand all encompassing approach of development is therefore essential foragricultural development in general and commercialization in particular.Developmentpartners,government, scientificcommunities,private sectorsincludingbusinessentrepreneurs,farmersandtheircooperatives,allarethekeystakeholdersofthisdevelopmentalprocess. TheNepalesegovernmentthrough its policies rightly emphasizes for a concerted efforts of all thesestakeholders for the agricultural development in the country. Realizing that investment in agriculture is a key for its development, this year the public sector investment in agriculture has been increased by almost 74 percent comparedtothelastfiscalyear.

Agriculture is the most complex human endeavor as well. Unlike many other sectors such as manufacturing and services, it involves highly uncertain, hard to control or modify, biological, social, economic and climatic processes.Its development is also influenced by changes that undergo in the socio-economic,technologicalandpoliticalspheresofanationandbeyond.

Evidences show that investment in agriculture sector had declined since 1980'suntiltheworldconfrontedwithraisingfoodpricecrisisin2008.Infact,the share of foreign aid to agriculture in total aid declined from around 23 percentin1979-81to6percentin2007-08.Thefoodcrisisbecameareminderforthenationalandinternationalcommunitiesforarenewedcommitmenttoraiserealandeffectivesupporttodevelopingcountriesonagriculturalsector.For most of these countries that are in the receiving side, agriculture is the primarysectorhavingasignificantshare inthenationalGDP. Performanceof the sector in these developing countries not only determines the fate of billions of people living there but also supports consumers in developed countries.

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In Nepal, the global trend of declining aid to agriculture corresponded with the public sector investment in agriculture. Public sector expenditure in agriculturecamedowntoaround3%fromaround7%duringlast3decades.

Recently,wehaveseenthatinvestmentinagricultureisbeinginternationallyvalued. Ibelieveit isaveryhightimeforustoutilizesuchsupportsinthemosteffectiveway.Thatis,wereciprocatebyimprovingtheperformanceofouragriculturesectorandhelpstabilizethevolatileagro-foodsupplysituationacrosstheearth.By2050,agricultureneedstoproduceenoughfor9billionpeopleofthisglobe.Thisisadauntingtaskatthepresentscenariosincetheworld is already lagging means and ways to feed 850 million undernourished peopleand165millionmalnourishedchildren.Ourowncontext isnotanybetter.Alittlemorethan23percentoftheNepalesepopulationisstillunderpoverty trap and only the agriculture has the tenacity to bring majority of these people out of the trap.

Within the last couple of decades, agriculture has gone through major structural and phenomenal changes across the globe. It has been the subject of long and disputed globalization agenda. Rapid development in scienceand technology has offered significant growth opportunity in agriculturalproductivity. Revolution in information and communication technologieshas led to theevolutionofunprecedentedextendofconsumerismeven inagro-food products. Supermarkets even in developing countries are replacing traditionalwetagriculturalmarketssteadily. Globalfoodvaluechainshavelinked consumers from developed countries to producers in developing countries and vice versa. Development of logistical technologies providesopportunitiesforlossandwastereductionacrossthefoodchain.Effectively,agriculture has developed into industrial in nature with genuine source of highprofitabilityandhasrisen intoanequally intensecompetitiveindustryfor farmers and actors of the food value chain.

Inthesecircumstances,modernizingouragriculturebyutilizingandexploitinglatest socio-economic, technological and political developments withinandacrosstheglobeisasynergisticsolution. Ourfarmersaswellasotheractors of food chainsmight not bebetter prepared and equipped to copeup with new challenges. Since development of agriculture sector is a win-winresult forall itsstakeholders,wemayneedtofindacontextualmodelofsupportinagriculture,whichredefinethenature,objectiveandmodalityof international cooperation. The aim is to invest in the sector in a way,which not only makes the recipient self-sustaining but also helps to pay backthesupportingcommunities.Enhancementintheinvestmentthrough

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internationalcooperationinagricultureanddevelopmentofinternalcapacityto use the support effectively and efficientlymust become our immediatepriorities. Veryrecently,ourdevelopmentpartnershaveshownthesimilarcommitment through their support and engagement in the preparation ofAgricultureDevelopmentStrategy(ADS). IwouldbepleasedtoseesimilarcommitmentintheexecutionofADS.

With this, I would like to conclude by thanking the organizers as well as participants andwishing for the success of this event in achieving desiredresults.

Thank you.

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Closing remarks byDr. Rishi Raj Adhikari, Executive Difrector, IFA

A very good morning to all of you • Hon.MinisterofAgricultureDevelopment,Mr.TekBahadurThapa

Gharti • Chief Secretary Mr. Leela Mani Paudyal • SecretaryofForestandSoilConservation,Dr.GaneshRajJoshi • Mr. Yogendra Karki, Project Director, PACT andDr. PremBahadur

Thapa,ChairpersonofACoSbothourco-organizersofthisseminar • Membersofthediplomaticcorps • Eminent personalities in the field of agriculture development,

foreignrelations,economy,business,diplomacy,andacademy. • Representativesfromthedonoragencies. • Paper presenters, Chairpersons and Commentators • Friends from media • ColleaguesfromMinistryofForeignAffairs,AgricultureDevelopment

and other Ministries, All other invited guests and my co-workers fromtheInstituteofForeignAffairs.

I thankHon.Minister forhiseloquentand thoughtprovoking ideason thethemeoftheseminarandforsettingthetoneforthefollowingtwosessions.

Agriculture is very important for sustaining our lives and as the source of economicrevolutionofourcountry. Ithasthegreatestpotentialof leadingNepal out of unemployment and poverty trap and bringing peace and stability in the country. It is main source of food, income and employment for the majority, especially for the rural, marginalized population. It employs twothirdofcountry’slaborforceandcontributesmorethanonethirdofGDP.

Agriculturehasroleineconomicdevelopmentby:

• Increased supply of food for domestic consumption and importsubstitution;

• Increased employment in tandem with release of labor for industrial employment;

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• Enlarged the size of the market for industrial output; and

• Increased supply of domestic savings; with earning of foreignexchange.

However, it is subsistence in nature and associated with poverty, underdevelopment with very modest economic growth rates. Supportingproduction aspect of agriculture only is not enough to make agriculturecompetitive.Commercializationandindustrializationisnecessary.

Agriculture has been observed to play a vital role in the transition of lessdeveloped countries to higher levels of economic development, through progressive industrialization and greater employment of labor with higherwage-levels.

Sustained economic growth in less developed counties requires policiesfor economic development that yield incentives for efficient expansion ofagricultureaswellasindustry.Increasesinagriculturaloutputstimulatethedemandfor industrial inputssuchas fertilizerandfarmequipment;aswellas expand the supply of agricultural goods used as inputs to nonagricultural production.

TherearemanylessonsfromAsiancountries.Economicmiracleofsomeofthe Asian countries has been observed to be based on labor-using industries and exports of labor-intensive manufactures. Agricultural growth and rural development have a significant role to play in the industrialization andeconomicgrowthofthesecountries.Theadoptionofthe20-yearAgriculturePerspective Plan (APP) in 1997 and recent endeavor of another 20 yearsAgricultureDevelopmentStrategy(ADS)andcurrentgovernmentsdoublingthebudgetallocationinagriculturereflectstheemphasisthegovernmenthasgivenontheagriculturalsectoranditscommercializationwiththetargetofeconomicrevolutioninthecountry.ItisquitepleasingtolearnthatsomanyinnovativeNepalesecurrentlyhavestartedcommercializationofagricultureinvariouspartsofthecountry.Itishighlydesiredthattheseinnovationsmustbe expanded and link small and poor farmers and take to economy of scale so that large number of poor youth get the job in these enterprises and do not have to migrate for menial jobs abroad.

However,therearepolicyflawsincommercializationofagricultureinNepalasthereisnoconceptofcompletechainmanagement(fromproductiontoconsumption).Production,marketing,processinganddistributionaretakenasseparateprocesseswithnointer-relationship.Duetomigrationofyouthabroad and to the cities there has been shortage of agriculture workers,

16


pushingupthelaborchargesandalsoresultinginsizeableacreageoflandtobefallow.Encouragingcommercializationandindustrializationofagriculturewouldengagethesemigratingcitizenswithinthecountryandcontributetonationaldevelopment.

I would like to present a model of agriculture development that supports a farmeroutofthepovertytrap:

Linking Small Farmers To Commercialization- A Model

FACTORY WORKERLAND TILLER

FACTORY OWNER

MARKET

POLICY INFRASTRUCTURE

RESEARCH

LINKAGES

TECHNOLOGIES

STORAGE

ENABLING ENVIRONMENT

LINKING SMALL FARMERS TO COMMERCIALIZATION -A MODEL

Thank you very much.

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PaperPresentationonCommercialization of Nepalese Agriculture

and External CooperationBy Mr. Deependra Bahadur Kshetry

Former Vice Chairman, National Planning Commission.

Nepal is a country of potentialities waiting to be translated into realities.Nature has bestowed natural beauty and resources, the harnessing of which ismarredbymismanagement, faultydecisionsand inadequate investment.Basedon the interactionswith likely investors it couldbesaid thatbarringthe law and order fragile situation, and lengthy procedures for foreigninvestments,scopesforitareplentyforitswaterresources,tourismactivitiesand industries.

Though agriculture possesses high potentials due to diverse ecology andsoilcharacteristicscoupledwiththeirrigationfacilitiesyettobeharnessed,investment neither external not domestic has been attracted. Productionand processing of agricultural commodities have immense scope both fordomesticconsumptionandexport.Sincepolicyandpriorityplacement layselsewhere, agricultural sector is lagging behind and fails to even meet the calorieneedofthepopulationwiththeoutputofthecountry.

This write up is organized into five sections. First section deals with thefeaturesoftheNepaleseagricultureanditscommercializationtrend.Secondportionexaminesthestatusofexternalassistanceandareascoveredby it.Third section covers the achievements made from the commercializationactivities.Thefourthsectiondealswiththemeasurestobetakenandthefinalpart concludes the write up. With the conclusion of this exercise it is expected that a clear picture will emerge about the commercialization of Nepaleseagriculture and a need to adopt policies in order to meet market demand of agricultural produce in the country.

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1. Features of Nepalese Agriculture and Trend of Commercialization

Nepalese agriculture used to be more of culture than profession. Tilltodayworshipping of elements related to agricultural practices are in use.Offeringtheagriculturalproducesbeforethehouseholdsconsumeappeases‘BhumeDevta’localdeities,whohaveattachmentwithland.Similarly,Naag(Venerated Snakes) are worshipped every year to get protection in theagricultural activities of rural households. Unique feature of letting frogsmarriedatatimewhendroughtprevailsforlong.Bydoingso,farmersbelievethatnatureaddressestheproblemofrainfall.Cattlesanddomesticpetslikedogsareworshippedduringthefestivalsoflightthatcoincidespostharvestseason.These featurescharacterize thesubsistence levelofagriculturearemore attached to the unfounded belief of getting benefits from nature. Iftherewasroundayearirrigationnetwork,therewouldbenonecessityoffrognuptialfunctionwouldrequire.Almostthreefourthofpopulationisengagedin agriculture with average size of holdings of 0.7 ha. Peasant proprietorship with smallholdings predominate the agricultural households, which have the tendencyofkeepingfewcattleandpoultry.TheNepallivingstandardsurvey(NLSS)2011/12revealsthat64.2percentraisecattleand53.6percentkeeppoultry. This shows the common characteristics of agricultural householdsandindicatesrelativelythelowdegreeofcommercializationofagriculture.Itis manifested from the sources of income the agricultural households receive. Farm income drastically declined to 27.7 percent in 2011/12 compared to47.8 percent in 2003/04 (NLSS, 2011/12). Non-farm income has gone upconsiderably and remittance forms a sizable portionof household income.FromtheconsumptionpointofviewoneinfivehouseholdswereidentifiedasconsuminganinadequatedietbasedontheFCS(FoodConsumptionscore)andoneinfourwereidentifiedasfoodpoor(NPC-2013)

In the past, in pursuit of making agricultural growth sustainable, annual exhibitionsofagroproductsindifferentdistrictswereheldandtheagricultureyear was observed. Long term planning of agricultural sector designed covering twenty years under thenameofAgricultural Perspectiveplan (APP)whichspeltoutclearlythattheresourceneedandprojectionsofachievementstobemadeundertheprogramindifferentcomponentsofagriculture.Aperfectcoordinationbetweenirrigationinfrastructureandcerealcropswasvisualizedtomaketheagriculturalproductionsustainabletoensurefoodsecurityandmeetexternaldemand.OwnershipoftheAPPlackedsincefrequentchangesofgovernmentandreorganizationofministries,theresponsibilitiesofwhichweretakenverylightly.TheoutcomesoftheAPPwerenotrealizedtangiblehowever; trendswereset tomaketheessential ingredients forsustainable

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development of agriculture in place, such as credit needs, market channels andcoordinationamonglineagencies.

Agriculture farms run by government with the aim of demonstration andexperimentation to lead theagriculture intomorebusiness likeenterprise,arenotgettingdueattentionbythegovernment.Somearebeingprivatizedorleased out in a bid to transfer the ownership right. Management of such farms areneglectedpartlyduetoinsufficientbudgetandevenifbudgetisallocated,proper use is hardly honored. The objective of running the governmentfarms are waning and proving to be redundant exercise leading to waste of resources, includinghuman resourcewho feel thepostingat experimentalfarmsaspunishment.Vividdirectionislackingastodealingwithgovernmentfarms.Consequently,appropriateagriculturalpracticesinaparticularecologyandsoilconditionsareimmenselymissing.Commercializationofagriculturalproducts and initiation of industrial enterprise dealingwith farm productsthroughreplicationarebecomingrare.

Rural integrated projects were focusing on rural households engaged in agriculture inraisingoutput.Projectsmeant forcropdiversification, raisingincome of small and medium scale farmers, market access for agricultural products were initiated to drag the farmers intomarketing of agriculturaloutput. Leasehold forest and livestock development project linked the farm householdstobenefitfromnon-timberforestproducts.Specificprojectslikethosewereinstrumental in impartingknowledgetofarmersoncommercialtype of farming and sell the marketable surplus.

To initiate commercialization of agricultural products, the Federationof Nepalese Chamber of Commerce and Industries (FNCCI) has run theAgriculture Enterprise Development Centre, primarily encouraging private sectortoinvolveinagroenterprises,incooperationwithUSAID.Thecenterfocusesonproductionofcashcrops,processingandmarketingofthosecorpsthrough providing training and technical support. Presently, the center is concentratingitseffortsintodevelopingonevillageoneproduct(OVOP)andonedistrictoneproduct(ODOP), ingeographicalareasfeasibletopromotesuitableproducts.Similarly,highvalueagroproduct(HVAP)projectalsoisinoperationencouragingthefarmerstoadoptnewpracticesinproducingblackpepper, apples, cardamom, tea and many other kinds of herbal products.

Under the Ministry of Agriculture Development (Cooperatives erstwhile)Project for Agriculture Commercialization and Trade (PACT) has been inoperation since 2009 in Cooperation with the World Bank. The PACT isconcernedwith improvingcompetitivenessof smallholdersand theagro -

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businesssectorinselectedhighvaluecrops,valuechainintwenty-fivecentralandwestern hills and Terai districts having high importance in agriculture.Mainobjectivesoftheprojectaretoassistindividualfarmersandcooperativesorientingtoengageinprofitablemarketorientedproducts,promotenetworkamong producers, processors, traders and other stakeholders and make the farmers able to meet the standards of the products in line with nationalandinternationalmarketdemand.Firstphaseisoverandthesecondphaseenvisagescoveringthewholecountryincorporatingeightmainareasnamely,value chain in vegetables like tomatoes, cabbages, dairy products, ginger, coffee, floriculture, cardamom, fishery, live-stock and poultry products.Nominal portion (one-fifth) of the project cost would be borne by thegovernmentwhilerestwouldcomefromtheWorldBankintheformofgrantand loan, the latter portionwill slightly be higher. To bring changes in theagricultural practices in rural areas; making the farmers able to sell theirproductsintothemarkettoincreasethefarmincome.Theprojecthasbecomeinstrumentalthroughlinkingwithmarkets,improvingprocessingtechniques.Thedemandforitsserviceshaveshotup.

Micro Enterprise Development Project run by UNDP in coordination withgovernment agencies mainly Ministry of Industry (MoI) has promoted tocreate self employment among youth of rural poor, marginalized through training, facilitating to establish enterprises based on local raw-materials.Enterprise development and sustainability is the main component to which theUNDPplayscatalyticroleinstrengtheningcapacityoflocalbodiessothateventuallytheexercisebecomesself-fulfilling.Sinceruralareascontainagroforest based materials, the use of which would not only provide employment and income to rural poor families but also encourage enterprise development basedonagro-forestproductscateringthenationalandinternationalneeds.

Returnee migrant workers have taken keen interest to start enterprises based onagriculturalproduction.Dairyfarming,piggery,vegetablegrowing,fisheryare the undertakings the youths have started according to the experience theyhadandpotentialitythatexistsintheareatheystartbusinessin.Besidesthat, government policy of awarding grants to cooperatives and individualfarmers as part of technical support has encouraged commercialization ofagriculturalproductsspeciallyvegetables,warehouseandstoragefacilitiestobeprovidedthroughgrantofgovernmentalsohasassistedtodrawattentionof farmers to follow cash crop farming. Industrialization based on agro-productshowever,isdismalagainstthebackdropofdeceleratingconditionsof overall industrial sector. Rice milling units consist the principal industrial undertaking in agro industrial sector. It is therefore believed that with the

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promotion of productivity, commercialization enhances which furtherdemandstheprocessingofagroproductsthatagainwillstimulatedemandforagroindustriestobesetupbydomesticandforeigninvestments.

External Assistance: Status and Areas focused.

External assistance is the main source of development expenditure in the Nepalesebudget.Multilateral, bilateral and internationalnon- governmentorganizations are the main sources. Loan and Grant are two componentsin which agriculture sector in general and commercialization portion ofagriculture in particular receives grant in larger proportion. Acceptinggrants does not mean only the funds but technology and management also. Sometimesgrantispicturedasmeaninglessinthesensethatmajorpartofisit being returned back to the source country under the garb of technical and humanresourcesupport,thatprovestobehundredtimesexpensivethanthenativesource.Importantthingiswhatonecanlearntoutilizetheresourcestoextractoptimumbenefit.

General impression among people is that developing countries like ourslack funds therefore desired level of development is not achievable. But,thedatademonstrateotherwise.Nogeneraltrendisobservedinutilizationof both grants and loans. Table – 1 shows that there is vast gap betweencommitmentanddisbursementofgrants.Themechanismofgrantissuchthatonce thegovernment initiates the intendedprojectafter thatonly it seeksreimbursement from the donor agencies. In some cases lack of counterpart fundinthenationalbudget,theprocessofutilizationofgrantfundsbecomesslower.

Table- 1 : External Assistance use - Grant

(Rs. In Million)

2007/08 2008/09 2009/10 2010/11 2011/12

BilateralCommitted Disbursed C D C D C D C D5621 9576 23655 8720 36900 18351 24820 21738 31460 28833

Multilateral 35443 10745 19441 17663 33358 20195 39914 24184 26877 11977

Total 41064 20321 43096 26383 70258 38546 64734 45922 58337 40810

Percentage 49.5 61.2 54.9 70.9 69.9

(Source: Economic Survey 2013/14)

Similarly, utilization of loan account, Table -2 demonstrates that two fiscalyears successfully obtained disbursement well above the level of commitment

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whilefiscalyear2009/10onwardstheresultwasverydismal,wellbelow50percent.Thisisthescenarioofoverallbudgetandshareofforeignassistanceinit.Similarcasewillbeobservedincommercializationofagriculturealsoasubsector of the budget.

Table- 2: External Assistance use - Loan (Rs. In Million)

2007/08 2008/09 2009/10 2010/11 2011/12

BilateralCommitted Disbursed C D C D C D C D

7486 632 3541 613 0 4550 7000 4112 21453 3254

Multi-lateral

636 8348 1338 9356 26351 6673 34363 7963 18389 7829

Total 8122 8980 4879 9969 26351 11223 41363 12075 39842 11083

Percent achieved

110.6 204.3 42.6 29.2 27.8

(Source: Economic Survey, 2012/13)

Intending to transform the Nepalese agriculture into business enterprise from its present position, friendly countries and international agencieshave offered assistance. Doing so multilateral and bilateral agencies haveto follow the government's priority areas and policies enhancing the sector. Similar to the past policy document, the approach paper of the thirteenth plan emphasizes on making the agriculture, livestock and poultry sector competitiveandbusinessoriented.Motivationforyouthtoenter intoagrobusinessthroughvariousmeanswouldbethepolicyorientationduringtheplanperiod.Inordertomakeagriculturesectorcompetitive,workingpolicywould be making easy access the agricultural inputs, insurance schemes for agriculture and livestock, credit, rebate on the imports of agriculture and livestockrelatedmachineriesandequipment’sandtaxrateonagrobusiness.Supporting government's sectorial policies are the responsibilities of theexternal agencies. However, donors sometimes preempt and impose theassistanceonthepleaofthenationalpolicyofdonoragencies.Streamliningthisissuehasbecomenecessary.Therefore,governmentispreparingforeignaidpolicyandproposingoperationmodalityofexternalaid.Donors'objectiveshouldbetobackupthepoliciesofthecountryintendedtobeassisted.Bydoingso,donorscanservetheinterestoftherecipientcountrytoattainthetargeted growth rate.

As per the details published by Finance Ministry, the programs and projects to be supported by bilateral, multilateral agencies and non-government

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international organizations, some components are directly related tocommercialization and industrializationof agriculture. Someprojects coverfewfiscalyearswhilesomearecarriedoverfromthepast.Projectsstimulatingagricultural productionandproductivity, ensuring food security, processingandmarketingofagriculturalproduceareoptedhereforourpurpose.Fisheryandlivestockdevelopment,institutionalcapacitybuildingindesigningpolicies,analysis on risk and vulnerabilities among rural poordue to circumstanceslike market integration, price volatility and climate change are included.Vocationalandtechnicaltrainingstocreateemploymentinagriculturesectoralsoaresponsoredbyexternalaidagencies.ThefollowingtabledepictsthefundsdevotedforcommercializationofAgriculturalproducts:

Table: 3: Funds Committed by External Sources(Rs. In Million)

Bilateral Multilateral Joint Total

Agricultural production

4274.1 4274.1

Food Security 3.9 31.1 17.7 52.7

Marketing 242.8 196.8 41.4 481

Miscellaneous 59.1 46.5 105.6

Total 4579.9 274.4 59.1 4913.4

(Source: Finance Ministry, 2013)

Underbilateralsourcesdonorcountriesandagenciesaffiliatedtothemareincluded, while under multilateral agencies UN specialized agencies arecovered.The'joint'columnincludestheinitiationmadejointlybyparticularcountryandUNagency.Thefiguresaredrawn fromthepublicationof thefinanceministry'StatementofTechnicalandotherAssistanceF/Y2013/14',fromBilateral andMultilateral sources including INGOs'.Amountsdonatedwere in different currencies like US dollar, Swiss Franc, Japanese Yen etc,whichareconvertedintoNepalirupeewiththerelevantexchangerates.Thefiguresshownmaynotbeutilizedinonefiscalyearbutmaybeextended,upto few more years.

Agricultural production received highest amount of Rs. 4274.1 millioncommitted by bilateral agencies only. No amount was available frommultilateralagenciesandjointendeavorforagro-production.Foodsecurity,an issuethat isreflectedasrightofthepeople,totalamountreceivedwas52.7 million each contributed by bilateral agencies Rs. 3.9 million, Rs31.1 millionfrommultilateralagenciesandRs17.7millionfromjointsources.Foodsecurity being important and appealing to people all the agencies seem to beinterested,thoughtheamountissizeable.MarketingattractedRs.481.0

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million, the highest portion of Rs. 242.8 million was devoted by bilateralsource while multilateral and joint sources contributed Rs. 196.8 millionandRs.41.4millionrespectively.Miscellaneoustopiccoversotherareasnotincludedintheabovebutrelatedtocommercializationandindustrializationofagriculturesuchasassessmentoflanddegradationandclimatechangeandpromote,protect,monitorthelegislationonrighttofood.UnderthisheadingRs. 105.6 million is earmarked;Rs. 59.1 million from bilateral sources and Rs. 46.5million frommultilateral source.The funds thusallocated seemtobeindirectlyrelatedtocommercializationofagriculture.Buildinginfrastructureincludingknowledgeofqualitymaintainingforexportisalsoimportantaspectthat cannot be neglected.

Stimulating production and productivity of agricultural produce includinghorticulture, livestock, poultry andfishery remained the important activitytopromotecommercializing.Processingandmarketingof surplusproductsdependsprimarilyonproductivitygains, infrastructuretopreserveorstoretheagro-productslikevegetables,meatproductandfruitshavesignificance,witnessingthefactsofharvestingtimes.Similarly,minimizinglossduringpostharvestseasonsisamattertobeconsideredseriously.Thelossincurredduringhandlingandstoringcouldbeminimizedwithsufficientgrainsoragriculturalproducesavailableformarketing.Thegovernmentpolicyshouldbedirectedtowardsthisdirectioneitherbydevotingresourcesfromgovernmentannualbudget or adhere the policy to elicit resources from external agencies.

The external funds allocated by the ministry of agricultural developmentin the current fiscal year 2070/71 inmajor agricultural projects related tocommercializationaregivenintable-4.

Table – 4 Major Agricultural Projects under External Assistance F/Y 2070/71

(Rs. in Million)

Purpose/Source Govt. Grant Loan TotalAgro Production (415.2) 1117.1 354.8 1471.9Food Security (21.8) 392.6 - 392.6Marketing (168.1) 1785.6 - 1785.6Miscellaneous (0.9) 10.8 22.3 33.1Total (606.0) 3306.1 377.1 3683.2

89. 10.2 100.0

Source: Ministry of Agri.Dev. 2013

FromtheapprovedprogramsofMoADofmajoragriculturalactivities,oftheRs.3683.2million,89.8percent(Rs.3306.1million)comesfromgrantswhile

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10.2 percent (Rs. 377.1million) is derived from loan accounts. Out of thetotal grant of Rs. 3306.1 million, 54.0 percent - Rs. 1785.6 million is devoted tomarketingwhile 33.8percent –Rs. 1117.1million is allocated forAgro-production.Miscellaneous itemscover the leasehold forestandpromotionoflivestockdevelopmentforwhichbothloanandgrantamountareutilized.Bulkoftheamountbeingreceivedundergrant,thereislikelihoodnottopayenoughattentiontomaterializethegoalssetearliertobeaddressedbytheresources deployed.

Ground for commercialization and industrializationof agricultural productsis already set, the next step is to provide momentum emphasizing on infrastructure development and management skill to handle the issue. Agriculture enterprise is becoming expensive due to several factors such as shortage of layout, rising input costs and uncertainty of market. According to economic survey 2070, total land area devoted for cereals was 3344 thousand hectare yielding 8738 thousand metric tons using 145653 metric tons of chemicalfertilizers(withinthefirsteightmonthofF/Y).Comparedwiththepreviousyear'sfigure,thecultivatedareaisalmostthesamebutyieldswerealittleless(5747.2thousandmetrictones)thanthecurrentyear's,withthetremendousamountofchemicalfertilizers,almost219percentmore(45672metrictonspreviousyear)thanthepreviousyear.Nosignificantincreaseintheareaofcashcropswasseen.Ontheotherhand, thepriceofchemicalfertilizersespeciallyofDAPandpotash increasedby40.6percentand55.0percentrespectively.Factorslikethesehavediscouragingimpactsmainlyduetocostescalation,but the return to farmerswasnegligible.Exploitationoffarmersismadebythemiddlemenormarketingagentswhochargeheavyratestofinalconsumerswhileofferingminimumtogrowers.Owingtothesefactors,agriculturesectorneedsstructuralchangesandcoordinationamongrelatedagenciesrequiredinordertomakeagro-enterprisescost-effectiveandcompetitiveinthemarket.

Achievements

AsubsistencecharacteristicofNepaleseagricultureiswaningoutovertime.Since farm income from small plots of owned land do not cover the ever increasing cost of living of people, farmers have the tendency to leave the landbarrenandseeknon-farmjobelsewhere.Thosewhosticktofarmingalsocultivatehighvalue cropsand seasonal vegetables that couldbemarketedandtheincomeoutofwhichsupportstobuycereals.Therefore,farmershaveknownthebenefitsofmarketoriented farmbusinessbutancillarysupportservices like market information, credit, insurance and storage facilitiescritical forbusiness enterprise are lacking.However, by the joint effortsof

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the government and external agencies, commercialization of agricultureis gaining momentum. Dairy farming, poultry raising, tea, coffee, ginger,cardamom like cash crops growing activities have become popular leadingto growth of exports of agricultural products. Mostly agro-products exports formsemiorunprocessed items.This featureopensuptheopportunity todevelop processing industries in the country and raise the export proceeds from agricultural products.

Thereisdearthofinformationontheissuesrelatedtoenterprisedevelopmentleadingtocommercializationand industrializationofagriculture.Verygoodnetworkofextensionservicewasinplaceonce,recededovertimewithlessimportance given by the state under liberal economic policies. From the designatedextensionservicescenterslocatedindifferentareasofadistrictfailedtofunctionproperlyeitherduetoabsenteeismofstafforbudgetproblemand communicating information, be it farming techniques, post harvestmanagement,processingorfetchingtomarket,isvitalforinstitutionalizationofcommercializedagriculture.Godownsandcoldstoragesareveryimportantelementsforpreservingandmaintainingstock.Thesecanaffectthemarketprice and hence the income of farmers, as well as help in maintaining supply in the market.

Someindirectindicatorshavingcorrelationwithfarmenterprise–productionand marketing could be taken from studies conducted entirely for otherpurposes. Table 5 shows the access of farmers in different infrastructurescreatedbythestate:

Table 5: Access to Infrastructure within 30 month(Percent of Population)

Description 2003/04 2010/11

Paved Roads 37.2 51.4

Rough Roads 67.6 79.8Local Market 60.7 64.0Market Centre 34.4 44.7Agri. Centre 31.9 42.8Sajha Co-op. 33.7 53.9

Banking 27.8 35.9

Irrigated Land (Area Hect.) 11823 35748

Source: Nepal Living Standard Survey 2012, Economic Survey 2012

Roadnetwork is developing fast, facilitatingmarket agricultural inputs andagro-products.Almosthalfofthefarmpopulationis intheaccessofpaved

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roadswithinhalfanhourstraveltime.Similarly,64.0percent farmershaveaccesstolocalmarketwhichiswithin30minutesdistance.SajhaCooperativeshaveproliferatedandareattheaccessto53.9percentofthefarmpopulation.Irrigatedlandhasmorethantripledsince2003/04to2010/11accountingfor35748ha.oflandunderperennialsourceofirrigation.Indicatorsmentionedabove facilitate to increase agricultural productivity and market productsaccordingly. All these infrastructures are made available in the auspices of government agencies.

Private sector is leading to establish enterprises dealing with processing, packagingandtransformingagriculturalproductsfromthepointofproductionto the point of end use. Investments thus are made by private sector in developingbusinessenterprises that induceproduction,enhancementandimprove value chain thus maximizing the farm income. Migrant workers returningbackaftergainingexperienceandsomemoneytostartwithbusinessinthecountrytakeinitiatives.Thesepeoplearefocusingontunnelcultivation,dairyfarming,vegetablegrowing,fisheryetc.poolinglandresourcesorundercontract farming. Production,nodoubthas increasedbut support servicesfrom government side are not matching partly because agro enterprises are rarely registered in the form of corporate body. Entities lacking corporatenatureareoftendeprivedoftheservicesincludingsubsidybythegovernmentandcreditfacilitiesformallyfrombanksandfinancialinstitutions.

The press frequently covers enterprises promoting agricultural sector.Ostrichfarming,slaughterhouse,setup ineasternplaintargetingexportofmeat products to P.R. of China and Vietnam etc. are some novel and income generatingprofitableenterprises.Floricultureispickingupfastwhilebecauseof faulty financing practices, export oriented floricultural enterprise hasfailed.Inlackofstoragefacilities,onionsproducedinthecentralTeraiunderspecialprojectslike'MissionOnion',farmershadtosellatbelowthecostofproductiontoIndianbusinesspeopleandimportlaterthesameitempayinghigh costs. Inconsistent import regulation and custom practices also havediscouraged the local producers, which apply to cereals, poultry products and fruits.Nepaleseexport of agricultural commoditiesoftenmeethostilecustomsregulation,asaresulttheexporteditemsremainattheborderforweeks till the sanitary and phyto sanitarymeasures are cleared by Indiancustoms.Suchpracticeisunilateral,whereasNepaldoesnotcareaboutwhatwe import from India.

Initiativestakenbydifferentagenciesindevelopingtheagriculturalsectorintobusiness enterprises are worth reviewing because duplication of activities

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arefoundandworkingstylealsodiffer,henceallowingtheservicerecipientconfused.Guidelinefromthegovernmentagencyhelpstobringuniformityinactionandthinningouttheprojectactivitiestocovermorefarmpopulation.

Directions to be taken

Agricultural sector is an important sector, it has lost priority in policy and budgetary issues for a long time. Recently, realization is live amonggovernmentofficialsandpolicymakersthatagriculturesectorinNepalistheonly sector that can bring change in the economic well-being of Nepalese people and prosperity through ensuring food security and assured income. Thepreviousgovernment ledbyDr.BaburamBhattrai laidanemphasisonthe importance of agriculture development. Agriculture alone can ensure the industrial base and exports of quality goods. Almost two thirds of thepopulationreliesonagriculturethatdoesnotassure livelihoodanddecentlife.Therefore,emphasiswasgiventodoublethebudgetsothatminimumbenchmark for rapid economic growth would be achieved. Increment in budgetwillhavenopositiveeffect, ifproductionorientednewprojectsarenotinitiated.Shouldtherebeanyprojectpendingduetobudgetconstraint,additional budget might help enhancing agriculture. Commercialization ofagricultural projects is possible if external resources earmarked for agro- businesspromotionisutilizedproperly.InthisregardfollowingstepsshouldbetakenforrapidcommercializationofNepaleseagriculture:

Agro-enterprises need to be registered with the government body so that activities like monitoring and facilitation on the part of the governmentbecomes easier. So the process of getting registered needs to be simpleand hassle free. In case of registered firms government agencies can takeintoaccountfortheinstitutionaltechnicalandfinancialsupport.Creditandinsurance facilities become impossible to non- registered firms. Similarly,subsidies,ifany,fromgovernmentarealsonotpossible.Tomaketheenterpriseupdatefinanciallybookkeepingandregularauditingbecomeessentialwhichis not possible to unregistered enterprise.

External assistance in any form should be channelized through government agencies.Theassistanceshouldcomplywiththerecipients'legalandphysicalneeds.Thetraditionofutilizinginternalfundsatthewillanddesignofdonorsshouldbemadeawayforthwithtofullyattainthegoalsthoseareconsistentwith national and local needs.Donor drivenprojects hardly guarantee theperfectuseoffinancialandtechnicalmattersthatsuitthe localconditions.Harmonizationofforeignassistanceisnecessary.Theassistancefromexternalsources should be the part and parcel of government's development agenda

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with articulated aims and objectives to be accomplished. Any assistanceoutside the frame of national policy and agenda is a waste of resourcesandtime.Inregardstoutilisationofexternalassistancegovernmentshouldenhanceabsorptivecapacitysothatcommittedfundswouldbeutilizedtothefullest extent.

Theagenciesinvolvedinenterprisedevelopmentincludinginagriculturalfieldareworkingindependentlyfixingtargetsandemployingfinancialresources.Wasteofresourcesfeltthiswaycouldbestbeutilizedtoattaingreaterandwider goals if these agencies coordinate with each other. Micro-Enterprise DevelopmentProgram(MEDEP)underministryofindustries,AgroEnterpriseDevelopment (AED) under Federation of Nepalese Chamber of CommerceandindustriesandProjectForCommercialisationofAgriculture(PACT)underMinistry of Agriculture Development all of which are supported by external agenciesneedsperfectcoordination.

Considering the varied ecological zones, potentials ofNepalese agricultureand forest based products both seasonal and off seasonal are high. TheforeignmissionsofthegovernmentofNepalshouldexplorethebestpracticesinrespectivecountriesunderthepreceptofeconomicdiplomacyandtrytoreplicateitinNepaltoscorethebestinworldmarket.TheoutcomeoflongexperienceofthecountriesoftheworldcouldbestbeutilizedinNepalthroughmissions stationed overseas, complying perfectly the needed regulations.Nationalinterest,basedoneconomicpoliciescouldbepresentedbeforethenationrepresentedbyNepaleseoverseasandtheareaofexternalsupportbeaguidelinetofinalize.

Unlessanationlikeoursisreadyforcommercializationandindustrializationofagriculture,noinducementwouldbetheretoattractexternalassistance.Thegovernmentshouldtakefollowingmeasures:

a) Prepare a database of agriculture sector focusing on the existingposition and immediate tasks to be done to create environmentconducive for commercialization.Data related to landownership,croppingpattern, human resource, informationonhydrology andmeteorology etc.

b) Government policy shift is necessary in processing, storage andmarketing rather than only on production enhancement. Since amajor part of exports of agricultural produce consists of raw and semi-processed forms, it is necessary to emphasize on processing andmarketingthroughincentivemeasures.

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c) The concerned ministry – Ministry of Agriculture Development,shouldbeequippedwithtechniciansand laboratoriesrequiredtorunresearchanddevelopmentworksmoothly.Thoughtheprivatesector may take a lead, government sector is expected to conduct farmresearchand facilitate the farmers toadoptprofitableagro-business.Inthisconnectiontheleveragegovernmenthastoacquireis in modern technology in agriculture sector. Private sector in developingcountrieslikeourshasrelativelylessscope.So,public-privatepartnershipinresearchanddevelopmentanddisseminationof results would be of great importance.

d) Compliance of regulations of international standard is theresponsibilityofthegovernment.TheWTOaswellasotherregionaltrade organizations are expected to honor the provisions, as themember, measures like sanitary and phyto sanitary have to be complied fully. For this, external assistance could be elicited and benefittedfromtheexperiencesofothercountries.Netbenefitofthismeasurewouldbethatthefacilitatingcountry itselfcouldbethe best customer because it has witnessed the issue very closely.

e) Throughtaxincentivesindifferentaspectsofcommercializationandindustrialization of agriculture, namely concession on registrationfee for the land meant for agro- business, rebate on the import duty oftoolsandmachineries,partialexemptionofvalueaddedtaxonthe goods and services entering the market out of these endeavors could provide a cushion. Smooth running and increased market sharewillbealeewayforattractingexternalfundsincludingForeignDirectInvestment(FDI).

f) Dissemination of information from research institutions andfarmsshouldbe institutionalized.Marketing Informationprovidedhitherto needs to be strengthened and coordinated in such a way that rural farmers ensure access to services including extension from the government.

Conclusion

TransformingNepaleseagriculturefromsubsistenceleveltoacommercializedone is themain task to improve the living condition of Nepalese farmersthrough ensuring food security. Many periodic plans and programs were launchedinthepast,partialachievements,overthestatedobjectivesweremade. The potentials given by the ecological diversity and soil conditions

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of Nepal are yet to be reaped. Another agricultural Development Strategy is prepared encompassing all aspects including climate change. However, dauntingtasktobeginwiththeagricultureledgrowthofNepaleseeconomysolely lies on the commercialization and industrialization using funds bothfromdomesticandexternalsources.

Recently, Nepal government has led emphasis on the growth of Nepalese agriculturesectorforwhichbudgetisincreasedalmostdouble.Inthefiscalyear2012/13agriculturereceived2.6percentofthetotalbudgetwhilethisfiscalyear,theallocationis4.1percentofthetotalbudget.However,capitalexpenditureisstillatalow12.8percentoftheRs.21403.1millionearmarkedforthesector.Resourcecommittedbyexternalsectorfundingis21.8percentofthetotalbudgetforagriculturalsector.Tosetindustrialbaseinthecountry,it has been realized both in government and private sector that agriculture should get priority.

Theagriculturalprojectsapprovedforthefiscalyear2013/14exclusivelyforcommercializationofagricultureisRs.3683.2millionofwhich89.8percentcomes under grant. For these projects government has earmarked Rs. 606 million only, which is one-sixth of the external resources. Similarly, bilateral and multilateral agencies including INGOs have earmarked Rs. 4913.4million for commercialization of agriculture. Sufficient interest shown byexternal agencies support the cause of transforming agriculture into business enterprises.

Externalfundsoftencomeatthewillofthedonoragenciesratherthanaspartof development agenda of the recipient country. It holds true to Nepal also. Therefore,harmonizationofforeignaidandtakingownershipoftheprojectsunder external assistance becomes necessary to honor the Paris Accord and fully reap the advantage from the external aid. To ensure these aspects,development programs of the recipient country should fully be appraised through missions abroad and come to a consensus in implementing theprojects. It will minimize the alleged feeling that funds in the form of foreign aid again returns back to donor countries. Ownership of external aidedprojects by recipient countries brings fruits to both the donor and receiving ends.

Government is themain player that sets the ground for eliciting externalassistance including FDI. Infrastructure development like rural roads, electrification,andirrigationetc.heavilyfalluponthegovernmentforwhichithastoprepareextensiveplanofaction.Tocommercializetheagriculturesector, tax incentives including rebate in registration fee of the land to be

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used in the enterprise and concessional import duty for the machineries and equipment’smeantimported.Financialserviceslikecreditandinsurancealsoarecritical.Thesearethecushionsthepotentialentrepreneursgettospeedupthecommercializationexercise.

After all, enterprise development prospers with the initiation andencouragementof theprivate sector.Government canassist indevelopingprojects, building infrastructure and serve as facilitator. Research and development in government farms help the farm sector to adopt technology and avoid risks which private sectors seem reluctant to take. With these measures if government creates conducive environment, agriculture sector willprosperthroughcommercializationandindustrializationforwhichcriticalinputs like capital and technology could be mobilized through external assistance.

ReferencesNationalPlanningCommission(2013),ReportonFoodSecurityandNutrition,2013

NationalPlanningCommission(2012),NepalLivingStandardSurvey2010/11

MinistryofFinance(2070),BudgetSpeech

MinistryofFinanceEconomicSurvey,2069/70

MinistryofFinance(2013)Statement of Technical and other Assistance F/Y2013/14

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Comment on the Paper Commercialization of Nepalese Agriculture

and External CooperationDr. Ganesh Raj Joshi

Secretary MinistryofForestsandSoilConservation

CommentingonapaperwrittenbyaveryeminentpersonlikeDeependraBKshetryisadifficultjobforme.FirstofallIwouldliketocongratulateDipendrasir for his excellent paper. He has touched almost all dimensions of agricultural developmentmoreimportantlyoncommercializationandexternalsupport.HehasmadeelaborativediscussionsoncharacteristicsofNepaleseagricultureandtrendsofcommercialization,statusofexternalassistanceinagricultureandareasfocusedforsuchcooperation,andachievementsmadesofarintheareas of agricultural commercialization and industrialization. Discussing onthestatusandachievements,hehasproposedthewayforwardforpromotingagriculturalcommercializationandindustrializationinNepal.

Let me put some comments on the paper that will be useful for improving the quality of the paper. Only one year foreign assistance data has beenmentioned in paper. This is inadequate to evaluate the performance inagriculturalcommercializationwiththeexternalassistance. Iwouldsuggesttolookintothetotalexternalassistanceforthelast30-40years(basedontheavailabilityofdata),anddisaggregateitintoagriculturalandnon-agriculturalsector.Itwouldbenicetoanalyzethetrends/growthinboththesectorsandmakecomparison.Iwouldalsosuggestdisaggregatingintoloans,grantsandtechnicalassistance.Iftheinformationisavailable,theuseofthesetypesofexternalassistancebysub-sectors(inagriculture)wouldbeusefultocarryoutfurtheranalysis.Iwouldalsosuggestcorrectingsometypologicalerrorsinthepaper.

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I would like to supplement what Deependra sir has written on differentaspects.

We all know agriculture is an important sector to contribute to economic developmentandpovertyreductioninNepal.Thiscanhappenonlywithagro-based industrial development which is evident from the experience of ASEAN and East Asian countries.

Letmejustcite“RuralAreaAgri–basedEmploymentDevelopmentStrategy"proposed by Prof Mellor during 1980s. He suggested major four components forimplementingthisstrategy:

1. Increasingagriculturalproductionthroughinvestmentincostreducing technologies, infrastructures and other inputs.

2. Theshiftofindustrialstrategytowardslaborintensiveanddecentralized strategy

3. Accelerationofinternationaltrade

4. Decentralizationofadministrativestructure(regulatorytofacilitating)

This would lead to decrease in average cost which results in increase inaggregateproduction,farmincomeandaggregatedemand.

I am sure our Agriculture Perspective Plan was also based on the abovepremise as Prof.Mellor was the architect of APP. This could not be fullyimplementedastherewaslackofownershipbyministriesconcerned(exceptagriculture), inadequate resources allocationandweak coordination for itsimplementation,amongothers. ThefinancialsupportanticipatedfromtheexternalsourceswasalsoinadequatetoimplementtheAPP.

Thereweremanyprojectssupportedfromexternalassistanceinagriculturalsector in Nepal. The agricultural sector was the major component ofIntegrated Rural Development Projects (IRDPs) implemented during 1970sand1980s indifferentpartsof thecountry.Tocite some IntegratedCerealproject, Agriculture Research and Production Project, Agriculture Researchand Extension Project, Market Access for Rural Development, Secondary Crops Development Project, Crop Diversification Project, Livestock DevelopmentProjects (different phases), Commercial Agricultural Development Project,Leasehold Forestry and Livestock Development and many others. At present, the projects such as supported byWorld Bank (PACT), AsianDevelopmentBank(RISMFP),Kisanko lagiBiuBijan(IFAD),andmanyotherprojectsfrom

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bilateral assistance (Japan, Korea, USA, etc) are under implementation inNepal.

The initial years'projectsunderexternal assistancemighthave focusedonproduction aspects with little attention on post-harvest aspects. But post-production aspects have been considered adequately in the recent years.These all have contributed to the development of human resources andcreatedabaseforcommercializationofagriculture.

Oneoftheshortcomingstilltodayistheabsenceofclearcutforeignaidpolicy.Thishasimplicationonidentifyingareasandsub-sectorsthatneedexternalfunding(asdomesticinvestmentmightbeinadequate).Wearealsomakingblanketdecisionintermsofthesizeofassistanceandsub-sectors.Thereisalsoaneedtoassesstheareaswherewehavecomparativeandcompetitiveadvantage and need of external support to promote them. Hence, we should beselectiveinavailingforeignassistanceneedsbysub-sectors(inagriculture)– in technology development, infrastructure development and humanresources development (HRD). The external assistance should support inimplementingourpoliciesandstrategiesIntermsofHRD.Weshouldgettheservicesofexpatriateincriticalareaswherewehavedeficit,asNepalhaslargemassofexpertsindifferentfieldsofagriculture.Alsoweshouldseekfundingcommitmentsfromdevelopmentpartnersinimplementingperspectiveplansand strategies in agriculture considering the importance of this sector, like ADS.

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Comments from the ChairDr. Rishi Raj Adhikari

Executive Difrector, IFA Commercialization of Nepalese Agriculture and

External Cooperation.

I would like to extend my thanks to the paper presenter, Mr. Deependra Bahadur Kshetry, former Vice Chair of the National Planning Commissionforhiseloquentpresentationand richnessof theanalysison thesubject. IalsothankDr.GaneshRajJoshi,SecretaryoftheMinistryofForestandSoilConservation for his candid comments on the paper. I also thank all theparticipants for theiractiveengagement in thedeliberationof theseminarandforcontributingtowardsrefinementofthepaper.

ThethemeofthepaperwasverycrucialandimportantforNepal'sdevelopmentthrough modernization, commercialization and industrialization of heragricultureasithaspotentialofeconomicrevolution,throughemploymentenhancement,povertyeradicationandpeaceandstabilityinthecountry.

The paper mentions about government realization of the importance ofcommercialization and industrialization of agriculture and accordingly thebudget has been doubled recently and new agriculture policy as ADS has been initiated. It talks about government's emphasis on coming up withForeignAidPolicyforitsefficientutilizationforimprovedagricultureincludingcommercialization and industrialization. Government plans including the13thApproachpaperemphasizesoncompetitivenessandbusinessorientedagriculturebysupportingtheyouth,especiallyfromruralareasandwomenthrough tax rebate and other measures etc.

It recommends for policy shift from production to processing and valueadditioninagriculture.Theplansandprogramsmustmentiondirectsupporttocommercializationand industrializationofagriculturenot indirect.Theremust beharmonizationof foreign assistanceby fulfilling legal andphysicalneeds.Theremustbeintra-andinter-ministerialcoordinationinmanagement

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ofinternationalcooperationinagricultureandParisAccordinmanagementofinternationalaidmustbeadheredto.Governmentfarmsmustdemonstratethecommercializationofagriculturetoinstillconfidenceamongstthegeneralfarmers.

Role of private sector needs to be enhanced through PPP. Government'sinitiativeofprojectslikePACT,MEDEPandtheexampleoffacilitatingFNCCItowardsOVOPandODOPis intherightdirection. Itshouldalsostep-upitssupporttotheinitiativesofsomeoftheinnovationofthecitizens,especiallythe returnee migrants, in their endeavor towards commercialization ofagriculturesuchasostrichfarming,tunnelingvegetables,dairy,fisheriesetc.

Governmentfarmsandotherfacultiesmustbestrengthenedandequippedto be able to conduct research adequately for commercialization andindustrializationofagriculture.Internationalstandardsinexportingagriculturegoods should be maintained and there is need to register the enterprises to getaccesstogovernmentfacilities.

However,therearesomepertinentissuessuchas:

Internationalcooperationcomesnotonlydirectlyforagriculturedevelopmentbutasubstantialportionalsocomesintheformoftechnicalandmanagementsupportwhichgoesbacktodonorcountry.Thereisdearthofinfrastructuresand management, including godowns, cold storage facilities along withinformationandexperiencesharingincommercializationandindustrializationof agriculture.RegistrationofAgricultureenterprises is herculean taskanddisappointsthepotentialyoungentrepreneurs.

However,thereisneedtoemphasizemoreonthefollowing:

The paper needs to recommend clear cut action plan for obtaining andusing the external support in agriculture. The external support must bean integral part of our foreign policy through making our missions abroad active on economic diplomacy. The government must plan other sectorssuch as infrastructuredevelopment in tandemwith commercialization andindustrializationofagriculture.

Lastly,theinternationalcooperationmustbebasedonourownplanningandrequirementsnotondonors'plans.Ionceagainthankyouallforyouractiveparticipation.

Thank you very much !

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PaperPresentationExisting Policies Gaps, Challenges and Way Forward for Effective

Mobilization of International Cooperation towards Commercialization and Industrialization of Nepalese Agriculture

By Mr. Ganesh Kumar K.C. Former Secretary

Ministry of Agriculture Development

1. Background

Nepal a small landlocked South Asian country sandwiched between India in the south, east and west and China in the north Nepal is richly endowed with natural resources such as land, water, forests, diverse climate and biodiversity. Nepalispredominantlyamountainouscountrywithelevationsrangingfrom64 m above sea level in Kechana located in southern plain area of eastern TeraiofJhapadistrictto8,848mSagarmathatheworld’shighestpeak.Suchwidevariationinecologicalstructures,alloffertremendousopportunitiesforagricultural development in the country.

Agriculture is the backbone of the Nepalese economy because it is the single largest contributor (35.1%) to Gross Domestic Product (GDP) (MoF, 2012),employs 66 percent people directly and a means of livelihoods of about 74 per cent people. Despite such an important role of agriculture sector in the Nepalese economy, public sector investment in this sector has been low at about 2.0-2.5 percent annually. Thus, the Nepalese agriculture hasstill remained a subsistence type with low level of commercialization andindustrialization.

Agricultural commercialization and industrialization have been importantelements to sustain and enhance human life and a key to unlock the door tomodern-day human civilization in theworld and a remarkable shift hasoccurredintechnologicalinnovationsandintheworldmarketdevelopmentaftertheadventofcommercialization.

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In most developed countries, traditional farming are now replaced byindustrialized farming - organized according to industrial management techniques,whichcanmoreefficientlyandeconomicallyadapttonewandever-improvingtechnology,specializationofcropsandanimals,birds,andthefluctuatingfarmpriceswhereasindevelopingcountries,smallfarmsarestillusingtraditionaltechniques,farmersarestrugglinghardtosustainagricultureasaprofitableprofessionforbetterlivelihoodsandthisverymuchappliesinNepal.

In Nepal, widespread poverty coupled with unavailability of requiredagriculture inputs and heavy exodus of youths from rural areas has further aggravatedthesituation.Foodinsecurity(about33outof75districtsarestillfooddeficit)andmalnutrition(around40percentofchildrenunderfivesufferfrommalnutrition)aremajorissues.Thesehinttheneedtoanalyzetheissuesin-depththendevelopstrategiesforcommercializationandindustrializationof agriculture sector.

Thispaperhasattemptedto reviewtheagriculturalpolicies, relevant long-term perspective plans, define commercialization and industrialization,agriculturesectorandforeignaidinagricultureandidentifytheconstraints.Finally,thepaperhasputforwardsomepolicysuggestionforconsideration.

2. Concept of Commercialization and Industrialization Commercialization

Commercialization is the process by which a new product or service isintroducedintothegeneralmarket.Commercializationisbrokenintophases,fromtheinitialintroductionoftheproductthroughitsmassproductionandadoption.Ittakesintoaccounttheproduction,distribution,marketing,salesandcustomersupportrequiredtoachievecommercialsuccess.Asastrategy,commercialization requires that a business develop a marketing plan,determine how the productwill be supplied to themarket and anticipatebarrierstosuccess(Investopedia,2013a).

Itfurtherexplains'commercialization'asafunnel.Thewidestpartofthefunnelrepresents many ideas that a company might have for launching a product. Asthefunnelnarrows,thecompanyweedsoutideasbasedonlogisticsandcosts, consumerandeconomic trends, and feasibility.Commercialization ispartofalargerfeedbackloopforaproduct,astheultimateintroductionoftheproductintothemarketmayrequireadjustmentstotheprocess.

Commercialization is often confused with sales, marketing or business development.Thecommercializationprocesshasthreekeyaspects:

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• Thefunnel:Itisessentialtolookatmanyideastogetoneormoreproducts or businesses, which can be sustained, long-term.

• It is a stage-wise process, and each stage has its own key goals and milestones.

• It is vital to involve key stakeholders including customers.

Wikipedia(2013b)definescommercialagricultureasalarge-scaleproductionof plants for sale, intended for widespread distribution to wholesalers orretail outlets. Commercial farming is most commonly found in advanced industrialized nations. The harvested crop may be processed on-site ortransported to a processing facility and then sold to a wholesaler as a complete-product, or it may be sold as-is for further processing elsewhere. Commercial agriculture differs significantly from subsistence agriculture,as themain objectiveof commercial agriculture is achieving higher profitsthrougheconomiesofscale,specialization, introductionofcapital-intensivefarming techniques, labor-saving technologies, and maximization of cropyieldsperhectarethroughsyntheticandnaturalresources(fertilizers,hybridseeds,irrigation,etc).Subsistenceagricultureisaneconomicmodelinwhichmostmembersofapopulationworkinagriculturetofeedthemselveswithlimited need for trade.

Thus, commercialagriculture isa typeofagriculture suited to industrialorpost-industrialeconomicmodelsinwhichmostmembersofapopulationdonotworkinagriculture,arefedbyothers(thefewwhodoworkinagriculture),andpurchasetheirfoodandfiberasconsumers,withcurrency.

Industrialization

Theprocessinwhichasocietyorcountry(orworld)transformsitselffromaprimarily agricultural society into one based on the manufacturing of goods andservices.Individualmanuallaborisoftenreplacedbymechanizedmassproductionandcraftsmenarereplacedbyassemblylines.Characteristicsofindustrializationincludetheuseoftechnologicalinnovationtosolveproblemsasopposed to superstitionordependencyuponconditionsoutsidehumancontrolsuchas theweather,aswellasmoreefficientdivisionof laborandeconomicgrowth(Investopedia,2013b).

Industrializationistheperiodofsocialandeconomicchangethattransformsahumangroup fromanagrarian society intoan industrialone (Wikipedia,2013c).Thereareseveralfactorsthatfacilitateindustrialmodernizationandenterprisedevelopment.Keypositivefactorsrangefromfavorablepolitical-legal environments for industry and commerce, through abundant natural

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resourcesofvariouskinds,toplentifulsuppliesofrelativelylow-cost,skilledand adaptable labour.

Industrial farming is a form of modern farming that refers to the industrialized productionof livestock, poultry, fish, and crops. Themethods of industrialagriculture are techno scientific, economic, and political. They includeinnovation in agricultural machinery and farming methods, genetictechnology, techniques for achievingeconomiesof scale inproduction, the creationofnewmarketsforconsumption,theapplicationofpatentprotectiontogeneticinformation,andglobaltrade.Thesemethodsarewidespreadindevelopednationsandincreasinglyprevalentworldwide.Mostofthemeat, dairy, eggs, fruits, and vegetables available in supermarkets are produced using these methodsofindustrialagriculture(Wikipedia,2013d).

Council on Food, Agricultural and Resource Economics (2013) definesindustrializationinagricultureasfollows.

“Industrializationinagriculturereferstotheincreasingconsolidationoffarmsandtoverticalcoordination(contractingandintegration)amongthestagesofthefoodandfibersystem.Theemergingsystemisexpectedtobehighlycompetitiveinglobalmarkets,moreefficient,moreresponsivetoconsumerdemands, less dependent on government assistance, and able to more rapidly adoptnewtechnologies”.

Traditional versus Value-Added Agriculture

Some have suggested that industrialization has resulted in two types ofagriculture:traditionalandvalue-added.Traditionalagriculturereferstotheproductionofbulkcommodities,inwhichlargequantitiesofundifferentiated,broadlygradedproductsaresoldinanonymousspotmarkets.Price,quantity,andbroadquality parameters are the key typesof informationneeded. Intraditional agriculture, the different steps of the production system canoperaterelativelyindependentlyfromoneanother.

Value-addedagriculturereferstotheverticallycoordinatedproductionsystemthatdesignsagriculturalproductiontomeettheneedsofaspecificcustomermarket.Specificproductattributesisakeyitemofinformation.Thefocusisalwayson thefinal foodproduct rather than the initialbulkcommodity. Insucha system, theproductionstepsare interdependent.Theshift towardsvalue-added agricultural products is evident in the area of U.S. export growth (www.umanitoba.ca/afs/agric_economics/ardi/industrial.html, 2013).

Industrializationofagriculturemeansthemovementtolargerscaleproductionunits thatuse standardized technology/management andare linked to the

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processorbyeitherformalor informalarrangements(BoehljeandDoering,2013). Size and standardization are important characteristics in loweringproductioncostsandinproducingproductsthatfitprocessorspecificationsandmeetconsumers’needs forspecificproductattributes,aswellas foodsafety concerns. Smaller operations not associated with an industrializedsystemwillhave increasingdifficultygainingtheeconomiesofsizeandtheaccess to technology required to be competitive, except perhaps in nichemarkets.Accesstoinputandproductmarketswillbeespeciallycritical.

3. Trailers of the Past

The industrialization in agriculturemore or less coincideswith that of theindustrial revolution in general. Identification of nitrogen, potassium and phosphorus(generallyreferredtobytheacronymNPK)ascriticalfactorsinplantgrowthledtothemanufactureofsyntheticfertilizers, making possible more intensive types of agriculture.

Thediscoveryofvitamins and their role in animal nutrition,inthefirsttwodecades of the 20th century, led to vitamin supplements, which in the 1920s allowed certain livestock to be raised indoors, reducing their exposure to adversenaturalelements.Thediscoveryofantibiotics and vaccines facilitated raising livestock in concentrated, controlled animal feed operations byreducing diseases caused by crowding. Chemicals developed for use in World War IIgaverisetosyntheticpesticides. Developments in shipping networks andtechnologyhavemadelong-distancedistributionofagriculturalproducefeasible.

With the commercialization and industrialization the number of peopleengaged in farming and number of farms has decreased tremendously and their ownership is more concentrated.

Agriculture has been a vocation of the Nepalese people since centuries.The necessity for agriculture development was realized almost 90 yearsagowiththeestablishmentofAgricultureOfficein1921.Fouryearslateritwas elevated to the status ofDepartment ofAgriculture (DoA). Themajorundertakingsof thedepartment thenwere the introductionand testingofdifferent suitable plant varieties, agriculture education, and livestock andarboriculture development.

The idea of bringing outside technical support from developed countrieswasinitiatedsince1924whenoneJapaneseAdvisorwasinvitedtotransfertechnology in agriculture. After about four months study on agriculturepractices in Kathmandu valley the Advisor reported that the technological

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know-howof theNepalese farmers is better than technicians and there isnothingnewtoteachthem.ThenheleftNepal.

Similarly,during1960stheproductivityofcereals inNepalwashigherthanthat of our neighbouring countries. Fifty years later the scenario reversed.Despite vast potentiality the agriculture sector development is still trailingbehind.ThisindicatesthesluggishdevelopmentofagriculturesectorinNepal.

4. Current Scenario - An Indication

Productivity and competitiveness of agricultural sector is low, in the samelineadoptionofimprovedtechnologyislimited.Productiongrowthofstaplecereals has not taken pace with the present demand. Agricultural trade is degenerating. Agricultural export was US$ 248 million whereas importincreased fromUS$ 157million in early 1990s toUS$ 621million in 2013(ADS,2013).About182,000metrictonsoffoodgrainswereimportedintheyear2010/11alone.

AnnualGDPgrowthisalsolowestamongSAARCcountries.It is3.7percentinNepaland7.8percentinIndia.Theforeignassistanceinagriculturesectorhas remained at the level of US$ 2,000s million during the last decade.Development in number of agricultural education institutions, quality ofeducationandnumberoftrainedhumanresourceshasincreasedbutnottothelevelofexpectations.

The twenty year Agriculture Perspective Plan (APP) was implemented in1997withtheendorsementofallmajorpoliticalparties.ThenAPPwasseenwith full hope that it will transform the subsistence agriculture into a well-managedcommercialandindustrializedagriculturesystem.After16yearsofAPPimplementationseveralexpectedoutcomeshasnotbeenseen.ItseemsthathadtherenotbeenAPPtheagriculturalsituationwouldhave inworstcondition.Thoughnotinlargescaleyet,smallsectordairy,fisheries,poultry,tea and vegetable seed enterprise development has been achieved.

The decade long conflict in the country compelled thousands of ruralhouseholds move to urban areas mostly to Kathmandu and abroad leaving agriculture in a labour scarce situation. So,during thepastdecadeandtillnow the government has remained unstable and the focus is more on peaceprocessandbringingpoliticalstability. Insuchsituation,asusualtheagriculturedevelopmentwasinleastpriorityanditstillvalid.

5. Review of long term plans from Policy Perspective

Historically, eight long-term perspective plans have been prepared with

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thetechnicalandfinancialassistancefromthedevelopmentpartnerssince1940s. Although these plans were not been able to transform the status of subsistenceagriculturetoacompetitiveandvibrantonebuttheseeffortsatleast kept agriculture moving and struggling hard to transform subsistence agriculture to a commercialized and industrialized one. Highlights of such plans are presented below.

• A 15 years long-term plan was prepared before the peoples’ revolutionfordemocracyin1950.About17Nepaleseagriculturists,irrigationengineers,botanistandveterinarianswereintheteamfortheformulationoftheplan.ThemainaimofthisplanwastomakeNepalself-sufficientinfoodproductiontokeepthepeople(about9,500,000populations)healthyandfitforhardwork.Developmentof cash crop was also proposed in this plan document. In 1951, agriculturedevelopmentwasinitiatedunderPoint-4Programwiththe support fromUS Government. The vision and action plan ofthe document was appreciated and adopted in the US supported projects.ThiswasthefirstforeignaidassistanceinitiatedinNepal’sagriculturesector.Later,GovernmentofIndiaalsostartedprovidingtechnical support for agriculture development programs.

• In 1970, a 20-year Perspective Plan for Agricultural Sector waspreparedbyFAOinconsultationwithgovernment.Majoremphasisof this plan was on improving cropping intensity, productivityenhancement, rapid expansion of ground water irrigation, andhorticultureandlivestockdevelopmentprograminmountainsandhills.Theplancouldnotbeputintoactionbecausethengovernmentneither endorsed nor implemented this plan instead an exercise to develop 10-year plan was done by forming a special task force team of Nepalese experts.

• In1972,TenYearAgricultureDevelopmentPlanwasprepared.TheachievementthroughtheimplementationofthisplanwasonlyintheareaoforganizationalreformofDoA.Theactualactionplansofthisofdocumentcouldnotbetakenintothefield.Theplanemphasizedmore on the regional specialization viz. livestock development inmountainregion,fruitsinthemid-hillsandcerealsinTerai.Generalpolicies and strategies for each sub-sector were laid out. Focus on agriculture credit, market and soil fertilitymanagement werethe major elements of the plan. At grass root level, extension and research workers did not own the program rather they felt it as a burden.Therewaslackofwell-definedoperationalstrategies.

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• In 1982, Agricultural Sector Strategy was prepared. This strategyidentified weaknesses in institutional and organizationalarrangements as the main reasons for low agricultural growth rate. Thestrategyfocusedmainlyonlanduseplanningandenvironmentalissueswithoutconsideringthelegalaspectsforitsimplementation.Hence, this strategy was also not endorsed by the government.

• In 1985, National Planning Commission (NPC) authorized thenAgricultureProjectServiceCentre(APROSC)toprepare‘PerspectivePlanforLandUse,AgricultureandFoodGrains’.Theplanwasfullof projected targets basedonmathematical calculationswith fullof figures and statistics. Targets were fixed for each commodity.Butthemechanismformakingoravailingtherequiredinputswasmissing.

• In 1986, government prepared basic needs program which emphasized on six basic needs items such as food, clothes, shelter, health, education and security. Similar to previous plans it wasalso an ambitiousplan. Targets to increase the cereal productionat district levelwerefixed. Separateprogramswereprepared foragricultureandirrigation.Thiswasasupply-orientedprogramwiththetargetfixedforspecificproductionandinputsbutthisplanwasalsostoppedafter1990.

• In1995,a20yearlong-termAgriculturalPerspectivePlan(APP)wasprepared.Thisplanisanagriculture-ledgrowthstrategyforpovertyeradicationandoveralleconomicdevelopmentofthecountry.Ithasidentifiedthepriorityareasoffocusinagriculturalsector.Itaimsatincreasing the agricultural growth from the level of 2.5 to 5 percent and reducing thepoverty proportion from49 to 14percent overthe20-yeartimeframe.Itwasastrategicplanandcouldhavebeena turning point in the history of agriculture had it been able to get seriousness in its implementation. APP has expected 4-5 percentannualagriculturalgrowthratetobecatalytictostimulateatleastdoublethenon-agriculturalgrowthinemploymentgenerationandservicesprovidingsectorswhichwouldopenupjobopportunitiesforthepoor,particularlypoorwomen,andtherebyhelpreducethenumber of rural poor.

APP has been in implementation for its full-proposed life. Based on APP,several policies, periodic plans, programs and projects have been formulated sinceitsimplementationin1997.

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APP also suffered in its implementation mainly due to unavailability ofresourcesbecauseavailablenationalresourcesweredivertedmoretowardsconflict management from 1999-2006. Government and developmentpartners reduced investmentonagriculturalprograms.Becauseof this theprivate sector also hesitated to invest in agriculture. Similarly, there were frequent changes in leadership of the key institutions and itmade it evenmoredifficulttoresolvethecoordinationissues.(Duringthe16yearsofAPP,therehavebeen19PrimeMinistersand18SecretariesinMoAD).APPasanational plan, its ownership should havebeen takenby all the concerned.Unfortunately, APP became the document of MoAD alone.

In addition, withdrawal of subsidies on fertilizer and shallow and deeptube wells hampered the uprising development of irrigation sector. Suchinconsistencyinpolicyimplementationleadstodecreasedcredibilityamongthe farmers. There was weak institutional capacity on project or programimplementationandlessattentionwaspaidonimprovingit.

Mechanism for solving legal issues while implementing APP was missing.Similarly, the issues of social and geographic inclusiveness were not clearly mentioned. Human factors including farmers’ role and capacity were notconsideredduly.With changednational and international contexts suchastradewithrespecttoWTO/SPSwerenotgivendueattention.

Mostimportantly,fromthefirstyearof its implementation,theinvestmentboth from public, private and development partners was not given due attention as envisaged in APP and some sector started debating on itsrecommendation.

However, achievement towards APP has been somewhat visible in roads, horticulture and community forestry but not in cereals, fertilizer andseed. In case of livestock and irrigation the performance was mixed. APPimplementationingeneralwaspoorbecauseoflimitedsupportintermsofresourcesallocation,actionplans,andinstitutionalarrangementsneededtoimplement program as per APP vision.

• In 2013, Agriculture Development Strategy (ADS) has beenprepared. The final draft has been submitted toMoAD and is intheprocess ofmakingnecessary arrangement as pre-requisite toits implementation. This strategy is carefully refined taking lesionfromAPP in terms of commercialization. It can be considered asthe improved version of APP. It would be too early to comment on it practicality in view of the political situation in the country.Theelection forConstituentAssemblyhas just completed for the

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secondtimetodraftandapprovetheConstitutionofNepal.HowtheelectedgovernmentviewADSisyettobeobserved.Butkeepingthese aspects aside for a while and reviewing it from technical and long-term vision in agriculture for commercialization perspectivefollowingobservationcanbemade.

6. Few Observations in ADS in Relation to Existing Policy and Policy Gaps

ADS is prepared based on extensive consultation with a broad range ofstakeholders in all fivedevelopment regions andhas recommendedactionplans.Ithasprovisiontoincludeofnewideasandstrategiesrequiredduringtheimplementationperiod.AlthoughADSisa20yearstrategybutitincludesa10yearactionplanandaroadmap.ThelessonslearnedfromAPPexperiencehave been incorporated in the formulation of ADS. Among these lessonsare the need of ensuring governance, promoting effective participation ofstakeholders,anddecentralizingdecisions.Itisarationalestrategybasedonthe assessment of the current and the past performance of the agricultural sector in order to take it near to the reality.

ADShasalsorecognizedsomeofpracticalissuesandinconsistenciesinhumanresourcedevelopment (HRD)policy, subsidypolicy, social andgeographicalinclusiveness, yield gaps in research stationand farmers’field and feasibleoptionsforminimizingsuchgaps.

As ADS has involved close development friends of agriculture right from designingitisexpectedthatADSshouldnotsufferfromlackoffinancialandtechnical assistance like APP.

ADS preparation was supported by Asian Development Bank (ADB),International Fund for Agricultural Development (IFAD), European Union(EU), Food and Agriculture Organization of the United Nations (FAO),SwissAgency forDevelopment andCooperation (SDC), Japan InternationalCooperationAgency(JICA),DenmarkAgencyforInternationalDevelopment(DANIDA),WorldFoodProgram(WFP),UnitedStatesAgencyforInternationalDevelopment(USAID),DepartmentforInternationalDevelopment(DFID),theWorld Bank, theAustralia Agency for International Development (AusAID),andtheUnitedNationsEntityforGenderEqualityandtheEmpowermentofWomen(UNWomen).

Ø ADShasacknowledgedthechangedcontextinrelationtoAPPspeciallyintermsofbothnational(out-migrationofagriculturallabor,foodsecurityandnutrition,tradecompliancesetc.)andinternationalchanges(regional

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economic growth including growth of neighboring countries - India and China),climatechangeetc.amongothers.

Ø Policy consistency and credibility have been highlighted as major governance factor to achieve the ADS outcome.

• Someof the innovativepolicy initiativesreflected inADS includesfour flagship programs viz. (i) Food security and nutrition, (ii)Decentralized research, extension and education, (iii) Valuechain development program, and (iv) Agriculture innovation andentrepreneurshipdevelopmentprogram.Someimportantactivitiesincluded are presented below.

• Mainstreaming food security and nutrition program into existingagriculturaleducationsystem.

• RestructuringofNepalAgricultureResearchCouncil(NARC)forthedecentralizationofresearch.

• Establishment of Community Agricultural Extension Service Center (CAESC) in each VDC for effective service delivery at the grassroot levelandpilotingofvouchersystemtoenableandempowerfarmers.

• Establishment of matching grants to promote agro-enterprises innovations.Thisalsoincludesyouthandwomenentrepreneurshipprogram.

• Inclusive value chain development of selected prioritizedcommodities.

• Promotion of a Farmer’s Commission that can promote farmers’rightsandestablishmentandpilotingofFarmersWelfareFund.

• Mechanismstointegratesectorialministriesplanandprograms(asreflectedinADS)instrategicplanandannualprograms.

• Farmer’sbusinessschool(tolinkfarmerswithmarketaswell).

• Land banks and tax measures to discourage keeping land fallow.

• Policy monitoring and analysis system.

• Establishmentofamulti-donorADSTrustFund(ATF)withaflexibleimplementationmodalitywiththeobjectiveofensuringfundflowmechanism to overcome investment issue encountered in APP.

• Jointmonitoring of programs, joint evaluation (both governmentand non government actors) and also independent evaluation toreviewandifneededrevisethetargets,outcomes,activitiesetc.

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Some Missing Links in ADS • Restructuring of NARC has been sufficiently addressed but

restructuring of research program that would be more appropriate hasnotbeenproperlyreflected.

• Minorcrops,underutilizedcropsandsmallanimals,whichformthesourceoflivelihoodandalsoimportantfromnutritionperspectiveisnotadequatelyaddressed.

• Establishment of agricultural colleges in each region is a good proposal but agricultural graduates coming out of such colleges needs tobeabsorbedwithin thecountry tohavepositive impactofinvestmentinagricultureeducationinagriculturesector.ADSfailtoenvisagesuchspecificplan.Inaddition,properO&Msurveyandsubsequenthumanresourcedevelopmentplan is lacking.CurrentO&M (not approved yet) hasn’t accounted any of the changesproposed by ADS.

• Similarly, establishment of CASEC is also a challenge. Role of Ministry of FederalAffairs and LocalDevelopment (MoFALD) is verymuchcriticalinthisrespect.

• Multi-donortrustfundstilllacksclarityintermsofmanagementandmodality.

• Valuechaindevelopmentofprioritycommoditiesandthrustisgoodbutwhatandhowthesecommoditiestobeprioritizedmayrequirefurther analysis.

• IntegratingotherrelevantemergingpoliciesandprogramswithADSis crucial.

• Fallowland,landfragmentationanduseofagriculturelandfornon-agriculture purpose and limited irrigationmay critically constraineffectiveimplementationofADS.AlthoughADShasacknowledgedbuttoeffectivelyinvestinirrigationthroughDepartmentofIrrigation(DoI)andimplementationoflandusepolicyisstillahugechallenge.

• Some aspects of APP, which needed legal back up, was not envisaged whenAPPwasformulated.EvenADSnowhasalsonotsufficientlyportrayed the legal aspects that need to be accounted during implementation.Ithasbeensporadicallyandlooselymentionedinthe document.

• Ownershipandaccountabilitybymajorstakeholderstoimplementpolicyisstillvague.

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7. Existing Policies

BeforethepromulgationofNationalAgriculturalPolicy2004(NAP),periodicplandirectives,longtermperspectiveplans,masterplansandannualprogramplansusedtobethewrittenaccountofintendedfuturecourseofactionforthe specific period. These documents mentioned targets to be achievedindicatingwhat,howandbywhom.After1990,severalrelevantpolicieshavebeen formulated and now the number of such policies exceeds more than 20 (MoAD2013).

AnoutlineofNationalAgricultureDevelopmentPolicy1991waspreparedbutitpracticalitylastedforonefiscalyearonly.Specificpoliciescloselyrelatedtoagriculturaldevelopmentinclude:NationalAgriculturalSectorDevelopmentPolicy 2010, period plans, Rural Infrastructure Plan 2004, Agri-business PromotionPolicy 2006, LandUtilizationPolicy 2012, IrrigationPolicy 2003,SupplyPolicy2012,NationalWaterPlan2002,ScienceandTechnologyPolicy2005, Foreign Aid Policy 2002, Climate Change Policy 2067, Nepal Environment Policy and Action Plan 1993, Forest Sector Policy 2000, Nepal IndustrialPolicies 2067, Commerce and Trade Policy 1992 and various commoditiesspecific policies. Some commodity specific policies within the umbrella ofNAP include seeds, tea and coffee, dairy, poultry, rangelandmanagement,fertilizerandcooperativepolicies.Theseallrecognizetheroleofagriculturein overall development of the country.

All the perspective plans and policies have the similar aim of agriculturedevelopment for poverty alleviation, and food securities but differ only intheirmethods.Alltheeffortsinthestruggleofpreparingplancanbecountedasmerit todesignnextplan.Someformulationwaspoor, thetargetswereambitiousandtheinstitutionalcapacityforimplementationinadequate,bothpublic and private investment has been limited and remained at low level. TheseperspectiveplansandstrategiespreparedbeforeAPPlackoperationalstrategiesandmechanismsformobilizationofresources.Assaidearlier,allthese plans lack implementation guidelines, had low focus in agricultureresearch and technology development. The relationships among research,education,extensionandfarmerorganizationswerealsoneglected.

National agricultural policies and perspective plans have indicated thenecessityofcommercializationandindustrializationofNepaleseagriculture.However, the methods to achieve this target are vague. All polices have attempted to make the developmental efforts transparent, simple andeffectiveandtothisdirectionthesepolicieshavebeenfounduseful.

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The vision of NAP is to concentrate on commercialization of agriculturefor improving the living standard of the people with an the objectives toensurefoodsecurityandpovertyalleviationthrough increasingagriculturalproductionandproductivityalongwithstrengtheningdevelopmentbasetomake agriculture competitive at regional and global levelswithoutmakingadverseeffect in the fragileenvironment.Therearevariousclearlydefinedpolicyoptionsregardingincreasingtheproductivity,utilizationofappropriatetechnology, wider adoption of scientific land use management system,promotionoforganicfarming,participatoryresearchsystem,andregulationof GMOs. It has clearly indicated that all perspective plans and specificcommodity policies should be formulated based on these policies. NAP is anumbrellapolicy.However,NAPfailstoaddressalternativesforchemicalsinputs; SPS related issues and agricultural insurance and agriculture trade relatedissue.ItalsosilentondefiningcommercializationandindustrializationintheNepalesecontextbuthaskeptenoughflexibilitytoincludethemodernareas/disciplinesofagriculturaldevelopmentaswhennecessarybasis.

Based on the second objective of NAP the Agribusiness Promotion Policy2063(ABP)hasbeenformulatedtoenhanceagriculturalcommercializationand trade (MoAC, 2008). ABP is the major policy for the promotion ofcommercializationandindustrializationofagriculturesector.Itsfirstobjectiveaimsatsupportingmarket-ledandcompetitiveproductionsystem,thesecondobjectivetargetsdevelopmentofagro-industryandthethirdobjectiveaimsatcommercializationofagriculturesector.

Basedonobjectives44policieshavebeen formulated inABP.Highlightsofsome important policies include establishment of Special Economic Zone as perIndustrialPolicy.AccordinglyABPhighlightsontheneedforimplementingproductionprogramsinthreedefinedareasasgivenbelow.

a. CommercialCroporCommodityProductionArea

b. OrganicorPesticide-freeProductionArea

c. Agro-productExportProductionArea

ABPalsoemphasizedontheneedforavailinginputs,equipments,machineries,physical infrastructures and support services in an integrated way to promote production, processing andmarketing of agriculture commodities (Clauses3.3,3.4and3.5). Thesemainly include:production inputs; technologyandtechnicalservices;irrigation;agricultureroad;ruralelectrification;agriculturecredit;insurance;collectionandmarketcentresandmarketnetworks;marketinformation;general,coldandfrozenstorage;coolingchamber;appropriate

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agriculturetools,equipment’sandmachineriesformechanization;processingequipment’s;transportation;laboratorytestingservicesetc.

ABPalsoemphasisesontheneedforprovidingthecustomtaxrebateforthetools, equipment’s andmachineries required for the agriculture enterprisedevelopmenttillthetenthyearoftheirestablishment(Clause3.7).Suchtools,equipment’sandmachineries includethresher,sprinkler,weedingmachine,harvester, chilling van, cooling vat, milk processor etc. Such provision is necessaryforthecommercializationandindustrializationofagriculturesector.

Contract farming or leasing of land could be one of the best options topromote production in large scale and to attain economies of scale inproduction.RealizingthisABPhasemphasizedontheneedforpromotingandlegalizinglandleasingsystem(Clause3.6)andenforcingnotenancyrightforsuchlandleasingsystem(Caluse3.32).SincetheproductionsysteminNepalisdominatedbysmallholdersthesearetherightpolicymeasuresforattaininglargescaleproductioninordertopromotingcommercialization.

Thelawonlandceilinghasbeenoneoftheobstaclesforownershipforlargeareaofland.Thishasnegativelyimpactonlarge-scaleproductionespeciallyforplantationcrops like tea, coffee,arecanutandorchards.Realizing this,ABPstressesonrelaxing landceiling law (Clause3.16).Similarly, thepolicyhighlights on credit sanction by pledging agriculture project as collateral(Clause 3.8). There are several policy measures in ABP for promotingcommercialization and industrialization of agriculture sector. However,implementation of these policymeasures require legal, administrative andprogramformulationprovisionsinordertotranslatethemintoreality.

ABPhasemphasizedontheneedforthelargergrowthcentres,developmentof special economic zones, and concept of export zone support and subsidies onmachineries and equipment, development of laboratory in the privatesector. But regarding the subsidy and support facilities it has stated thatthese issues need to get approved through annual budget program.

SimilarlyNationalFertilizerPolicy2058 isbasicallymeant forsupporting toimprove the soil fertility forbetterproductionaswell as for improving theavailabilityofchemicalfertilizersinthecountry.Towardscommercializationthe policy has indicated to maintain the reserve stock, it is open to promote foreign investment in the production of chemical fertilizers in the countryand also to encourage cooperatives to purchase share of fertilizer plant inneighbouringcountriestoensuretheavailabilityofthefertilizerinthecountry.

Role of year round irrigation is critical for commercializationof agriculture

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sector. The Irrigation Policy 2003 fully supports it. This policy in generalemphasizes on proper utilization of available water in the country andinstitutionalizationofwateruserscommittees.Thepolicymentionsthatanyagricultural landwithirrigationfacilitiesshouldbeusedonlyforagriculturepurposes and one should get permission from GoN if intended for otheruseofsuchlands.Thispolicyalsosupportedthetrans-basinwatertransferand management system to divert water from big river to dry lands areas. The policy also mentions about development of skilled human resource.It has identified sizeof the irrigationprojects, guidelines for site selection,implementationmechanism based on users’ participation,maintenance ofwater channel and stakeholders’ responsibilities, andwater charges. But itdoes not give any mechanism for making year round water available to the farmers.

TheLandandUtilizationandManagementPolicy2012isfoundimportantpolicyamongothersaimsatoptimumuseofavailablelandresourcesandcheckitshaphazard use in order to support the overall economic development of the country.Itclassifiestheavailablelandbasedonthesoilstructures,topographyusefulness and need of country. It plans to develop all legal aspects regarding thepolicieswithintwoyears;landmanagement,conservation,andlanduseplanningaresomeoftheaspectsthepolicyhashighlightedon. Itclassifiesthe lands for agriculture, residential areas, commercial areas, industrialareas, forestland etc. This policy will be verymuch useful in planning thecommercializationandmostimportantlychecktheconversionofagriculturelandtonon-agriculturaluses.Operationalstrategiesfortheexecutionofthispolicyhavealsobeenmentioned.

All the policies listed above are relevant and will be supportive in thecommercializationandindustrializationofagriculturesectorinNepal.

8. Public Sector Investment in Agriculture

Thepublic sector investment inagriculture sectorhasbeenvery low (withrespect to contributionofagriculture sector toGDP) tobringa visibleandrapidchangetowardscommercializationand industrializationofagriculturesectorinthecountry(Table1).Alargeinvestmentisneededformodernizing,commercializing and industrializing the traditional agriculture sector ofNepal. Policy alone is not a sufficient condition for commercialization andindustrializationofagriculturesector.Aninvestmentplanandlargeinvestmentisimportantforcommercializationandindustrializationofagriculturesectorin the country.

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Table 1 : Government Expenditure in Agriculture and Irrigation Sectors.

Year Agriculture, million Rs Irrigation, million Rs Total, million RsCurrent Capital Total Current Capital Total Current Capital Total

2000/01 1818.6 552.0 2433.6 400.4 3684.6 4085.0 5204.6 7070.6 10603.62001/02 2190.9 505.4 2696.3 271.4 2913.5 3184.9 5664 6386.6 9066.12002/03 1784.0 187.0 1971.0 503.7 1840.9 2344.6 4445.7 4502.6 6660.22003/04 1856.0 160.2 2016.2 401.1 2070.9 2472.0 4433.5 4648.4 6960.22004/05 2117.2 217.5 2334.7 410.9 1921.5 2332.4 5080.3 4884.6 6999.52005/06 2437.5 265.4 2702.9 403.7 2462.7 2866.4 5809.5 5834.7 8435.72006/07 2766.2 1374.2 4140.4 451.3 3012.6 3463.9 8732.1 8978.5 11068.22007/08 3057.9 3211.8 6269.7 484.0 3605.1 4089.1 13023.4 13570.6 14447.92008/09 4401.0 556.9 4957.0 593.7 5695.8 6289.5 10508.6 11803.4 175362009/10 5950.3 638.6 6588.9 677.5 7974.6 8652.1 13855.3 15879.6 23893.12010/11 8066.9 1069.6 9136.5 712.3 7352.0 8064.3 18985.3 18270.4 25265.1Total 36446.5 8738.6 45247.2 5310 42534.2 47844.2 95742.3 101830 140935.6

Source: Statistical Information on Nepalese Agriculture 2011/12, Ministry of Agricultural Development ,Kathmandu, Nepal, 2012.

9. External Assistance in Agriculture - A General Assessment

Foreign aid continues to play an important role in Nepal’s economicdevelopment because it occupies about 26 percent of national economyandabout40donorssupportNepalinvarioussectors.Theexternalsupportsin agriculture sector have been in terms of financial assistance, technicalassistance, and commodity assistance (MoF, 2012). An analysis of externalassistance in agriculture during the last decade shows that total foreign aid disbursement inagriculture sectorwas justRs.806million in2000/01andRs.1143million in2010/11 (Table2). If bothagricultureand irrigationareconsidered the foreign aid disbursement does not seem encouraging.

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Table 2 : Foreign Aid Disbursement in Agriculture and Irrigation Sectors.

Year Agriculture, million Rs Irrigation, million Rs Total, million RsGrant Loan Total Grant Loan Total Grant Loan Total

2000/01 27.5 778.8 806.3 347.1 2436.8 2783.9 374.6 3215.6 3590.22001/02 289.5 607.2 896.7 183.5 1895.9 2079.4 473 2503.1 2976.12002/03 141.3 433.2 574.5 245.1 996.4 1241.5 386.4 1429.6 1816.02003/04 193.8 381.1 674.9 409.1 993.1 1402.2 602.9 1374.2 2077.12004/05 457.7 294.3 752.0 489.8 895.8 1385.6 947.5 1190.1 2137.62005/06 460.3 365.5 825.8 795.0 575.8 1370.8 1255.3 941.3 2196.62006/07 633.5 1419.8 2053.3 546.8 185.1 731.9 1180.3 1604.9 2785.22007/08 568.2 2039.7 2607.9 676.9 198.6 875.5 1245.1 2238.3 3483.42008/09 362.1 362.1 724.2 962.5 322.3 1284.8 1324.6 684.4 2009.02009/10 492.2 460.7 952.9 1461.0 555.8 2016.8 1953.2 1016.5 2969.72010/11 908.4 234.6 1143.1 1100.3 415.2 1515.5 2008.7 649.8 2658.6Total 4534.5 7377 12011.6 7217.1 9470.8 16687.9 11751.6 16847.8 28699.5

Source: Statistical Information on Nepalese Agriculture 2011/12, Ministry of Agricultural Development, Kathmandu, Nepal, 2012.

Analysisoftrendofforeignaiddisbursementshowsthatwiththeexceptionof2006/07and2007/08,theforeignaiddisbursementinagriculturesectorisdecreasingcontinuously(Figure1).Sametrendholdsgoodforforeignaiddisbursement in irrigation sector till 2007/08 and there has been nominalincrementtrendsince2008/09.

Figure 1. Trend in foreign aid disbursement in agriculture and irrigation sectors.

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The poor resource base of the national economy does not permit biggerdomesticsavingstomeettheresourcegap.Hence,theneedfortheexternalsupportinagricultureisdesired.Themainthrustofthedonortotheagriculturesectorhasbeentowardstheimprovementofagriculturalproduction.Ithasbeen channelizedmostly in irrigation,machinery, inputs, support services,infrastructuresdevelopment,andtoprepareinstitutionalbaseinthefieldofextension, research, training and planning. In the past, foreign aid has mostly been spent on study tours, exchange visits, seminars, workshops, human resource development, procurement of goods, and expatriate consultants. A large part of such aids has been spent on expatriate consultants.

Generally,bilateralaidisintheformoftechnicalandcommodityassistanceand it formsa grantportionof theaidwhereasmultilateral is in the formof loan forfinancial investment. The team leaderdesignatedby thedonorgenerallycontrolsbilateralaid.ThesameappliesinthecaseofallUNagenciessupportsandtheloanprojectsaregenerallyadministeredbynationalprojectmanagerbutwithvarioustermsandconditions.

Bilateralaidwhether intheformofgrantor loan, isgenerallytied-upwithdonors policy whereas multilateral with member countries. Commoditysupport from bilateral donor is generally linked with donor’s home country andthepriceusuallyinflated.

Both,bilateralormultilateralaidinagriculturesectorfromthepointofviewofsustainabilityoftheachievementhasnotbeenverysatisfactoryingeneral.Permanent institutions have not been able to continue the spirit of theworkingmodalitiesortechnologytransferprocessaftertheexitoftheprojectsupport.Usually,projectshavebeenimplementingwithoutfullinvolvementofexisting institutions.Theseall indicate theneed foran in-depthanalysison the effectiveness of and appropriateness of external assistance in theresearch and development and transfer of technology.

Similarly, external assistance lately in agriculture has been mostly on developmentwingswhereasteachingandresearchaspectshavebeenleftout.Hence,coordinationandlinkagewiththeothertwowingshasmisbalancedthe tripod.

Donor supports in the formofaprojectaremore focusedonmeeting theproject target by any means without much considering the sustainability of project initiatives. Lately, the donor-funded project has been utilizing theCBOs for technology transfer or providing services, without full supportand ownership from permanent institutions in the government. After the

57


terminationofverysuccessfulprojecttocontinuetheessenceoftheproject,governmentwillhavetoprovidesimilarfacilitiesandinputsforsustainability.Ifgovernmentcannotprovidethesimilarfacilitiesthebenefitoftheprojectoutput gets diminished.

Foreign investment in agricultural sector is low as compared to other sectors. Agriculture sector stands in sixthpositionoutof10sectors for sector-wiseallocation of foreign aid in 2011/12 (Table 3). Foreign direct investmentincreased from1993/94until2002.After the cessationof conflict in2006,foreign investment is increasing slightly. Among key subsectors, foreign investmentremainedhighinirrigationuntil2006.Thenagricultureincreasedits share from 2006-2008.

Table 3: Sector-wise Allocation of Foreign Aid in 2011/12

Sector Disbursement, USD millions

Percent of Total

Education 229 26Local development 153 17Road transportation 117 13Electricity 107 12Health 85 10Agriculture 46 5Peace and reconstruction 43 5Economic reform 35 4Other - Social 34 4Drinking water 27 3Total 876 100

Source: Economic Survey 2011/12, Ministry of Finance, Kathmandu, Nepal, 2012.

10. Some Suggestions Towards appropriate utilization of external assistance:

• Understanding of the concept and level of its applicability in Nepalese conditioninviewoftheexistinginstitutionalcapacityandresourcesmust analyze including the relevant policies and plans. How the commercializationandindustrializationconceptcanbeintroducedto small farmers must be strategically considered. Analyse carefully whether the foreign assistance focuses on the poor small farmers.

• Legal, administrative and program provisions should be madefor the implementation of policy measures of Agri-business

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PromotionPolicy2065inordertopromotecommercializationandindustrializationofagriculturesectorinthecountry.

• Legal, administrative and program provisions should be madefor the implementation of policy measures of Agri-businessPromotionPolicy2065inordertopromotecommercializationandindustrializationofagriculturesectorinthecountry.

• Nepal‘s Agriculture sector need strong external support to bridge the resourcegapsrequiredforcommercializationandindustrializationofagriculture sector. Suchfinancingmaybe for thecapital goods(includinginfrastructuredevelopment,machineriesetc),inputsandHRDafterdevelopingclearandconsistentnationalunderstandingabout the areas where donor support is needed. Such supports should be based on agriculture sector wide development policies, strategies, plans and programs.

• Involve all concerned stakeholders in policy, strategy and program formulation, implementation, monitoring and evaluation. Amechanism for the joint regular monitoring of the programs and projectsshouldbedevisedwithaclearToRofallthestakeholders.

• Program assistance rather than project assistance concept should beintroducedwiththecleartermsandconditionsintheagreement.Government should play active role for proper mobilization andutilizationof assistance. In thepast, foreign loansor grantswereon the purchase of unnecessary equipment, experts as well asNationalProjectManagersnotcompetentfortheassignmentandtechnologyrecommendations,whicharenotappropriate,andnotfitinthemainstream.

• Several donor-assisted projects have been concentrated in physical infrastructure development, equipment purchase overlookingthe software aspects (knowledge and skill) of operation andmaintenanceofsuchequipment’s.This ledtocessationofprojectinitiativesaftertheterminationoftheproject.Allthesemadetheoutcome most volatile getting diffused or disappeared quickly.Avoidrepetitionofsuchcases.

• All assistance in agriculture sector should be coordinated by MoADtoavoidduplication.MoADshouldexpanditsowncapacityfor designing, implementation and monitoring of programs andprojects instead of depending on donors for such tasks. Some

59


projectsinthepasthavebeenprovedexpensivetocontinueaftertheirtermination.Thus,atotalaidrequirementshouldbeanalysedwith in-built project in the government system and with a strong contingencyplan.

Thus,itwouldbeprudenttostrengthenthepolicyanalysisdivisioninMoADwith competent human and other resources to analyze, formulate, implement, monitorandadvocatethepolicyprovidingspecialincentives.

Challenges from Commercialization and Industrialization Perspectives • Commercializationinvolvingthethousandsofsmallfarmersisitselfabig

challenge.Itneedstobedesigneddifferently.

• Weak policy analysis, formulation, implementation, monitoring andadvocacyaswellaslowercredibilityofpoliciesduetodisruptionofsomepolicymeasureswithinafewyearstimeafterpolicybeingimplemented.

• Thepolicy shouldnotbeabolishedor reformedat least forfiveyearssinceitsimplementationinordertomaintainthecredibilityofthepolicymeasuresbeingtaken-up(exceptthepolicywhichhasnegativeimpactinlargescale).Thesemainlyincludepoliciessuchassubsidyoninputs,marketdevelopment,farmelectrification,irrigation,processingforvalueaddition,farmmechanization,tools,equipment,machinery, insurance,credit, farmers’ social security support or safety-net measures etc. Donor assistance also should be harmonized in the same line.

• The land use andmanagement policy should be amendedwith clearvisionforcommercializationandindustrialization.Legalprovisionshouldbemadeforfixinglowerinsteadofupperceilingofagriculturelandinorder to promote modern or mechanized and commercial agriculture.

• Privatesectorsinvolvementinagricultureisnotveryencouraging.Attractbusiness houses in agriculture commercialization creating conduciveenvironment for private sector investment in agriculture.

• Implementation of development activities in public-private-people-partnership(PPPP)modeforcommercializationandindustrialization.

• Value chain concept should be introduced together with commodity prioritization.

• Cooperatives should be involved for agro-industry development andmarketingofcommodities.

• Appropriatemechanization should be promoted to address the laborshortageproblemaswellastoattractruralyouthsinfarming.

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• Underutilizedandindigenouscommoditiesshouldbeexploredbothforinternalconsumptionandforexport.

• Organizational reform should be done from the perspective ofcommercializationandindustrializationofagriculturesector.

• Agricultural programs and projects should be designed and implemented targetingruralyouthsasgivenbelow.ØBothon-andoff-farmagricultureenterprisedevelopmentprograms

should be introduced with donor support to retain the rural youths inagriculturetogetherwithmechanization,skill trainingandotherincentiveplans.

ØInvestmentinagricultureresearch,educationandextensionshouldbe increased in a balanced way.

ØIncentive package should be developed for rural youths for agro-industrydevelopmentandAgriculturalmechanization.

ØHRD plan of agriculture sector should be developed in order to address emerging issues and challenges especially for enhancing export,minimizingtradedeficits,addressingclimatechangeissues,commercializationandindustrializationofagriculturesector.

ØBridgethegrowinggapbetweenscientificknow-howandfieldleveldo-how both in production and post-harvest phases of farming.Develop one woman and one man farmers’ facilitators through shorttermtraining,establishingFarmers’fieldschoolsinthefieldsofoutstandinggrowers,timetotimeorganizingdemonstrations intheareasofagriculturaldiversification, foodprocessing,andvalueaddition.

ØScientific strategies should include attention to both on-farm andnon-farm livelihoods. Institutional structures of small holders'horticulture, poultry, and cereals estates can be promoted bystimulatingtheformationofself-helpgroupsatthefarmlevel.

11. Areas for Further consideration • An in-depth analysis of sector-wide investment plan.

• Provision for extension services through educational institutionssuch as universities and colleges, professional organizations andcommunitybasedorganizations(CBOs),andprivatesector.

• Establishment of research and education institutions in eachdevelopment region.

• Strengthen Agro-meteorology units to address the climate change, long-termweatherforecastingmechanism.

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• Developmentofirrigationgrid.

• Implementation of farmers’ social security and support servicessystem.

• Development of processing and export zones.

• Restructure agriculture curriculum and academic methodologies for enabling agriculture graduate to become entrepreneur.

• IntroducehomesciencescoursesinagricultureInstitutes.

• Set up Agriculture risk fund to insulate farmers from risk arising fromweatheraberrations

• Loweringofinterestrateforsmallandwomenfarmersandformationof Small holders Estate.

• Involvementofexistingfarmergroups,cooperativesandCBOsasthedevelopmentpartnersofgovernmentinimplementingtheprojectsandprogramson cost sharing basis as in PACT grant commissionsystem.

Acknowledgements:

I would like to express my special thanks to Dr. Shiddi Ganesh Shrestha,Former Deputy Director General Planning, DOA for his generous supportin preparingthis document by sharing ideas and going through the text. I highly appreciate his suggestions. Similarly, I am Thankful toMr. YogendraKumar Karki, Project Director, and PACT for his encouragement technicalrecommendationsforthepaper.Finally,mythanksgotoDr.RishiRajAdhikari,ExecutiveDirectorInstituteofForeignAffairs,forkindcooperation.

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www.umanitoba.ca/afs/agric_economics/ardi/industrial.html. 2013. accessedon21October2013.

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CommentsonPaperPresentationExisting Policy Gaps, Challenges and Way Forward for Effective

Mobilization of International Co-operation towards Commercialization, and industrialization of Nepalese Agriculture

ByDr.ChampakPokhrelFormer Member

NationalPlanningCommission

Thepaperpresentedbythewriterisgoodwithadequatereviewofpreviousplansandpoliciesandisalsorichininformationwithidentificationofvariouspertinentissuesinthefieldofanalysis.Someoftheissuesidentifieddemandwider consultations for reaching to a practical solution and hope that thisseminar will pave a way towards that. While I generally agree with the issues that thewriter has traced out, attention to following aspectsmay furtherenrich the paper.

Working definition of commercialization

Let us not indulge toomuch on definitional aspects of commercialization.A fairunderstanding that ‘beingable toproduce individuallyorcollectivelyon large scale and being able to sale with reasonable profit along withsatisfactorydevelopmentofvaluechains’shouldbeadequatetoguidetopolicyformulation,inmyview.Noneofthedefinitionsinsocialsciencesarerobust.Basically, Iwouldavoidquotingdictionarymeaningsorwebsites toindicate the definitions, as they provide generally intuitive sense, and theconceptmaynotnecessarilycomefromacrediblesource.Theexplanationsthat the writer has given for clarifying the meaning of commercializationseemtobeadequatetomaketheessenceclear.However,ifthewriterwants,Iamnotagainstquotingsomeauthoritiesinthefieldtohonortheirrichnessof knowledge to guide a concept building.

Thinly spreading of resources and too many priorities

Nepalese agriculture programs suffer generally from too many prioritiesand thinly spreading of resources. Thus, when a review is done andrecommendations are provided, many things have to be touched upon.

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Consequently, recommendationsand issuesbecomesa shopping list,oftendifficulttoimplement.Inmyview,theGovernmentshouldbeinvolvedonlyinstrategicareaofhighmultipliereffects.Iwanttobringintoattentiontheneedofprioritizationoftherecommendationforbuildingafocusedframeworktoavoid thinly spreading of resources from the government sector. I do not think it is an easy task. It may call for a separate study. However, this issue has to be pointed out by the paper.

Investment growth in agriculture in the first decade of Agriculture Perspective Plan (APP) was negative

Public sector development expenditure in agriculture in the first decadeofAPPimplementationwasnotonlylowasspecifiedinthepaper,buthada negative growth of about 3.6 % a year in real terms, even if it seemedsomewhat increasing in nominal terms. Detail is found in ‘Managing Food Price Inflation inNepal’, byDr. C.P. Pokharel, published in ‘Managing FoodPrice Inflation in South Asia:World Bank, 2010’. I would suggest that theagriculture sector expenditure be shown also in real terms in the current seminarpaper.Thiswillhelpinshowingtherealtrendofwhathadhappenedin the expenditure, in reality.

APP lacked political commitment and adequate international co-operation

ThereisageneralfeelingthatAPPhasfailed.Thisisnotthecase,inreality,as the plan did not get fully implemented based on the vision developed. I thank thewriter forgivingvarious illustrations supporting this, as itwouldbenefitthefutureplanningofthesector.Inmyview,APPdidnotfailbutthetask has remained incomplete not because of the lacuna in the strategy but becauseofourinactivenessorlackofseriousnessinpolicyimplementationsand investment whether it be on the part of the government or donors, at large. APPwas a strategic plan andnot a detailedplan. Thus, itwasnotmeant to offer a detail menu. This has been misunderstood by many.AfterAPP formulation, sub-sectorplansunderbroadagriculturehad tobedevelopedbasedonAPP,inaperiodicbasisbyputtingtheagriculturessectoron front line in termsof investmentandpolicyco-ordination.Thatdidnothappen. However, APP strategies were implanted in some components like road(e.g.agriculturesroads),openingofagriculturetofreemarket,closinglossmakingproductionfarmsofthegovernment,promotingprivatesector,diverting ministry of agriculture (MOA) towards commercial thinking inplanningand implementation, reframingextensionapproach towardsgrass

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rootbasedinstitutionalparticipation,developingindustrialentrepreneurshipinagriculture,etc.Inputdeliverieswereaffectedadversely,followingdonors’conditionalitythantheAPPrecommendation.

Current ADS also is framed on the base of APP with a focus on the enhancementofthecommercialcomponentswhichdidnotgetadequatelydevelopedduringthetimeofconflictwhichhadledtodestructionofmarketopportunities and slackness in investment, thereby, constraining also theproductiongrowth.APPhadopenedthetrackofpoliciesandstrategiesandgiventherisinghighvalueproductionafterconflict,itwaslearntintheprocessthataspecialframeworkwasneededforthecommercializationofthesector.That’showADScame.TherearemanygoodideasinADS,asspecifiedbythepaper. I support the writer’s view on ADS as an improved version of APP in the current context, not an alternate.

Need of thinking agriculture from broad perspective

Thinking agriculture broadly is essential in analyzing expenditure onagriculture,thanafocusonlyoncrops,animalhusbandry,irrigationandsoftinputs. We should look at how much the broad agriculture has been supported by investment including agriculture road, irrigation, community/leaseholdforestry, cash crops, animal husbandry, agriculture inputs, micro credit, agro enterprisepromotion,agricultureresearchandextension,marketpromotion,development of the value chain, analysis of regional information, policyresearch, etc. Analyzing all those is out of the scope of the paper developed bythewriter inabsenceofconsolidatedinformationsource.MOADshouldstart developing data base by tracking such aspects to improve the future planning of agriculture.

Linkage with other sectors

Connectingagriculturewithothersectorisimportant,beittoindustrialsectorthrough agro enterprise development, trade sector or tourisms. A culture of a strong policy networking will be needed for this.

Allowing mechanization and opening avenue for larger area of cultivation

Small scale farming cannot boost the production and employment in thecountry, adequately. Contract farmingorothermarketbasedapproachofincreasingtheareaofcultivationtomakeholdingsizesuitableforcommercialfarmingisneeded.Thoughcontractfarmingandco-operativeapproachhavebeenfollowed,theirimplementationhasbeenweak.Currentarrangementis

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notadequate.Legalframeworktostrengthenthemhastobedevelopedtoincrease the access to land for the entrepreneurs.

Strengthening contract law

Having a strong contract law based on open market framework is very important to give big push to Agriculture by creating the environment ofincreasedaccess to landand commercial cultivation. Small holdingof landdoes not alleviate poverty. It is good paying job that accounts than the ownership of a small piece of land that hinders the movement of the labor. Theproblemoflandremainingfallowhasalreadystartedindicatingthis.Againpeople don’t believe much in policies, psychologically, as the governments has notbeenimplementingthemwithconsistency.Winingpeople’sconfidenceatlargehasalsobeenessential.

Connecting laborers returning from foreign job market with agriculture commercialization

Most of the Nepalese laborers going abroad are from rural areas. When theyreturnbacktheycomewithmoneyandskills.Thereishighpotentialtomobilizethereturneesfromtheforeignjobmarketinthecommercializationofagriculture in the country. However, they should be supported by giving ideas of potential portfolios, access to production resources like land, additionalfinances andmarket connections. Agriculture planning should lead to thisprocess.Currentlythecountryhasnotbeenabletoutilizeeffectivelyboththeremittancerevenueandskillsgainedabroad.

Agriculture Sector deserves a separate and modern Act

AgricultureisthekeysectortodrivethenationaleconomyofNepal.Severalagriculture policies have come. But, mostly they were of short lives ordid not get implemented as rightly pointed out by the paper. Policies are approvedbythecabinetbutdonotfallunderlegalbindingforthecontinuityinimplementation.Arecentstudyunderprogressonadevelopmentsectorof Nepal has argued that only about 40% of the policies approved getimplementedbecauseofthelackoffunding,co-ordination,andsupportfromotherpartners.Thus, inan importantsector likeagriculture,policyaloneisnot enough and there is a need for a separate Act by assembling vital aspects of the sector development including contract farming.

Market research with SAARC desk in the Ministry of Agriculture Development

Market prospect for agriculture of Nepal is directly linked to price and productionstructureofSAARCandChina;withmoreconnectiontoNorthern

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IndiaandChina (Tibetregion).Howeverwedonothaveofficial trackingofhow the sector and market prospect is developing in the region and in those countries inmediumandlongerterm.Withoutunderstandingthesituationofthelargeandpotentialtradingpartners,wecannothavegoodpolicies. Ipropose thata SAARCdeskbeestablished inMOAD formarketandpolicyanalysis of the region with a focus to India and China.

Promoting cultivation in using sky space

Nepalbeinga landconstrainedeconomy,athinkingtowardsadopting landsaving and sky using agriculture is important. Crops like mushrooms, and some ottervegetable,rooftopgardening,poultryfarming,animalhusbandrywithstallfeedingandsimilarotherscouldbesuchproductswherelandrequiredwill be less and enterprise can be expanded vertically. There is need fortechnology enhancement and support to such programs.

Promoting agro-industries and linking with agriculture through micro enterprise development and micro finance access

Promotingagroindustriesandlinkingagriculturewithagroindustriesthroughmicro enterprisedevelopment andmicrofinance access is very important.Presently, more convenient environment is developing to enhance access tomicro finance resources to agriculture because of Central Bank’s policydirectivestofinancialinstitutiontoinvestpartoftheirdepositinagriculture.Likewise,co-operativeshavealsobeenemergingasagoodsourceinfinancingruralenterprises.However,dwindlingpoliticalpoliciesforcheappopularityofrebatesandwaiversinpasthavecreatedproblemsinexpandingtheportfolioandfinancingagricultureforlongerperiodswhichshouldbeavoidedinfuture.

Agriculture subsidy

Agriculture subsidy in the country is good in the context of high subsidy in neighboringcountries.Butthesubsidiesinasmallcountrywithlongopenborder like ours can work well only if it can be prevented of travelling in vehicle, on bikes or on foot, else it gets easily leaked out in several ways. Pricedifferentialoncommoditysubsidiescanbepracticed.But, itwillhavelimitedsuccessduetomismanagementpossibilityofdifferentkind.Alternatebetterapproachwouldbetofocusonprovidingplentifulagriculturefriendlyinfrastructurelikeagricroads,shallowtubewell,irrigation,marketresearch,informationbuilding anddissemination, creating trading facilities, targetedextension etc. They reduce cost of production at the farm level and ontransportation of inputs and outputs, significantly. Parallel subsidy in line

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withthestructureacrosstheborderisnotnecessarilyabestoptionandanappropriatelychosencrosssubsidyschememaybeevenmoreeffective.

Promote economic diplomacy in agriculture

To enhance donors’ understanding of the importance of agriculture foreconomicgrowthandpovertyalleviationinNepalandtopersuadethemforabroader supports to this sector are important. About two third of the industries being agro industries in Nepal, development of the agriculture sector will also enhance industrialization in the country through the development ofagroindustries.Previousgoodplansinthesectorhavesufferedduetoweakmobilization of financial and technical support. In this context, NepalesediplomaticmissionsabroadandevenNRNassociationcouldbemobilizedtopromote economic diplomacy in the sector. For this, a good networking of MOADwiththemshouldgetdueattention.

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Comments from the ChairExisting Policies, Gaps, Challenges and Way Forward for Effective

Mobilization of International Cooperation Towards Commercialization and Industrialization of Nepalese Agriculture

ByMr.LeelaManiPaudyalChief Secretary

GovernmentofNepal

Mr.Ganesh K.C., Former Secretary atMinistry of AgricultureDevelopmentpresented his paper titled ‘Existing Policies, Gaps, Challenges and WayForward for Effective Mobilization of International Cooperation TowardsCommercializationandIndustrializationofNepaleseAgriculture”.Hesaidthatagriculturewas the largest contributor to Nepal’s Gross Domestic Product(GDP)employing66%peopledirectlyandservingasameansof livelihoodforabout74%ofpeople.Thewidevariation inNepal’secologicalstructureofferstremendousopportunitiesforagriculturaldevelopment.Hecomparedthe technologically advanced farming methods of developed countries to themoretraditionalapproachemployedbyNepalesefarmersandalsogavedataonfooddeficitdistricts(33outof75)andmalnutrition(~40%ofchildrenunder5).Thiskindofdatahintstheneedtoanalyzeanddeveloppoliciesforissuessuchasindustrializationandcommercializationofagriculturalsector.

Hediscussedtheconceptsofcommercialization,industrialization,traditionalversus value added agriculture, past and current scenarios in the sector and reviewedpast long termplans frompolicyperspective.Healso talkedabout the more recent Agriculture Development Strategy (ADS) that isawaitingapprovalbyMinistryofAgricultureDevelopment, its featuresandshortcomings.

He gave data on agricultural expenditures, disbursement of fund etc., suggestionsonappropriateutilizationofexternalassistance,thechallengesNepal faces in terms of commercialization and industrialization as well asareasforfurtherconsideration.

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Mr. Lila Mani Paudyal commented that there are governmental effortsin thefields of landpolicy, contract farming that thepaper presenters didnotmention.Hesaidthattherewereenoughpolicies inplace,whatNepalneeds is new programs. He said that the inability to meet high volume market demandsandlackofconsistencyhasresultedinmanymissedopportunitiesfor the country. He said that local plans by local people were needed, instead oftherelianceonforeignaidandexpertise.Hesaidthatthetimehadcomefor Nepal to focus on how to get things done, not merely what to get done.

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Closing Remarks

Dr.PremBahadurThapaChairperson ACoS Nepal

Chair of the Session

ChiefGuest,SpecialGuestandOtherDignitariesintheDais

DistinguishParticipants(Secretaries,HisExcellency,Ex.Ambassadors,JointSecretaries,UnderSecretaries,RepsfromDifferentLineAgencies,NGOs,INGOs,PrivateSectorOrganisations),

Journalists,LadiesandGentleman

It ismyprivilegetothankyouall foryouractiveparticipationonthisgreatNationalLevelConferenceon“InternationalCooperationinCommercializationandIndustrializationofNepaleseAgriculture:FromPolicytoPractice”.Asweall know, highly experienced professionals commented on the comprehensive papers presented in the following areas and also discussed and collected feedback on various aspects;

1. Commercialization and Industrialization of Nepalese Agriculture andexternalcooperationbyMr.DeependraKshetry,FormerViceChairmanNationalPlanningCommission.

2. Existing Policies, Gaps, Challenges and Way Forward for EffectiveMobilization of International Cooperation Towards Commercializationand Industrialization of Nepalese Agriculture - by Mr. Ganesh K.C.,Former Secretary, Ministry of Agriculture Development.

Theconference is foundsuccessful inachieving itsobjectives. Itwas foundsuccessful inhighlightingdifferent initiativesso farandwayforward in thissector. A team of Rapporteur lead by Ms. Annie Acharya, IFA must have recordedthediscussionpoints,whichwillbefurtheranalysedandanactionplan would be prepared for future works and submission to the concerned authorities.

AgriculturalConcernSociety(ACoS-Nepal)isavolunteernetworkorganisationofNepaleseagricultureprofessionalsandaimstocriticallyanalysethepolicies,programme, events and actions related to agriculture development and

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research,whichcanhelppromoteoverallagriculturedevelopmentandbenefittothegeneralfarmersofthecountry.Ithasimplementeddifferentadvocacyand lobbyingrelatedactivitiesonpolicyrelated issuesandemerging issueswhich affect general farmers and overall agriculture sector, that ultimatelyshouldbenefitbothfarmersandconsumers.So,ACoS-NepalincoordinationwithIFAandotherorganisationswillalsofacilitateprocesstoputforwardtheexploredissuesandoptionstoaddresstheseissuesintoaction.

We have plenty of reasons to be proud with the achievements that the conference had. So, once again,on behalf of organizer, I would like to thank paperpresenters (Mr.DeependraKshetry, FormerViceChairman,NationalPlanning Commission and Mr. Ganesh K.C., Former Secretary, Ministry ofAgriculture Development); Commentators (Dr. Ganesh Raj Joshi, Secretary,MinistryofForestryandSoilConservationandDr.ChampakPokhrel,FormerMember,NationalPlanningCommission);SessionChairs(Dr.RishiRajAdhikari,ExecutiveDirectorIFAandExEmbasadorandMr.LeelaManiPaudyal,ChiefSecretary,GovernmentofNepal).

IwouldalsothanksMinisterforMinistryofAgricultureDevelopmentMr.TekBahadurThapa foracceptingour invitationas chief guestandencouragingwords during inaugural session;Mr. Yogendra Karki (Director) and Team inPACTforfinancialandothersupports;Dr.RishiRajAdhikari(ED)andTeaminIFA forall coordinationand logistics;ACoS-NepalExecutiveCommitteeandothermembersforcoordinationandlogistics;participants,Journalistsandallforyouractiveparticipation.

Onceagainthankyouallandwishyouallthebestandhopetoseeyouagain.

Thanks

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Summary of the Seminar

A seminar on “International Cooperation in Commercialization andIndustrialization of Nepalese Agriculture: From Policy to Practice” wasorganized by IFA jointly with Project for Agriculture Commercializationand Trade (PACT) and Agriculture Concern Society Nepal (ACoS-Nepal) onthe 25th of November, 2013 at Hotel de l’Annapurna in Kathmandu. Theprogram consisted of four sessions. In the inaugural session, the seminar was inaugurated by the Minister for Agriculture, Dr. Tek Bahadur ThapaGharti, In the first session, Mr. Deependra Bahadur Kshetry (Former ViceChairman,NationalPlanningCommission)wasthepaperpresenterandDr.GaneshRajJoshi(Secretary,MinistryofForestryandSoilConservation)wasthecommentator.Inthesecondsession,Mr.GaneshK.C.(FormerSecretaryat the Ministry of Agriculture Development) presented his paper and Dr.Champak Pokharel (Former Member, National Planning Commission) wasthecommentator.ExecutiveDirectorofIFA,Dr.RishiRajAdhikari,chairedthefirstsessionandChiefSecretaryMr.LeelaManiPaudyalchairedthesecondsession. In the closing session, Dr. Prem Bahadur Thapa (Chairman, ACoS-Nepal)deliveredtheclosingremarksandtheprogramwasconcluded.

Firstofall,aftertheformalinaugurationoftheseminar,Mr.YogendraBahadurKarki(ProjectManager,PACT)deliveredthewelcomeremarks.Hesaidthatthepurpose of the seminar was to solicit ideas and share experiences and lessons learnt.Hesaidthatitwastimetorevisitandrenewexistingpoliciesregardingcommercializationofagriculturesectorandtherolethatinternationalsectorcouldplay toacquire thisgoalof commercialization.PACTproject,hesaid,was the only developmental tool that had reached all 75 districts of Nepal. Agriculture is the engine of development for Nepalese economy that employs two-thirds of the labor force. He said that the competency of Nepalese farmers could be increased through the involvement of regional and internationalsectors.

Hon’ableMinister Tek Bahadur Thapa Gharti delivered his keynote speechnext. He very aptly quoted the saying, “If agriculture goeswrong, nothing

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elsecangoright”.Hesaidthatagriculturewasthebackboneofthesurvivalofacountry.InNepal,itaffectsthepeoplebothatapersonalandcommunitylevel since it is the key factor for development. He said that today’s state ofagriculturewas the resultofpreviousplanningandNepalhaddefinitelyprogressed in commercializing to some extent on various agricultural sectors such as poultry, milk, honey etc. Although some progress has been observed, hesaidthatnow,thepastpoliciesandeffortswerenotsufficientfordrivingagriculturebased industrializationandtransformation inthecountry;moreeffortswereneeded.

Nepalese government through its policies emphasizes cooperation amongthedevelopmentpartnersofagriculture–government,scientificcommunity,privatesectors,farmersandtheircooperatives.Publicsectorinvolvement,hesaid,had increasedby74%fromthe lastfiscalyearwhichwasagoodsignsince agriculture is an uncertain sector because of its dependence on factors such as climate, which is beyond human control. Investment in agricultural sector had been decreasing since the 1950s up to 2008 when the world confrontedafoodcrisis.Thisraisedawarenessabouttheagriculturalsector.Mr.Thapasaidthatitwashightimetoutilizefundsinthebestpossiblewaybecause we are already failing to feed the malnourished people today and by 2050, we would need food for nine billion people.

Agriculture has seen major changes within the last couple of decades across the globe due to rapid development in science and technology as well as revolution in information and communication technology. This led to anincrease in consumerism in agrifood products as well. Small shops have been replaced by supermarkets even in developing countries. Agriculture has developed to industrial in nature for farmers and actors of the food value chain.Theaimofinvestmentinagricultureshouldbetomaketherecipientself-subsistentandhelpgivebacktothedonors.Ourdevelopmentpartnershaveshownsimilar interests inAgricultureDevelopmentStrategy(ADS),hesaid.

Dr. Rishi Raj Adhikari delivered the closing remarks for the inaugural session. He said that agricultural sector had the greatest potential for bringingNepal out of the poverty trap by increasing the supply of food, increasing employment. Dr. Adhikari said that agricultural development would also be usefulindiscouragingmigrationtoothercountriesforemployment.

TheseminarconvenedafterashortbreakforthesecondsessionchairedbyDr.RishiRajAdhikari.Mr.DeependraBahadurKshetryproceededtopresenthispaper.He said thatalthoughNepalhasgreatagriculturalpotentialities,

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its harnessing has been marred by mismanagement and faulty decision and neitherexternalnordomestic investmenthasbeenattracted.Superstitiouspractices still prevail in this country where almost three fourths of thepopulation is engaged in agriculture with an average size holding of 0.7ha. Peasant proprietorship of small holdings predominate the agricultural households.Agriculturehasarelativelylowdegreeofcommercializationandfarm income is drastically declining. Agriculture farms run by governmentis lackingdueattention.Healsosaidthatsubsistencefarmingwasweaningoutslowly,notnecessarilyprogressingtowardscommercialization,butlosingimportantlaborforcetomigration.

He talkedabout theeffortsbeingmadebydifferentnationalorganizationssuch as Federation of Nepalese Chamber of Commerce and Industries– FNCCI, PACT (under the Ministry of Agriculture Development) etc topromotecommercializationofagriculturebymakingeffortstodevelop"OneVillageOneProduct" (OVOP),OneDistrictOneProduct (ODOP), improvingcompetitivenessofsmallholdersetc.ExternalassistancefromagenciessuchasUnitedNationsDevelopmentProgram–UNDP, USAIDandothermultilateral,bilateral and international non-government organizations comprise of themain source of Nepalese development expenditure. He said that grants and loansarebeinggiventodevelopagri-sectorbutsometimesgrantsandloansare meaningless as the majority returns to the host country under the garb of expensive technical and human resource support.

Important aspects to consider while promoting commercializing arestimulating production and productivity of agricultural produce includinghorticulture, livestock, poultry and fishery, Dr. Kshetry said. Infrastructureneeds to be in place for processing and marketing of surplus goods andstorage.Hegavefiguresonfundscommittedandprovidedbyvariousexternalsourcesandsaidthatthegroundforcommercializationandindustrializationof agriculture is set and the next step is to provide momentum emphasizing infrastructure development and management skills to handle the issue.

Thereisadearthofinformationonenterprisedevelopmentaswellaslackoffacilitiessuchasgodownsandcoldstorages.Thelatteraffectsmarketpriceas well as income of farmers and maintenance of a steady market supply. Hetalkedaboutthewaysanationcouldbereadyforcommercializationandindustrializationofagricultureincludingthefollowingmeasurestobetakenbythegovernment:

• Createadatabaseof agri-sector focusingon theexistingpositionand immediate tasks that could be done to create an environment conduciveforcommercialization

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• Policy shift in processing, storage and marketing along withproductionenhancement

• Ministry of Agriculture Development should be equipped withtechnicians and laboratories for necessary research

• Complianceofinternationalstandardregulations

• Offertaxincentivesindifferentagri-businesses

He concluded by saying that transforming Nepalese agriculture from subsistence level to a commercialized one is the most important tool to improvethelivingconditionsofNepalesepeoplebyensuringfoodsecurity.The daunting task is to use both domestic and international fundingfor commercialization of Nepalese agriculture and the responsibility ofinfrastructure development heavily falls upon the government.

Dr.GaneshRajJoshi,SecretaryatMinistryofForestryandSoilConservation,wasthecommentatorforMr.DeependraBahadurKshetry'spaper.Dr.Joshicongratulated the paper presenter on touching all relevant dimensions, specially commercialization of agriculture, and the support we have andare receiving to improve the sector. He appreciated the fact that the paper mentionedfuturedirectionstobetakenaswell.Hesaidthathewouldhaveliked to seefigureson foreign aids andhow the focushas changedwithinthefieldofagriculture.Also, thenumbersonsharesofgrantsand loans, ifgiven,couldhaveshowntheamountreceivedandutilizedineachsector.Herequested the presenter to disaggregate bilateral andmultilateral sourcesof funding as well. External assistance, he said, was a major component of government's agriculture related expenditure and talked about the receipt of funds for agricultural research and exterior projects such as Secondary Crops, DiversificationProjectsetc.Whiletalkingaboutprogressmadeinthelasttenyears regarding commercialization, he said that there weremany projectsbutmost focusedonproductiononly.He said thatweare thankful toourdevelopment partners and was positive about the prospects of industrialdevelopment based on agriculture and gave examples of East and South EastAsiancountries suchasMalaysia,Thailand, Japanandotheremergingcountries like Cambodia and Vietnam.

Hementioneda fewways inwhichagri-technology couldbe implementedsuchasshiftingtheindustryonbecomingmorelaborintensive,accelerationof international trade, decentralizationof government structure thathas amore facilitating approach and finally, helping farmers generate cash andincreasing their competitivenesson an international level.He gave various

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reasons as to why Nepal needs to focus on commercialization nowmorethanever.ItisadiscouragingsituationthatalthoughNepalisanagriculturalcountry,importsaregreaterthanexportsinthissectoraswell.ThereexistsanenormousmarketwithinNepal;weneedtoincreasecompetitivenessbyidentifyingcropsandcommoditiesthatwillhelpusmaintainacomparativeaswellascompetitiveadvantage.Duetothetopographicalvariationsinthecountry, he said, Nepal has a great agricultural advantage. Dr. Ganesh RajJoshialsomentionedthatalthoughwegetfundingfromdonorsanddonotlackinplanning,amajorchallengeforushasbeenimplementation.Externalassistance,he said, shouldbe supportiveofourplansandpolicies andweshouldbemoreselectiveregardingourneedsaswell.Also,althoughgrantsmaybelucrativesincetheydon'thavetobepaidback,weshouldassesstheeconomicsofgettingloansaswell,andinvestinproductiveareas.

HiranyaLalShrestha,FormerAmbassador,saidthatinternationalcooperationisanimportantaspectofago-diplomacy.Transportationshouldbedevelopedand more passes should be opened in the north for easier market access to China. More Memoranda of Understanding should be signed with countries onagriculturalmatters.Units forprocessingagriculturalproduceshouldbeestablishedandNepalshouldactivelypromoteagro-diplomacy.

Chauyen Lai, Nepali Congress, said that greater than 70% of Nepalesepopulation comprises of farmers and the issue of the seminar was verypertinent.HesaidthatpoliciesinNepalarelimitedtopaperwork.AgricultureinNepal reliesonnaturalphenomenaand traditionalwaysof thinking.Hesuggested introducing pilot projects in villages, introducing hygienic ways of farming so that consumers' health is not hampered and asked the government totakeresearchinitiativesandeducateNepalifarmersonthetypeoffarmingthat canbedone invarious regionsofNepal. Thiswaywemaybeable toretainNepaleselaborforceandpreventmigrationofouryouth.

Dr.BishnuHariNepal,FormerAmbassador,saidthatitisashamefulsubjectthat the majority people in an agricultural country do not have enough food. Hesaidthatin1976,NepalusedtoexportfoodtoJapan.ThereweremarketsbeyondIndiaandChinaaswell,hesaid.Hequestionedwhywewerenotabletomotivate and encourage our human resources and letting themgo andwork in other countries.

Sunita Nhemaphuki, Chief Editor of the Nepali magazine, "Krishak ra Pravidhi" asked for the research paper to be updated with recent data. She said that we needtoalsofocusoncommunicatingwithpeopletheideasgeneratedaswellas policies etc.

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Tanka Karki, Former Ambassador, gave examples of success stories inagriculture such as farming of cardamom that was not a project developed by thegovernmentoranyorganizationbutby the farmers themselves.Hesaidmore individuals were eager to work in the agriculture field and thegovernmentshouldidentifyideasandmakeeffortstocommunicatethemtothe general public.

Dr.DineshBhattarai,FormerAmbassadorsaidthatthehigher levelofficialsneedtoapplythebestpracticespossibleintheformofagriculturaldiplomacyand we need to make sure that donor agencies had the same interests in mind as the Nepalese government.

DeepakDhital,JointSecretary–MOFA,saidthatthepaperpresentedneedstocomparethepastsituationofagricultureinNepalversusthepresent,andwhetheragriculturedevelopmentissatisfactory.Nepalisturningintoanagri-foodimporterfromitspastroleasanexporter.Withoutattractingyouthtothesector,therewon'tbemuchachievementinthefield.LifepatterninNepaltoday ismovingfromsubsistenceagriculturetosubsistenceremittance.Hesaidthatstructuraltransitionofagri-sectorisneeded–agricultureshouldbeabletobringpeoplecashincome.Thiscanbedonebyvariousmethodssuchasidentifyingandutilizingthebioclimacticpocketsforhighvalueproductionwhile following WTO standards. Support from external sources is neededfor packaging, processing, product pricing and distribution. Financial andtechnological support is also needed in the agri-sector. People in the fieldshould be trained properly. Resources should be properly harnessed and research capacity of Nepal needs to be improved as well.

Dr.GanapatiOjhasaidthatNepalhasahugeinternalmarketaswellandweshould approach agriculture from an import substitution perspective. Anenabling environment in agriculture should be created and management skills shouldbeimprovedorelsethesectorwillneverflourish.

Dr.GopalPokharel,formerExecutiveDirectorofIFA,saidthatNepalesehavenotsetexactprioritiesandusuallycatertothosesetbydonoragencies.Thismentalityneedstostopandweneedtobemoreobjectiveinourgoals.

JanardhanAdhikarisaidthatwehaveenoughresources;weneedtofigureoutclearfuturedirections.

Radheshyam Malla said that we need to think globally and act locally. He said weneedtothinkabouthowwecanattracttheyouthtoagriculture.

Dr.M.P. Lohani, FormerExecutiveDirector– IFA, said thatmostgrantsgobacktodonorcountriesinformsoftechnologyassistance,expertiseetc.ThissituationthatexistedinNepal35yearsagostillexiststoday.

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Ms. Falkenberg suggested the Ministries of Agriculture and Forestry to work together to identify products that have a competitive edge in the foreignmarket.Shesaidthat50%ofNepal'sjuteindustryisidleandweareimportingitfromBangladesh.Ontheissueoffunds,shesaidthatNRNscouldalsobeanactivesource.ShesaidtheinvolvementofmigrantworkersisgoodbuttheexpertisethatcanbebroughtinbyNRNsshouldalsobefocusedupon.Also,duetothehighvolumeofemigrationofmenfromNepal,itismostlywomenworking in the agricultural sector and that should be taken into account while formulatingpolicies,implementingprogramsetc.

Mr.GiriRajTripathi,ResearcherinAgricultureSector,gaveexamplesofnoveleffortsmade inNepaleseagriculturesuchas theproductionof trufflesbutsaid that no product can be commercialized without proper research and innovation.

Mr. Deependra Bahadur Kshetry said that he would accommodate thecomments received from the audience in his paper.

The seminar convenedafter a short break for the third session chairedbyMr.LeelaManiPaudyal,ChiefSecretary,GovernmentofNepal.Mr.GaneshK.C., Former Secretary at Ministry of Agriculture Development presented his papertitled'ExistingPolicies,Gaps,ChallengesandWayForwardforEffectiveMobilization of International Cooperation Towards Commercialization andIndustrializationofNepaleseAgriculture".He said that agriculturewas thelargest contributor to Nepal's Gross Domestic Product (GDP) employing66%peopledirectlyandservingasameansof livelihoodforabout74%ofpeople.ThewidevariationinNepal'secologicalstructureofferstremendousopportunitiesforagriculturaldevelopment.Hecomparedthetechnologicallyadvanced farmingmethodsofdevelopedcountries to themore traditionalapproachemployedbyNepalesefarmersandalsogavedataonfooddeficitdistricts (33 out of 75) andmalnutrition (~40% of children under 5). Thiskind of data hints the need to analyze and develop policies for issues such as industrializationandcommercializationofagriculturalsector.

Hediscussedtheconceptsofcommercialization,industrialization,traditionalversus value added agriculture, past and current scenarios in the sector and reviewed the past long termplans frompolicy perspective.He also talkedabout the more recent Agriculture Development Strategy (ADS), that isawaitingapprovalbyMinistryofAgricultureDevelopment, its featuresandshortcomings.

He gave data on agricultural expenditures, disbursement of fund etc., suggestionsonappropriateutilizationofexternalassistance,thechallenges

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Nepal faces in terms of commercialization and industrialization as well asareasforfurtherconsideration.

ThepaperpresentationwasfollowedbycommentsbyDr.ChampakPokhrel,formermember of National Planning Commission. He said that the paperbroughtupalotofissueswithsuggestionsaswell.AfterAPP,therehasbeenadeclineinagri-investmentbutevenintimesofconflict,Nepalreportedabout3%growthintheagriculturesector.HesaidthatAPPcouldnotbecalledafailure, that there were other factors at work. Agriculture investment did not fallunderMinistryofAgriculture.Agriculture,hesaid,wasapoliticallymisused sector. He strongly opined that an Agri-Development Act be established; a country where majority of people relied on agriculture for their livelihood deserved it. He said that policies are never binding, and research must be streamlined. The targets set for the development of agriculturemustbemutuallyreinforcingtogetmaximumbenefitsoutofit.Ownershipand responsibilitymust increaseamongallpartiesconcerned.Hesaid thatdonorswanttounderstandwhatreallybenefitsNepalandaskedeveryonetopromote agricultural diplomacy.

The floor was opened for comments.

Mr.YogendraKarkisaidthatthesedaysaparadigmshiftisvisibleinagriculturalinvestment – it is shifting from government and big sector investment toindividual investment. He suggested that a matrix be included in the paper regardingpolicies,programsandimplementationleveldata.

Dr.BishnuHariNepal spokenextandsaid thatNepal's focus shouldbeonland reform and management. Land management should be the agricultural sector'sfirstpriorityandtechnologymanagementshouldbethesecond.

Dr.BirendraBirBasnyatsaidthatspeakersshouldhavefocusedonthetopicathandi.e.industrializationandcommercializationastheseminarseemedlikeanA.D.S.seminar.Moreevaluationisneededonourcurrentsituationandhowwecanprogressasanagriculturalnation.Hesaidthatgoalsofindustrializationandcommercializationcouldnotbeachievedwithoutmechanization.Thereisagapbetweenpolicyandpracticeduetolackoflegislationsoanagricultureextension act should be formulated that reaches people directly.

Netra Prasad Osti talked about balanced development, nutrition andsafeguarding agri-businesses. He said that more emphasis needs to be given on research for any progress.

Mr.UttamBhattaraisaidthatfoodtechnologistsneedtobeincludedintheagriculture development process. Pilot plants should be made in every sector.

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Institutions and boards should be established to support farmers' efforts.Subsidies seem to have a positive effect like in the usage of fertilizers byfarmers so it should be promoted.

Mr. Peter, an agri-investor of German origin, said that seminarmentionedinternational funding and donor agencies butmarketing partners of othercountries is also a helpful aspect to be considered because Nepalese farmers lackmarketaccess,know-howetc.OneimportantfacthementionedwasthatthereisnorespectforNepalesefarmers.Thissectorwouldbeabletoattractmore people if there was more respect given to the profession of farming.

Ms. Pramila Acharya said that if agriculture was commercialized, it would help upliftmid-levelbusinessesaswellandpromoteNepaleseeconomy.

Mr.BuddhiNarayanShresthaopinedthatgovernmentshouldintroducelawsforplanningsuchaszoningoflandifindustrializationofagricultureistobepromoted.Farmersshouldbegivenincentivesforqualityproductionofgoodsandfragmentationoflandshouldbediscouraged.

Dr. M. P. Lohani said that we should learn from our past mistakes and not repeat them.

Ms. Falkenberg said that Nepal's plan of increasing the threshold for foreign investment in agriculture to 2 million USD may result in loss of investors becauseofsuchahighfigure.

MDr. Champak Pokhrel reemphasized the need of having an Agriculture Development Act and an act for subsidies for the agriculture field so thatpolitical changes may not affect it and Nepalese agriculture could haveconsistency.

Mr.LeelaManiPaudyalcommentedonafewconcernsraisedonthefloor.Hesaidthattherearegovernmentaleffortsinthefieldsoflandpolicy,contractfarmingthatthepaperpresentersdidnotmention.Hesaidthattherewereenough policies in place, what Nepal needs is new programs. He said that the inability to meet high volume market demands and lack of consistency hasresultedinmanymissedopportunitiesforthecountry.Hesaidthatlocalplans by local people were needed, instead of the reliance on foreign aid and expertise.HesaidthatthetimehadcomeforNepaltofocusonhowtogetthings done, and merely what to get done.

ClosingremarksfortheprogramwasdeliveredbyDr.PremBahadurThapa,Chairman of ACos-Nepal.

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List of Participants in the Seminar

Participants List:

1. Hon.Mr.TekBahadurThapaGharti Minister for Agriculture Development

2. Mr. Leela Mani Paudyal Chief Secretary GovernmentofNepal

3 Dr.GaneshRajJoshi Secretary MinistryoForestsandSoilConservation

4. Mr.DeependraBahadurKshetry Former Vice Chairman NationalPlanningCommission

5 Dr.PremBahadurThapa Chairman ACos-Nepal

6. Mr. Yogendra Kumar Karki Project Director PACT

7 Dr. Champak Pokhrel Former Member NationalPlanningCommission

8. Mr.BuddhiNarayanShrestha BoardMember,IFA Gyaneshwor.

9. Ms. Pramila Rijal BoardMember,IFA

SCWEC, Kamaladi.

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10. Prof. Dr. Mohan P. Lohani FormerExecutiveDirectorofIFA

Bansbari. 11. Prof.Dr.GopalPrasadPokharel FormerExecutiveDirectorofIFA Maitidevi,Kathmanu.

12. Dr. Anjan Shakya FormerDeputyExecutiveDirector,IFA

13. Mr. Deepak Dhital JointSecretary&Spokesperson,MoFA

14. Mrs. Ambika Devi Luitel JointSecretary North East Asia Division, MoFA

15. Mr.DhanBahadurOli Director, SAARC Secretariat

16 Mr. Mani R Sharma Under Secretary SAARCSection,MoFA.

17 Mr.PremRajGautam SectionOfficer Department of Passport, MoFA

18. Dr.DineshBhattarai FormerPRtoUN,Geneva.

19. Mr.TankaKarki Former Ambassador to China

20. Prof.Dr.BishnuHariNepal FormerAmbassadortoJapan

Chairman,DilliRamanTrust

21. Mr. Hiranya Lal Shrestha Former Ambassador to Russia

22. Mr.SundarNathBhattarai FormerAmbassadortoThailand

23 Mr. Santosh Chandra Kunwar Agriculture Entrepreneurs

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24 Mr. Nawal Kishor Yadav SeniorAgri.ScientistofNARC

25 Dr.DilBahadurGurung ExecutiveDirector,NARC 26 Mr. Naresh Dangi NARC

27 Mr.NetraPrasadOsti NARC

28 Dr.BhimKhatri NARC

29 Mr.BishnuHariAdhikary SeniorScientist(S-4) Division Chief Communicationpublicationand DocumentationDivision,NARC

30 Mr. Navin Hada USAID

31 Mr.UttamKumarBhattarai JointSecretary

Ministry of Agricultural Development.

32 Mr. Rajendra Adhikari JointSecretary Ministry of Agricultural Development

33 Dr. Prabhakar Pathak JointSecretary Ministry of Agricultural Development

34 Mr. Vijoy Kumar Mallick JointSecretary

AgribusinessPromotionandStatisticsDivision,MOAD

35 Mr. Madhav Prasad Regmi Secretary Ministry of Commerce and Supplies

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36 Mr. Lila Ram Poudel DirectorGeneral Department of Agriculture

37 Dr.NarBahadurRajwar DirectorGeneral Department of Livestock Services

38 Mr Chauyen Lai Shrestha ForeignRelationDepartment Nepali Congress.

39 Mr.AnilGiri TheKathmanduPost

40 Mr. Chandra Shekhar Adhikari TheAnnarpurnaPost

41 Mr.BikashJoshi KantipurTV

42 Mr.RamKrishnaBhandari KantipurTV

43 Mr. Harihar Parajuli HimalayanTV

44 Mr.SushilBaskota HimalayanTV

45. Mr. Parshuram Kaphle HimalayaTimes

46 Mr. Radhesh Shyam Malla Program Presenter HimalayanTV

47 Dr.BishnuChapagain ACoS-Nepal

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48 Mr. Durga Prasad Dawadi ACoS-Nepal

49 Mr.PremBahadurThapa ACoS-Nepal

50 Mr.BharatBahadurPandey ACoS-Nepal

51 Mr.BaburamPathak ACoS-Nepal

52 Dr. Hari Kumar Shrestha Life Member, ACoS-Nepal

53 Mr. Rishi Raj Adhikari CPDD

54 Mr.SanjeevBhatia Embassy of India

55 Mr.DhanapatiKharel Baneshwor

56 Mr. Prakash Sapkota HimalayaTV

57 Dr.GiriRajTripathi TribhuvanUniversity

58 Mr.BinodAcharya NTCDB

59 Mr.UdayChandraThakur Department of Live Stock

60 Mr. Suresh Acharya TUTA

61 Mr.GangaBahadurThapa DepartmentofPoliticalScienceT.U.

62 Ms.YamunaGhale SDC

63 Mr.JanardanGhimire HEADS, Nepal.

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64 Mr. Kikuo UHNU EuropeanUnionGerman

65 Mr.B.K.Manadhar EuropeanUnionGerman

66 Mr.BaikunthaBhandari Agricultural News Society

67 Mr. Durga Prasad Adhikari SEAN

68 Mr. Somsak P. Poppilyo FAORepresentative

69 Dr.BinodSaha AssistantRepresentative,FAO70 Mr.GaneshKumarShrestha PACT

71 Mr.BadriPrasadDahal PACT

72 Dr.BiredraBirBashnyat MonitoringandEvaluationExpert PACT.

73 Mr.GanapatiOjha COE

74 Mr. Rudra Pangeni Republica

75 Mr.BholaK.Shrestha HELVETAS

76 Ms. C. Falkenberg CIM NepalGermanChamberofCommerce&Industry

77 Dr. Rishi Raj Adhikari ExecutiveDirector,IFA

78 Mr. Khush Narayan Shrestha DeputyExecutiveDirector,IFA

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79 Ms.SnayhaBasnyat Intern, IFA80. Mr.MahendraJoshi IFA

81 Mr. Subhash Lohani IFA

82 Ms.BinitaShrestha IFA

83 Mr. Sanuraja Puri IFA

84 Mr. Rajendra Magar IFA

85 Mr. Nish Magar IFA

86 Ms. Mina Magar IFA.

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International Cooperation in Commercialization & Industrialization of Nepalese Agriculture...IFA Publications1. ReportontheNationalSeminaronNepal’sForeignPolicy – 1993

2. ReportoftheSeminarontheUruguayRoundofMultilateralTradeNegotiationsandtheirImplicationsoftheNepaleseEconomy – 1994

3. Nepal’sParticipationintheUnitedNationsPeacekeeping

Operations (Report of the Seminar Organized in CooperationwithUNAssociationofNepal) – 1994

4. Nepal’sForeignPolicy:IssuesandOptions(Reportofthe

NationalSeminarOrganizedinCooperationwithFES) – 1999

5. TheSAARCProcessandPovertyEradicationinSouthAsia(ReportoftheTalkProgrammeOrganizedinCooperationwithSAPPROS-Nepal) – 1999

6. Policy Study Series-1 (Nepal-India, Nepal-China and U.N., LDCandNepal)–1999 – 2001

7. PolicyStudySeriesII(SecurityinSouthAsia) – 2001

8. g]kfn–ef/t v'Nnf l;dfgf M ;sf/fTds tyf gsf/fTds kIfx? ljifos uf]i7Lx?sf] k|ltj]bg – 2002

9. Report of the Seminar on Follow-up of the Eleventh SAARC Summit – 2003

10. PolicyStudySeriesIII(Nepal’sRelationswithBangladesh,PakistanandSriLanka) – 2003

11. FutureofSouthAsia:ANewGenerationalPerspective – 2004

12. Policy Study Series IV (Nepal’s Relationswith United States ofAmerica) – 2004

13. ReportonNepal’sForeignAffairs(2002-2003) – 2004

14. TradeFacilitation:Nepal’sPriorities – 2005

15. PolicyStudySeriesV:LabourIssuesandForeignPolicy – 2005

16. Nepal-ChinaRelations – 2005

17. Nepal and theUnitedNations in CooperationwithNCWA andUNAN – 2005

18. NewLifewithinSAARCinCooperationwithFES – 2005

19. ComprehensiveSecurityinSouthAsiainCooperationwithFES – 2005

20. NepalasaTransitState:EmergingPossibilities – 2006

21. Nepal-JapanRelations – 2006

Continue

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IFA Publications22. ReportonSpecialOrientationProgrammeforNepaleseForeign

ServiceOfficials(Deputed)workingindifferentmissionsabroad – 2007

23. DifferentDimensionsofBhutaneseRefugeeProblem:ItsImplicationsandLastingSolutions- – 2007

24. WaterResourceManagementofNepal:AStrongMeansforSustainableNationalDevelopment – 2007

25. AReportonBriefing-Cum-InteractionProgrammefortheNepaleseAmbassadors(Designate)toDifferentMissionsAbroad. – 2007

26. Nepal:AGenericGuidelineforDevelopmentthroughEconomicDiplomacy – 2008

27. ExpansionofSAARC:ChallengesandOpportunities – 2008

28. Nepal-GermanRelations – 2009

29. CourseDesignforAmbassadorDesignateandOfficialsofMinistryofForeignAffairs – 2009

30. ACompilationofJointcommuniquésandPressStatementsIs-suesbyGovernmentsofNepalandIndiaduringPrimeMinister’sOfficialsVisits(1990to2009) – 2009

31. ForeignPolicyofNepal:“ChallengesandOpportunities” – 2009

32. StatementsandDeclarationsofSAARCSummitsoftheHeadsofStateorGovernment(1985-2010) – 2010

33. SpeechesofHeadsoftheNepaleseDelegationtotheUnitedNa-tionsGeneralAssembly1990-2009 – 2010

34. SummitDeclarationsofNon-AlignedMovement(1961-2009) – 2011

35. SpeechesofHeadsoftheNepaleseDelegationtotheNon-AlignedMovement(1961-2009) – 2011

36. TranslatingCommitments,AccountabilityandPartnershipintoActions:AcaseofNepal. – 2011

37. AReportonEmergingChallengesofNepal’sForeignPolicy–NationalLevelSeminar. – 2012

38. InstitutionalizationofNepal’sForeignPolicy – 2013

39. ForeignPolicyofNepal:EnhancingEffectiveParticipationofNepalinRegionalandInternationalSystems&RiskofClimateChange in South Asia

– 2013

40. Fromabuffertowardsabridge:Nepal’snewforeignpolicyagenda – 2013

41. RoleofNRNinEffectiveMobilizationofEconomicDiplomacyinNepal – 2014

International Cooperation in Commercialization ... · Concern Society Nepal (ACoS-Nepal) conducted one day seminar on November 25, 2013 on “InternationalCooperation in Commercializationand

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