Karnali's Industrial Development Lags Behind Other Provinces Due to Lack of Infrastructure and Investment

Surkhet. Compared to other provinces, Karnali's industrial development is far behind. Despite being called a region of potential, Karnali lacks large and medium-sized industries and factories, which are considered the basis of economic prosperity. As a result, Karnali is not only still fully dependent but also relies on grants to operate the provincial structure.

Why has industrial development not been possible in Karnali? What can be the blueprints for economic progress? To discuss this, we have chosen Madhav Chaulagain, an investigator of Karnali's history, who was the Minister of Forests and Environment in the interim government formed after the Janashakti movement.

Here is the edited excerpt of the conversation with former minister Chaulagain:

• In your opinion, what can be the blueprints for Karnali's economic progress?

In the Karnali we see, the first aspect of economic progress is its unique geographical condition. Industries based on this unique geographical condition, social environment, and environmental surroundings create economic opportunities. We have diversity from high Himalayan regions to hilly and inner Terai areas. Industries based on the environmental conditions provided by this geographical diversity are an important sector.

We have great natural and cultural diversity. In this place with diversity of natural and cultural heritage, religious aspects are also connected, which seems to provide another big opportunity.

Another aspect is the economy based on the use of our natural resources. Among natural resources, rivers are a major basis, while important tourist destinations are another basis. In the context of tourism, we are always thinking only of Rara or Phoksundo. Whereas, there is a lot of diversity here, from the high culture to the upper Himalayan settlements down to the valleys. Our economic foundations must be linked to these geographical and cultural heritages. Outside these areas, there are no comparative advantages visible in Karnali.

• There has been no progress in establishing industries in Karnali so far. Unemployment remains the same, and even agriculture is not self-sufficient. How can the standard of living be improved without factories?

Yes, this is a very challenging situation for us. Because industries and factories are associated with modernization. As society progresses towards industrialization and modernization, industries and factories gradually expand. Karnali is a society operating on a socio-economic model based on traditional lifestyles, traditional agriculture, and animal husbandry. In such a society, factories will not open unless there is modernization, industrialization, or mechanization.

Access to infrastructure is essential to enter that sector. There is awareness in society, and we have seen possibilities, but the necessary environment to realize those possibilities has not yet been created. When the environment is not created, the possibility of modernization and industrialization is bound to be low.

The lack of environment means the lack of infrastructure. The reason for the lack of infrastructure is that there has been insufficient investment in our resources. Compared to other parts of the country, investment in Karnali's infrastructure has been insufficient. Because we are very far behind and the pace of development is slow, large factories and industries have not been able to be established despite great desire.

Currently, traditional domestic and small-scale industries are running in a subsistence manner. While that helps a family to some extent for their livelihood on a small scale, we need market-oriented industries that can improve the economic condition of the entire province and the people of Karnali. If it is market-oriented, it will compete. We have to build the capacity to go in that direction or compete. To compete, market access is needed, and infrastructure is essential for access. We do not have infrastructure. Without infrastructure, despite all desires, the possibility of opening industries that create a lot of employment remains low.

• The issue of problems has come up, when talking about possibilities, what kind of factories do you see potential for here?

Karnali's potential should be different from other regions. The model of industries being built in the corridors established in Nepal cannot be successfully copied in Karnali. If we try to establish industries in Karnali like those in Birgunj, Nepalgunj, or Biratnagar corridors, the cost will be higher because we are far from large markets. Therefore, those areas are not our comparative advantage regions.

Our comparative advantage lies in agriculture, especially fruit-based industries. Although the arable land is small, there is great potential for fruit-based industries. High-value products like Himalayan herbs are another big sector. So far, we have only been supplying raw materials; there are no processing industries. These industries have not flourished due to insufficient government protection and support to reach the market, and mainly due to lack of infrastructure.

Similarly, in the Sinja region, there is great potential for cement industries in areas with concrete and raw materials. Large industries can be developed here. This also requires access to basic infrastructure like roads, electricity, and communication. Without that, investors cannot come.

Another important sector in Karnali is hydropower. Hydropower is a sector with the largest potential in Nepal, but investment has not been possible here due to lack of infrastructure. There is potential for large industries related to eco-tourism. Its market can be cross-border, i.e., up to Tibet and China.

There are good opportunities for small and medium-sized industries as well. Since the forest area is large, there can be wood-based and non-wood-based industries. There is also potential for mining industries. Mines that were operated traditionally in the past but closed due to government policies can be revived. Intangible heritage in the tourism sector can become another big industry. Not just natural scenery, but industries based on new concepts of cultural tourism, heritage tourism, and 'landscape tourism' are areas of great potential.

• Karnali is always called a region of potential, but in practice, we are weak in all aspects. Why are investors not attracted here? You must have received information on this subject when you were the Minister of Forests and Environment at the center. What do you see as the investment-friendly environment in Karnali Province?

It can be said that the investment-friendly environment has not been fully prepared in the current situation, but I find that the attraction towards Karnali and the desire to invest are increasing. There is a mysterious attraction towards Karnali and Sudurpashchim regions, but investors lack access, investment security, and easy market access. The state has also not been able to bring policies that promote it.

For example, special economic zones have not been arranged across Karnali Province so far. Infrastructure has not been built even in places considered somewhat potential. There is no certainty of obtaining suitable land, land use rights, and security. Some investors want to make large investments, but they are hesitant due to problems with land purchase, taxes, and lack of government guarantees. The fear of legal complications and physical insecurity is equally present. The government has not been able to assure that my investment will be safe and that legal remedies will be available in case of disputes.

Currently, industries and businesses need to be viewed separately. Many people understand business as industry. A businessman only works as an outlet for selling the products of another industry. Hotels are also just businesses; they have not been linked to entrepreneurship. Due to the lack of an environment to promote industries, the contribution of Karnali's industrial sector to the country's Gross Domestic Product (GDP) is very low. However, due to the vast geography and unexpected natural resources here, people are seeing new opportunities.

Like in Mustang, a big wave of tourism can come to Karnali. Karnali and Sudurpashchim can become main destinations for tourists coming from Kathmandu, Pokhara, or India, but for that, travel predictability must exist. For example, certainty about how many days it will take to reach and return. Without that, investors will not want to take risks.

• You mentioned special zones; industrial zones have been designated in other provinces. Where do you see the potential for such industrial corridors or zones in Karnali?

There are a few things in this. First, small industrial villages need to be built. We have little government land, and what we have is encroached upon. Therefore, industrial villages should be built on the existing government lands, and surrounding activities should be concentrated there. The government should provide electricity, information, and financial assistance there. Although such efforts have been made in Jumla or Surkhet, they have not progressed effectively. The lack of infrastructure is the main obstacle.

Thinking about this in a new way, there is immense potential for sheep farming in the Himalayan region. This is a big market for sheep meat and wool. Currently, it is being done only in a traditional and family manner. By utilizing our large grazing areas, it can be made commercial. Similarly, if cold chains can be maintained for oranges and apples, good income can be generated.

A Special Economic Zone is a place where the government provides all facilities to attract entrepreneurs. Currently, entrepreneurs are getting entangled in finding land themselves and resolving disputes with locals. There are many stages and hassles in establishing an industry. Therefore, if all facilities and security are provided within a single zone, investors will be attracted. Although not as large as Lumbini or Chitwan, it is an opportune time to build small-scale economic zones suitable for Karnali's soil. Electricity is now reaching the main places. Now the quality of roads needs to be improved. If roads are built on time and are reliable, an industrial environment will automatically be created.

• What is the perception of Nepal's private sector or NRIs towards Karnali?

The private sector and investors in the diaspora see Karnali as a new opportunity. They feel that Karnali holds the future. The attraction is high, but they are afraid of uncertainty.

If there is risk management and security guarantees, they seem ready to come with large investments.

• What can be done to retain the manpower going abroad? What kind of entrepreneurial programs are needed?

The wave of going for foreign employment from Karnali has just begun. Historically, the manpower from here used to go to Kalapahad (India). There, they mainly worked in fruit orchards or in construction. There is a lot of potential to do both these jobs within Karnali itself. People have gone out due to the tendency to hesitate to work in their own villages. If commercial opportunities are created in Karnali itself in the fields of fruits, herbs, and construction, that manpower can be retained.

The big market now is tourism. The 'boom' in tourism provides employment to many, but for this, the condition of the roads must improve. Vehicles do not run at night in Karnali. We need to create an environment where vehicles run at night and roads are operational for 12 months. Parallel roads need to be opened as an alternative to the Karnali Highway. The situation where hundreds of vehicles get stuck due to landslides in places like Daikhola or Gagne Khola on the Karnali Highway must end. If the road network connecting Surkhet to Tibet is expanded, there is great potential for small, medium, and large industries to open. As soon as travel becomes easy and safe, the economic transformation of Karnali is assured.