The manufacturing sector remained stagnant in 2011/12 as protracted power cuts, dismal flow of fresh investment and frequent political and labor unrest badly affected the sector that employees mostly unskilled and semi-skilled workers.
As a result, the sector grew by meager 1.28 percent said the Economic Survey 2012.
The sector had grown by 2.29 percent in 2010/11contributing 6.2 percent of the gross domestic product (GDP). The contribution of manufacturing sector has been continuously decreasing over the last decade. It was recorded at impressinve 8.2 percent in the fiscal year 2002/03.
Depressing performance of this sector has led to nominal creation of jobs within the country.The private sector, which is the key player in the employment generation, says hardly 50 percent of the total industrial capacity has been utilized.
Meanwhile, the Survey showed that cement factories have utilized 56 percent of their production capacity. Similarly sugar, jute, cigarette, beer and matches factories are operating at 32 percent, 67 percent, 92 percent, 80 percent and 58 percent of total capacity respectively.
“Utilizing production capacity of the industrial sector is a major challenge,” read the survey. "The growth target for manufacturing sector has not been achieved due to the ever-prolonging political transition, deepening power shortage and hosts of other problems such as labor disputes."
According to the survey, 2,148 manufacturing industries were registered at the Department of Industry (DoI), generating employment opportunties to 250,406 people until the end of fiscal year 2010/11. The industries with foreign direct investment generated 155,432 jobs during the year. "However, manufacturing sector contributed only 33.8 percent of the jobs created during the period," the survey said.
Amid bleak performance of industrial sector , the government is working to endorse new special economic zones (SEZs) bill, Industrial Enterprises Act (IEA), Foreign Direct Investment and One Window Policy to facilitate more investment. Establishment of SEZs in 10 different places of the country such as Bhairawa, Biratnagar, Bara, Gorkha, Siraha is on the cards.
In a bid to lure foreign investment in the industrial sector, the government has declared investment year 2012/13. Additionally, the government has already signed the Bilateral Investment Promotion and protection Agreement (BIPPA) and Double taxation Avoidance Agreement (DTAA) with Indian government to boost investment.
