Nepal will be Attractive for Businesses Once There is Political Stability

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Nepal will be Attractive for Businesses Once There is Political Stability

Elisabeth von Capeller is the ambassador of the Switzerland to Nepal. She has in-depth knowledge of Nepal's development initiatives, having worked at the Swiss Development Cooperation's Nepal office in 2007. In an interview with Madan Lamsal of New Business Age, von Capeller shared Switzerland's development experiences and Swiss development assistance to Nepal. Excerpts:

Could you please tell us which are the areas that the Swiss Embassy is currently focusing on in Nepal?
As you may know, Switzerland has been present in Nepal for over 60 years. We initially started with development cooperation in the areas of cheese and forest, but we have evolved since then, and now we are more focused on private sector development. We have always supported the institutions of Nepal, and institutional building has remained an important focus for us. Without this, any development support would not be sustainable.

How has been your experience in Nepal so far?
We have had some very successful projects, such as the trail bridges that we supported to build in the 60s and 70s, which allowed people to be more mobile. Mobility and access are essential for economic development in rural countries like Nepal. Without roads, bridges, and tunnels, economic development is not possible. I would say that this has been one of our flagship achievements. The success is also that we are now able to hand over and withdraw our support.

We have also seen a lot of success in the technical vocational education system. We have been involved in this sector for a long time and are now supporting the government's efforts to strengthen technical and vocational education at the provincial and local level. Another area where we have been involved is migration. Fifteen years ago, people were shocked when we talked about migration. But, now it is widely accepted as a factor for development. We have supported the government in this area and will soon hand over the safe migration project. Migrants are the real heroes, and we have helped to provide them with support and information to prevent them from being cheated.

As an embassy, we are also promoting Swiss business interests. We work with other banks and development partners to support the government in creating a better framework for foreign investment.

Switzerland is often seen as an ideal for Nepal in terms of economic development and the federal system. Do you think that Nepal is taking the right steps to become the 'Switzerland of the East'?
It will be boring if Nepal becomes another Switzerland. While there are similarities and some shared experiences between our countries, we are both diverse and unique. We have found that the way forward for us, both economically and socially, is through a federal system that allows conflicts to be solved at the local level. This has been our success story in Switzerland.

It is important to note that Switzerland's economy is built on small and medium-sized enterprises (SMEs) rather than big industries. During the COVID pandemic, we saw that SMEs were more resilient than large companies. This is something that we support in Nepal because it is through SMEs that innovation and know-how are generated, and employment can be created. This understanding that small and medium enterprises can contribute to the economy is probably not understood by all the politicians yet.

What is your observation on the implementation of the federal system in Nepal?
This constitution was the consequence of the peace agreement. When compared with other countries, it is very good. But the constitution is only as good as its implementation. We have always said Nepal is on a good trajectory. I think it's a positive direction. It's a bumpy road. We believe that there should be at least three election cycles until a system is going to be in place. I personally think Nepal has achieved a lot.

However, certain things have to happen now. There are many Acts in the parliament, and also not yet in the parliament, which have to be passed for the system to function. There is always a saying that federalism is too expensive. No, it's not. If you want to have the same number of people in all three governments, it's expensive. But if it is according to the mandate, it's not. Switzerland has one of the cheapest administration costs worldwide.

Having said this, I believe that the Civil Service Act is very important for the province and the local level to hire their staff. Otherwise, it's not functioning. The federal system is always cheaper than a war. We also had tension in Switzerland in the 70s. We also had groups which started to be armed because they wanted to split. We could manage it by giving them a separate province. It was cheaper than the internal conflict.

How do you see the role being played by the players of the federal system? Are they doing the right job, or do you think some corrections are required?
That's a very tricky question. We say it is amazing at the local level. There may be things we can correct, but service delivery is much better. The province government will eventually find the role. I think people are expecting wrong things from the province. If somebody asks what my province is doing, I can only say higher education, hospitals, the provincial road, and economic framework. Federalism is all about competition, like which province will offer the best conditions for the private sector. That's what the province should be doing. The province does not give people something directly. So I think the understanding of the province may not yet be so deeply anchored. To understand what the federal government should do is also maybe not yet so anchored. Our role as the federal government employee of Switzerland is standard setting, policy development, and quality assurance. These are the major tasks of the federal government. Probably that's where the country will come to. It was a huge change, so it will take time. But I am very positive.

Switzerland has been focused on Nepal's political sector for some time. Now that the peace process has been completed, isn't it time for Switzerland to shift its focus back to the economy?
The peace process is not yet completed. There are two elements. First is transitional justice where we hope that the Bill will be passed. The other is all these Acts that I talked about which will enable the country to implement the constitution. I believe this is also still a mandate which comes from the peace process. The private sector should come to the forefront. Nepal needs to open up to the world because without foreign investment, the economy will not be able to produce enough. I believe that with foreign investment comes innovation, and it will allow young people to get jobs in the IT sector, in the fintech sector. That is the sector I believe is the future of the country. I believe this country will be a service delivery country. Some people think big industrial complexes will come, but I don't think so. Nepal will be a service delivery country in health, education, hospitality, banking, and many other domains.

Nepal is currently facing a trade deficit with Switzerland and experiencing a decline in exports. In your opinion, how do you foresee bilateral trade evolving in the future?
I think Nepal needs to offer attractive import products to Switzerland, and focus on exporting niche products because it cannot compete with bigger countries like India and China, just like Switzerland cannot compete with Germany and France. However, I do see a lot of potential in the FinTech sector. I don't know any other country which has such a good marketing advantage. You put a prayer flag and the top of a white mountain on any product, and it sells. Nepal is known as a beautiful, healthy, natural country. So I believe in certain niche products, you can build on that and sell better.

Have you considered any products that hold export potential?
I believe certain agricultural products have great potential. For example, we are currently promoting black cardamom, which I think can be exported in huge quantities. There is also a growing market for avocado. I recently met a trader who said Nepal has a lot of potential in this area. Additionally, I think there is potential for exporting agricultural goods in certain areas, such as coffee. We already have some tea shops in Switzerland that buy tea from Nepal. This is a high-end product, not a mass product. So, I see a potential in this sector as well.

Tourist arrivals from Switzerland to Nepal are currently very low. What do you think are the reasons behind this?
I believe that the travel industry is currently affected by multiple crises around the world, including the one in Ukraine, which is impacting people's willingness to travel. However, I am confident that tourism in Nepal will pick up again. Nepal is not a cheap country, and I think it needs to invest more in quality hospitality to attract tourists. People compare destinations when choosing where to travel, and Nepal needs to develop an understanding of which kinds of tourists it wants to attract. For instance, people from Switzerland come to Nepal for trekking, and they don't want to trek along the road. Therefore, Nepal needs to have a strategy on where to promote what kind of tourism. There is so much potential in this country, from religious tourism to outdoor activities such as bungee jumping, and many others. There are so many journeys that can be developed further. When compared to the international market in terms of cost-benefit, there is still a lot of potential for improvement in Nepal's tourism industry.

Nepal and Switzerland are preparing to sign an Air Service Agreement (ASA). Given the EU ban on Nepali airlines, what can we expect regarding the implementation of the ASA?
I have heard from many hotel owners in Pokhara that tourists have cancelled their visits following the air crash. Nepali airlines are still banned from flying in the EU airspace due to various reasons. The agreement between Switzerland and Nepal allows Swiss airlines to fly to Nepal, but until the EU ban is lifted, Nepal airlines cannot fly to Switzerland. We recently had a Swiss business delegation here, and representatives from Lufthansa and Swiss assessed the potential and believe that there could be potential, although perhaps not for direct flights yet. Swiss is in India, and they have an idea that Nepal could be a hub from China and then directly to Europe. These ideas need further development.

The implementation of the ASA depends on how the Nepal government addresses the request from the EU. This raises questions about different mandates for the aviation regulator under one roof. I believe this is a point that Nepal can address.

What were the outcomes of the Swiss business delegation, and what sort of Swiss investments can we expect in the near future?
Many of the delegates came from India. They previously thought of Nepal as another state of India, but they now understand that Nepal is a separate country with its own unique qualities. The delegates now see Nepal as a potential emerging market in Asia, and they were very positive about entering into business relationships with Nepali companies. They also found that the people in the ministry, even the ministers, were very open and accommodative. I have received very positive feedback about the delegation, and some deals may have already been reached since the visit. The pharmaceutical sector is particularly interested in continuing business with Nepal, and engineering companies are looking for ways to bring innovation to Nepal. Airlines are also interested in investing in Nepal. I believe that Nepal will be very attractive for businesses once there is political stability in the country.

Can we expect more delegations in the near future?
We are already planning to bring more delegations, especially in the fintech area. We are trying to make it more thematic, and it could happen in the second half of this year. We don’t give up because we really believe in Nepal and its potential.

You were here two decades ago also, and you have been here for the past five years. What positive changes have you seen here?
The first is peace, then you have a very progressive constitution. The Nepali people, especially the migrant workers, are the heroes of this country. Then there is the rural population and the resilience they have shown. The other thing is the Nepali hospitality and warmth. As I said, I see young people who want to invest and do something here. That's the best condition you can have. You have a country with this kind of beautiful nature where you can build on.

I hope there is some sensitivity to the environment. When we see the plastic, when we see the rivers being exploited for raw materials, it hurts. I believe now when Nepalis go for walks and hikes, they would want to invest in the future.

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