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Where to Invest?
This is the question frequently raised by the business community with the academician and consultants. But it does not need a detailed cross sectoral SWOT analysis to say that any new investment in Nepal should be based on the long-term view. Most of the investments so far, whether in vegetable ghee, carpets, Pashmina or readymade garments, were based on short-term vision and this explains to a large extent why these industries are now facing various problems. However, even within these sectors there are many players who are reporting good business. Anyone who wants to invest in those lines should try to emulate these successful firms.
Nepal has to either improve its cost efficiency or select a range of products in which it will not be competing directly with the neighbours. This leads to the conclusion that Nepal needs to produce low volume high value (LVHV) items, not bulky items, and harnessing those natural resources in which there are easily identifiable comparative advantages.
Based on the above logic, the prospective areas for investment will be high value agricultural crops (growing and processing) and bio-technology. If we are to stick to the carpets, Pashmina products and readymade garments, we better start concentrating on the premium segments by making them designer goods, not mass market items.
Other fields with good prospects are Information technology-based products and services (such as business process outsourcing or BPO), hydro-power generation and development of machinery and transport equipment that use alternate source of energy.
Landlockedness should not be the problem for any country if it carefully selects the products to specialize in and develops good international brand name. The secret behind the success of Switzerland and Luxembourg, both landlocked, lies not only in the good transit facility from neighbours, but also in the selection of LVHV products that they have specialized themselves in.
A policy choice to be made is between, what marketing guru Al Ries calls, the American model (Theory A) and Japanese model (Theory J). While both Japanese and American firms produce best quality products, the leading American firms are focused on one product and one brand and have gained one of the first three positions in the global market leadership, the Japanese firms are mostly diversified with several products and brands. According to Ries, this is why the Japanese economy floundered while the American economy managed to come around quickly after the Asian currency crisis. He further says those Japanese firms that follow the Theory A, such as Toyota, have been posting respectable profitability while their compatriots that followed the Theory J are still struggling.
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