Improving Business Environment at Sub-National Level

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We would like to express our deepest gratitude to all the individuals who helped us shape our study
through their valuable contributions. Firstly, we would like to thank the Mayor of Pokhara – Lekhnath
Metropolitan City, Mr. Man Bahadur GC and his team for giving us their valuable time, sharing their
plans for the city and particularly for hosting a consultative dialogue in their premises by bringing
together all relevant stakeholders. We would also like to thank our elected representatives of the
Federal Parliament, Honorable Rabindra Adhikari and Honorable Bindu Kumar Thapa as well as
Honorable Rajiv Pahari of the Provincial Assembly for giving us their valued counsel. Additionally,
we express our gratitude to representatives of the government agencies we visited: Pokhara-
Lekhnath Metropolitan City, District Tax Office, District Tourism Office, Office of Cottage and Small
Industries (now Industry Development Section), Nepal Tourism Board - Regional Office Pokhara,
District Agriculture Development Office and Fishery Research Station – Pokhara for supplying valued
industry specific as well as overarching data and information.
Furthermore, we would like to extend our appreciation to all the executive members of the private
business associations we consulted, including but not limited to: Paschimanchal Hotel Association
of Nepal, Restaurant and Bar Association of Nepal, Trekking Agencies’ Association of Nepal,
Nepal Association of Tour & Travel Agents, Nepal Air Sports Association, Trekking Equipment Shop
Association, Kaski Pokhara Handicraft Association, District Fish Farmers’ Association – Kaski and
the District Coffee Producers’ Association. These consultations and the data they provided have been
instrumental in shaping this study. Acknowledgements are also due to the over fifty local private
entrepreneurs we met as well as the Pokhara Chamber of Commerce and Industry and the Lekhnath
Chamber of Commerce and Industry for sharing their views on issues pertinent to our research. We
are grateful to Mr. Ram Krishna Gyawali of Samadhan Dainik for the strategic guidance on selecting
and approaching the most relevant stakeholders.
Next, we would like to thank The Asia Foundation for coming on board and partnering with us in our
humble effort on improving the business environment in Pokhara by strengthening local governance.
Lastly, we would like to extend our heartfelt gratitude to our in-house team at Samriddhi Foundation.
Thanks to Mr. Deependra Chaulagain, Mr. Nabin Rawal, Mr. Manogya Sharma, Mrs. Arpita Nepal
and Mr. Robin Sitoula for their invaluable help in designing and executing the project. Thanks also to
our research and design team, particularly Mr. Sujan Regmi, Mr. Jai Venaik, Mr. Roshan Basnet, Ms.
Ankshita Chaudhary and Ms. Ayushma Maharjan for their instrumental assistance in various aspects
of the implementation of our research. This study would not have been possible without your support.
Akash Shrestha
Sneha Pradhan
gg ACKNOWLEDGEMENTS

Acknowledgements i
Abbreviations and Acronyms iv
Executive Summary v
1. Introduction 1
2. Methodology 3
3. Limitations 5
4. Snapshot of Pokhara 7
Budget 7
Income Sources: 8
Expenditure: 9
Human Resource Capital 11
Land 12
Infrastructure 13
Access to Finance 25
5. Highest Growth Potential Industries in Pokhara-Leknath Metropolitan City 15
6. Industry Specific Challenges and Opportunities 19
6.1 Leisure Travel and Adventure Tourism 19
1. Leisure Travel 20
2. Adventure Sports and Activities 23
6.2 Forward linkage-oriented agriculture 26
3. Fish Farming 27
4. Coffee Production 31
Export Oriented Manufacturing 33
5. Handicrafts 34
7. Pressing Common Issues Spanning All Industries 37
Involvement of multiple regulatory agencies and dual role of regulators: 37
Procedural hassles: 39
Paying taxes: 40
Environmental standards: 41
8. Organizational Task Mapping of Pokhara Lekhnath Metropolitan City 43
9. Legal Mandate for PLMPC 47
Functional Analysis 48
gg CONTENTS

10. Observations of the researchers 53
Required Action 54
11. Local policy options for creating a conducive environment for growth 55
12. Recommendations that require support from provincial and federal governments 59
13. Conclusion 61
14. Endnotes: 63

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APM All-Party Mechanism
BFIs Banks and Financial Institutions
DCPA District Coffee Producers’ Association
EOI Export Oriented Industrialization
EMI Equated Monthly Installment
EPZ Export Processing Zones
GBP Gateway Business Park
JICA Japan International Cooperation Agency
LGU Local Government Unit
MOFALD Ministry of Federal Affairs and Local Development
MoU Memorandum of Understanding
MPC Metropolitan City
NAA Nepal Air Sports Association
NATHM National Academy of Tourism and Hotel Management
NATTA Nepal Association for Tours and Travel Agents
NRB Nepal Rastra Bank
NTB Nepal Tourism Board
NWSC Nepal Water Supply Corporation
OCSI Office of Cottage and Small Industry
PHAN Paschimanchal Hotel Association of Nepal
PLMPC Pokhara-Lekhnath Metropolitan City
PPP Public Private Partnership
PTC Pokhara Tourism Council
PTB Pokhara Tourism Board
PUM Programma Uitzending Managers
REBAN Restaurant and Bar Association OF Nepal
RoI Return on Investment
SARE System of Fast Opening of Firms
SEZ Special Economic Zones
TAAN Trekking Agencies’ Association of Nepal
TESA Trekking Equipment Shop Association
UCMA Office of Public Reform
VAT Value Added Tax
WSDO Women’s Skills Development Organization
gg ABBREVIATIONS AND ACRONYMS

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The capital of State 4, Pokhara - Lekhnath Metropolitan City (PLMPC) – the largest city by area and
second largest city by population in Nepal – has immense potential for growth. Its rich abundant
natural resources and scenic landscapes ha ve helped promote the region as a tourist hub. However,
there is an urgent need to improve the overarching macroeconomic indicators and regulatory
barriers that pose a serious threat to the city’s economic development. To the same end, promoting
enterprises with the highest-growth potential by creating a conducive business environment also
becomes extremely vital.
This diagnostic study, thus, through secondary research and numerous key informant interviews,
consultation meetings with private entrepreneurs, business associations, regulators and elected
representatives studies the macroeconomic indicators of Pokhara-Lekhnath, existing regulatory
barriers to doing business in the region and the challenges faced by fastest-growing industries in the
city, and explores feasible ways to resolve said problems.
Development Challenges
Despite housing a population of 414,149, businesses in PLMPC still lack skilled local manpower to
operate their businesses. Even though numerous skills training centers exist, majority of them are
focused on sending their students abroad for employment. Road infrastructure is a huge deterrence
for tourists. Tourism sector entrepreneurs share of how Indian and Chinese tourists have often times
voiced concerns about the deplorable state of current dusty and broken roads connecting Pokhara to
other major cities in the country; and rightly so. These have serious implications for Nepali tourism
as these are also the stories that these tourists would share with their families and friends back home;
the painful the stories of their experience in Nepal, the less likely their acquaintances’ travel to Nepal.
Lack of clean drinking water has forced residents and businesses to turn to buying drinking water from
private companies. The rapid urbanization and haphazard plotting has led to not only a shrinking
city but also shrinking lakes including the famous Fewa Lake. The resulting dearth in land has led to
traffic and parking problems, and prevented growth and expansion of new and existing industries.
Moreover, the city struggles with other pressing infrastructure needs such as: constructing a Tourist
Bus Park, relocating overhead electrical and telecommunications wires underground, constructing
a cycle and foot track around Fewa Lake, prohibiting activities that encroach footpath and roads,
reducing sound pollution, blacktopping roads, proper parking management, constructing Pokhara
Ring-Road, building public toilets and proper waste management.
Lastly, the ever-growing cost of finance (which only goes one-way), difficult compliance, and lack
of agriculture insurance have all been identified as critical hindrances to entrepreneurs in terms of
access to finance.
gg EXECUTIVE SUMMARY

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IMPROVING BUSINESS ENVIRONMENT
AT SUB-NATIONAL LEVEL
A Diagnostic Study of Pokhara
The following recommendations have been proposed to tackle some of these problems:
• With businesses in the region suffering from limited land availability for operation and expansion,
it would be extremely beneficial to identify land currently within the ownership of the MPC that
could be leased out to local businesses.
• Identifying and utilizing public lands to either publicly operate a parking facility or lease out to a
private party interested in building a parking lot could ease the city’s traffic problem, at least in
the lakeside area. Basundhara Park and Dikopatan are two such areas that have been suggested
by a number of locals and business owners during our interactions.
• The need for better road infrastructure has been highlighted time and again, not only domestically
but by international visitors as well. Narrow, dusty, broken and unmanaged roads to get to
Pokhara is a huge deterrence when it comes to promotion through referrals. A “Golden Triangle”
that connects Kathmandu, Chitwan, Bhairahawa and Pokhara that will allow easy commute for
local as well as international tourists needs to be explored. PLMPC needs to start a dialogue
with local governments from these regions and collectively make an effort to improve road
infrastructure.
• The Nepal Water Supply Corporation (NWSC) has been recently distributing cloudy tap water
that is unfit for drinking. Japan International Cooperation Agency (JICA) has been commissioned
to build a drinking water treatment plant for water distributed from one of the water sources
- Mardikhola. However, Pokhara also receives water from other sources such as Bhotikhola,
Kalimuda, Majhkula and Ghattekuna, and plans to build drinking water treatment plants for all
other remaining sources should be implemented.
• Unpredictability in terms of cost of finance and rapid one-sided increase in interest rates has
severely dampened private sector investment and expansion. This also poses a threat of souring
relationships between banking and financial institutions and entrepreneurs. The PLMPC should
start a dialogue with NRB and financial institutions in the area on how to overcome this problem.
Highest Growth Industries
Leisure travel and adventure tourism have been identified as sectors with the highest growth potential
in PLMPC. The hotel industry alone has invested over NRs. 200 billion and enjoys an average growth

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Executive Summary
rate of 19%. The hotel and restaurant industries collectively employ 44,524 people. Adventure tourism
has seen substantial growth over the past years, with 73% of all incoming tourists in the city being
branded as adventure tourists. The industry comprising trekking, trekking equipment, travel and
tours and air sports collectively employ 4146 employees approximately. Fish-farming and organic
coffee with their forward linkages to tourism have also been noted to show impressive progress
prospective. Currently, only 40% of the region’s fish demand is fulfilled by fish farmers. Likewise,
only 60% of local coffee demand is fulfilled by regional producers at the moment. Lastly, the majorly
women-run handicrafts industry, with its high export potential is a promising sector. The industry
serves an important social cause of empowering women by employing and training economically
and physically disadvantaged women as well as single, divorced, orphaned and abused women.
Locally produced handicrafts have international markets in Europe, America, Australia and Asia.
Some of the pertinent issues and subsequent recommendations in the highest growth industries have
been highlighted below:
• The average length of stay in Pokhara is 1.75 days. This directly affects the occupancy and
profitability of many businesses involved in leisure travel in the region. Creating a Tourism Profile
that identifies different touristic attractions, destinations and activities to do within the Pokhara
Leknath area is important to increase the length of stay of tourists. This can be done through
Public Private Partnership (PPP) with collaboration of the Municipality, local businesses and the
Tourism Board. Since the PTB has shown interest in creating a working group, they can potentially
help with the funding for creating the Tourism Profile.
• There is a lack of information for tourists. Last year only 500 maps of Pokhara were printed
which did not fulfil the demand. Tourist information centers should be built around areas such
as Tourist Bus Parks, Airports, Base camp bus parks, and in the lakeside area. Such information
centres can contain maps that promote local businesses through coupon systems. This should be
a coordinated effort between businesses, government and the tourism council.
• There are two peak tourist seasons in PLMPC throughout the year: March-May and September-
November. Local businesses are willing to carry out various festivals and programs on their own
to increase the flow of tourists during off-season. However, they will require extra security. PLMPC
should provide its security forces to help support such innovative local initiatives.
• The haphazard growth of paragliding companies has led to an unhealthy price war amongst
businesses in the industry which threatens to compromise on quality. It will be important to
ensure that new companies are quality service-oriented and not just short-term players who

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would bring in more long-term cost to local tourism than benefits. Therefore, new licenses could
only be provided to legitimate companies with high operating standards. Proper monitoring of
existing businesses is also very important. Shadow businesses should be identified and dealt with
accordingly.
• PLMPC should enlist the help of PTB to help trekking agencies put up signs at trekking routes, find
new routes and acquire a dependable tracking system. All of this can be carried out through a
PPP model. Additionally, sign posts can also be designed to run advertisements and serve as an
additional revenue source.
• Two important problems that have been preventing the growth of more hatcheries and nurseries
in the region is a shortage of land and lack of technical expertise. The Fishery Research Station
has been doing a good job in producing and selling fry/fingerlings as well as providing some
help in opening hatcheries/nurseries. However, more can be done. The fishery station itself is
limited by technical capabilities and thus the help it has been able to provide is also limited. More
research and investment in building such capacity is important.
• Farmers at the grassroots level have not been able to benefit from existing government subsidies.
Efforts should be made to make sure that such farmers are able to access existing benefits.
• Facilitating the creation of pockets and a local (pocket) brand could help lower certification costs
for organic coffee producers. Further, the municipality could bring in a certification inspector
as well as find ways to conduct yearly equipment tests at the local level such that business costs
become lower for entrepreneurs and compliance becomes easier. This could be funded by taking
certain fees from the coffee producers themselves.
• Small entrepreneurs cannot afford to bring in fiber-based raw material processing machines
that are important for using local raw materials like hemp and allo as inputs. Helping business
owners in the handicrafts industry with required technical help would not only expand and
diversify the industry’s production capacities, but also create markets for local raw material
producers.
• Fish farmers are currently taxed for their egg imports. However, there is a government policy
on not taxing agricultural seeds. This problem arises from the fact that the category of ‘fish’ has
failed to be included in the list of agriculture seeds in the Finance Bill. Such discriminatory tax
process creates a huge disincentive for fish farmers to expand their businesses and should be
addressed as soon as possible.

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Executive Summary
• Both fish farmers and coffee producers face problems in access to finance. Cumbersome
documentary requirements, high interest rates and rigid payment plans that prevent ideal delayed
payment plans pose problems for business owners. Finding ways to simplify agricultural loans
and implement agricultural insurance should be priority areas.
• Handicrafts come under the VAT bracket once they cross the mark of annual transaction of
over NRs. 5 million. This diminishes the price competitiveness of Nepali handicraft products in
the international market. This VAT provision comes as a conflicting government agenda which
directly contradicts its commitment to promote handicrafts and should be reviewed.
• The government provision to promote women entrepreneurship by providing a collateral free loan
of up to NRs. 100,000 is not sufficient to carry out any substantial expansion or operation project.
Furthermore, accessing the NRs. 500,000 loan through the Employment Development Fund is
extremely difficult due to burdensome compliance procedures. The amount and documentation
requirements should be reviewed to address the realities of women entrepreneurs.
• NRB regulations make it difficult for handicrafts businesses to accept advance payments for
orders more than one month in advance. This severely limits the handicraft industry’s capacity
to take and fulfill large orders. Such policy hurdles should be removed so that entrepreneurs can
have ample time to complete their orders as well as the freedom to accept large export orders.
Regulatory barriers spanning all businesses in PLMPC
Nepal is the most expensive place in South Asia to register a business. Burdensome business
registration and difficult tax and regulatory compliances (including problems of double taxation) are
recurring issues in all sectors. Entrepreneurs have to currently register in multiple agencies just to start
their businesses. Further, procedural hassles additionally encourage rent-seeking behavior.
As observed in the case of many previous attempts, any reform effort will face varying degrees of
resistance from various stakeholders. Therefore, a practical way to move forward would be to form
a team of local experts and relevant stakeholders who will engage in deliberations over what should
be the priority reform agendas for Pokhara-Lekhnath Metropolitan City going forward. For example,
task forces formed to ease business registration and compliance challenges should enlist the help
of study teams as well as sectoral and field experts while carrying out their functions. In this case,
the PLMPC could consult the former Lekhnath Municipality officials to learn from their experiences
of outsourcing the registration process to the Lekhnath Chamber of Commerce. Sectoral reforms
could also be carried out using the same technique. As such, the team responsible for creation of the
Tourism Profile should work closely with private stakeholders, PTC and PTB.

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The study has identified a bank of reform agendas that can be picked up by the municipal team to
champion reform efforts. The recent transition to federalism and the devolvement of power to the
local governments presents an opportune moment for the Mayor and his team to take advantage
of their recent election victory to collectively work with relevant stakeholders in addressing existing
challenges and strength-by-strength build a prosperous PLMPC.

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The newly formed Pokhara-Lekhnath Metropolitan City (PLMPC) is ripe with potential. Blessed with
beautiful lakes and panoromic mountain views, the region has been able to establish itself as a
popular tourist destination. Additionally, being one of the most developed economies in not only
State 4, but the entire nation, it enjoys its status as the state capital. With the promulgation of
the Constitution 2015, and subsequently the establishment of a federal governance system, the
local government now for the first time has immense influence over its own jurisdiction in terms of
legislative and executive powers. Successful elections therafter have enabled the locals to appoint
representatives of their choice to guide their city to new heights of prosperity. Thus, this is the perfect
moment for the PLMPC to work actively in its role to further stimulate growth in the region.
To that end, it becomes imperative to firstly identify the fastest growing industries in the Pokhara-
Lekhnath Metropolitan City, and then recognize the problems that threaten to curb the growth of these
sectors. Only then will it be possible to pinpoint the necessary policy changes the local government
will have to implement to allow for a more conducive business environment at the local leve.
gg INTRODUCTION1

Phase 1: Secondary Research and Stakeholder Mapping
The study commenced with the objective of identifying some of the fastest growing industries in the
Pokhara-Lekhnath Metropolitan City. The research team started out by conducting desk research and
analyzing available secondary data. The research sources included the Department of Industry’s
Industrial Statistics; Central Bureau of Statistics’ National Census of Manufacturing Establishment;
Ministry of Commerce, Trade and Export Promotion Centre’s Export Promotion Manual as well as
Pokhara- Lekhnath MPC’s official website. This process allowed the team to identify those businesses
that showed highest growth potential under each sector and map out the key private stakeholders
involved. The stakeholder mapping also extended to business associations, regulators, elected
representatives, Pokhara Chamber of Commerce and Lekhnath Chamber of Commerce.
Primarily Identified Growth Sectors in Pokhara – Lekhnath Metropolitan City
1. Manufacturing 2. Agriculture
1.1 Handicrafts 2.1 Fishery Farms
1.2 Food Products 2.2 Organic Farms
1.3 Furniture 2.3 Coffee Producers
1.4 Metal Fabricators
3. Service 4. Tourism
3.1 Hotel Training Centers 4.1 Adventure Tourism
4.2 Hotels
4.3 Restaurants
Phase 2: Key Informant Interviews (KIIs) and Stakeholder Engagement
The next phase of the study involved primary research. Members of the research team visited Pokhara-
Lekhnath MPC and carried out interviews with entrepreneurs in the previously identified fields. A
conscious effort was made to make sure that apart from being successful business owners, most of
the entrepreneurs selected were also influential and active members of their respective associations.
This way, the consulted individuals would be able to give us more informed views on the current
situation, challenges and prospects of their businesses and the sector in general. Furthermore,
interviews and consultation meetings with the newly elected Mayor of Pokhara- Lekhnath MPC,
government officials and regulators were also carried out.
On 2nd January 2018, Samriddhi Foundation with the support of The Asia Foundation and in
collaboration with the PLMPC conducted a consultative dialogue at the Pokhara-Lekhnath MPC
Office to discuss pressing economic policy-related issues that entrepreneurs from the highest growth
potential sectors of the PLMPC were facing in their industries. This helped the team deliberate over
what role the local government could play to resolve those policy issues - from laying down new policy
infrastructures where necessary and breaking barriers where policy hurdles exist to creating a more
conducive business environment at the local level. The dialogue was attended by 23 participants,
including elected representatives (Mayor, State and Federal Parliamentarians, and Ward Chiefs),
gg METHODOLOGY2

representatives of regulatory institutions and other government agencies, representatives of umbrella
business organizations/associations (Pokhara Chamber of Commerce and Industry, Lekhnath
Chamber of Commerce and Industry and sectoral business associations) and entrepreneurs engaged
in various business activities.
Along with providing key insights on challenges and prospects of their respective businesses, the
key informant interviews and the consultative dialogues helped further filter the selection of growth
sectors. The consultations made it clear that leisure travel and adventure tourism had the greatest
potential and forward linkage-oriented agriculture such as coffee and fishery could directly feed into
the demand created by the former. Researchers also observed that the successful export-oriented
handicrafts industry not only had strong ties with the tourism sectors identified but also played a
crucial role in training, employing and consequently empowering thousands of local women. Other
sectors such as Food Products, Furniture, Metal Fabricators, Hotel Training Centers and Organic
Farms which were also identified as high growth sectors were dropped from the study after KIIs and
stakeholder engagements for their issues pertained more to the areas that fall under the powers of
the State and Federal governments.
Data was also simultaneously collected from the municipality, the Office of Cottage and Small Industry
(OCSI), and the Internal Revenue Department during this phase.
Phase 3: Sector Specific Data Procurement and Analysis
After returning with a new clarity on the selected industries and data from the field visits, the researchers
worked once again to examine the collected information. Not all of the data was useful. However,
studying sector-wise periodic growth trends from the Office of Cottage and Small Industry’s (OCSI)
Industry Details indicated that Tourism and Agriculture sectors were indeed the fastest growing and
showed a much higher rate of growth in the recent five-year period.
At this point researchers were equipped with anecdotes and qualitative evidence, but they needed
more data-driven evidence to confirm the viability of the selected options. They also required more
information on the overall economic health of the MPC, to better understand the local challenges
as well as feasible government and policy interventions. Therefore, since most of the data required
were not available at the local municipal offices, a questionnaire was designed asking for the same
information from the business associations. This alternative method helped the researchers get the
data needed. Researchers also conducted further secondary research to collect general economic
data on the Pokhara-Lekhnath MPC. Moreover, they researched case studies on best practices in
other cities and countries to learn from their experiences.
Phase 4: Organizational Mapping and Report Preparation
In this final phase, researchers worked on gathering the last legs of information required in terms of
institutional capacity analysis and organizational mapping as well as occasional supporting data
still needed during the writing process. Infographics and box cases were also designed. This phase
culminated with the preparation of this Diagnostic Study of Pokhara.

Despite their best efforts, researchers faced some limitations in regards to getting the most relevant
data.
Firstly, the municipal offices lacked majority of the sectoral data that was required for analysis.
Therefore, researchers relied upon sector specific associations to obtain the data used for industry
study. Business associations are generally known to have more updated real time data than
municipalities. Thus, researchers were able to get a relevant updated picture of the industries in
Pokhara-Lekhnath.
Secondly, staff in municipal offices were extremely busy due to the recent structural changes in the
government during the duration of the study. Therefore, researchers were not able to schedule a lot
of engagements with the municipal team. Additionally, they were unable to meet some government
stakeholders as they were not in their offices even during multiple visits.
Thirdly, researchers observed an incongruence in the Handicraft’s Industry data. While an
organization like Women’s Skill Development Organization has trained over 11 thousand women,
the association data shows that the industry only directly hires around 5000 people. Further research
needs to be carried out to understand the exact reasons of such a discrepancy.
Lastly, the report could have benefitted from a more thorough study of Pokhara-Lekhnath Metropolitan
City’s macroeconomic indicators. Due to limitations of both time and readily available data in the
municipal level, researchers have in some instances used wider district specific or country specific
indicators in the analysis. Additionally, researchers were unable to include a robust institutional
capacity analysis of the PLMPC due to the same reasons specified above.
gg LIMITATIONS3

Pokhara-Lekhnath Metropolitan City—the state capital of State 4—is the only metropolitan city in
Kaski District and is Nepal’s largest city in terms of area. The city covers an area of 434.24 km.i
The
MPC is 9 and 18 times larger than Kathmandu and Lalitpur cities respectively.ii
Erstwhile Pokhara
Sub-Metropolitan City, Lekhnath Nagarpalika, Bharat Pokhari, Nirmal Pokhari, Kristi, Pumdi,
Bhumdi, Chapakot, Kaskikot, Hemja, Parunchaur, Lamachaur, Armala, Bhalam, Kahun, Arwa VDC,
3-9 number wards of Bhadaure Tamagi, 1-5 number wards of Kalika and finally 1,4-9 wards of
Majhthana make up the current Pokhara Lekhnath Metropolitan City and its 33 wards. Its neighbors
include Madi Rural Municipality and Rupa Rural Municipality in the north border; Annapurna Rural
Municipality, Parbat district and Syangja district in the West border; Machhapuchhre and Madi
Rural Municipality in the East border; and Tanahun district and Syangja district in the South border.
The city had a revenue generation of NPR. 453.1 million till Jestha of the Fiscal Year 2074/75.iii
The PLMPC has adopted the following major city development policies:
• To develop the city as a ‘smart city’ and to develop nearby municipalities as ‘satellite cities’.
• To identify Pokhara as a major industrial and tourism destination by connecting it to other major
cities (Korla to Triveni and Kerung, Kathmandu, Pokhara to Lumbini) through railway.
• To develop ‘smart metropolitan’ by ensuring every household to have a graduate, every
community to have technical manpower, and every ward to have a health post, old age club,
child development centre, fully equipped infrastructure and e-governance system.
• To develop Pokhara as a ‘Clean city, green city’ by controlling pollution in the rivers, lakes and
other water resources and regulating the ecosystem balance.
• To initiate ‘Make your own community’ in order to achieve economic prosperity and development
by using local resources and creating employment, through entrepreneurship development,
urban infrastructure development, modernization to abolish discrimination and enhancement of
citizens’ skills and capacities.iv
Budget
In order to ensure the successful implementation of the aforementioned policies and programs (also
to be discussed further in subsequent sections) the government has the following budget strategy for
the fiscal year 2074/75.
gg SNAPSHOT OF POKHARA4

Source: Annual City Development Plan, Year 2074/75, Pokhara Lekhnath Metropolitan City, 2017.
NRs. 1,38,40,00,000 is to be collected from taxes, NRs. 30,000,000 from revenue distribution, and
NRs. 50,000,000 from other sources. This collectively amounts to NRs. 1,464,000,000 which is
equivalent to 40.71% of the total budget. NRs. 2,319,253,800 will be collected from external sources
of intergovernmental fiscal transfers and finally, NRs. 255,000,000 from people’s participation.
Thus, a total of NRs. 4,038,253,800 has been proposed.v
Expenditures:
Source: Annual City Development Plan, Year 2074/75, Pokhara Lekhnath Metropolitan City, 2017.

Snapshot of Pokhara
NRs. 15,50,00,00 (3.83%) will be used for various fund management. NRs. 1,36,53,18,000
(33.8%) will be used for infrastructural development, NRs. 13,65,10,000 (3.38%) for environment
and disaster management, NRs. 15,10,00,000 (3.73%) for social development, NRs. 2,30,00,000
(0.56%) for economic development and NRs. 4,10,00,000 (1.02%) for financial management and
governance. Similarly, NRs. 1,25,00,000 (0.31%) will be used for institutional development and
service delivery, NRs. 78,39,31,000 (19.41%) for conditional grant, NRs. 47,05,24,800 (11.53%)
for social security benefit, NRs. 15,00,00,000 (3.71%) for cost-sharing NRs. 9,00,00,000 (2.23%)
for waste management, NRs. 30,84,70,000 (7.63%) for administrative expenses and finally
35,10,00,000 (8.7%) for ward-wise budget distribution. This accumulates to a total expenditure of
NRs. 4,03,82,53,800.vi
Human Resource Capital
The city houses a population of 414,149 which makes it the second largest city by population in the
country. The region is extremely diverse and is home to a number of castes, languages, religions and
cultures; where Brahmin, Kshatriya, Thakuri, Gurung, Magar, Tamang, Kirat, Thakali, Bhujel, Kumal,
Gandarva and Muslims all live in harmony.vii
As of the year 2072, there were 210 schools in the 33 wards of PLMPC.viii
The total enrollment in the
preprimary level in erstwhile Pokhara Sub-Metropolitan City and Lekhnath Municipality collectively
was 19,958 which included 9,030 or 45% female students and 10,928 or 55% male students. 3,299
or 16.5% of the total students were from the Dalit community and 7,780 or 39% were Janajatis.ix
During the year 2071, 9,473 students appeared for the School Leaving Certificate examinations in
Kaski District (Grade 10 Board Exam), out of which 6,887 or 72.7% passed the examination.x
The MPC has an abundance of skill training institutes that focus on hotel training, as well as various
languages and music training. Unfortunately, most of these institutes train their students with the aim
of sending them outside the country for employment. The hotel and restaurant industries thus face
a lack of skilled local employees and have to depend on neighboring cities to fill their vacancies.
Furthermore, staff retention is a serious problem. We also see a serious lack of technical expertise in
the fish farming industry, especially in regards to operating hatcheries and nurseries.
Through our research spanning different industries, we have seen that the associations have stepped
in to take an active role in activities centering training and capacity building. For example, Restaurant
and Bar Association conducts staff training 4-5 times a year during off seasons. Similarly, the Trekking
Agencies Association also conducts internal staff capacity building training and guide/porter
trainings in accordance with the National Academy of Tourism and Hotel Management. On trend, the
Nepal Air Sports Association conducts pilot training. The Trekking Equipment Shop Association and
District Coffee Producers Association also conduct capacity building sessions for their members. In
some industries, we also see individual entities taking a lead role in skills enhancement. The Women’s
Skills Development Organization is a leader in training disadvantaged women in the Handicrafts
Industry and has given vocational training to over 11,800 women.xi
Likewise, the Fisheries Research
Center plays an instrumental role in providing training and guidelines regarding the operation of
hatcheries and nurseries.xii
However, despite their efforts such existing hatcheries and nurseries have
not been able to be function at full capacity due to technical limitationsxiii
. On a brighter note, the

Paschimanchal Hotel Association has recently signed a Memorandum of Understanding (MoU) with
PUM Netherlands. This MoU will play a crucial role in helping members build staff capacity in areas
related to tourism promotion, brand marketing, online marketing and e-commerce.xiv
Although there
are substantial efforts in capacity building and training, there is definitely more room for growth,
especially when it comes to technical skills development.
The PLMPC has laid out the following plans for the fiscal year 2074/75 in terms of Human Capacity
Building:
Employment
• To provide unemployed youth with the necessary technical and vocational education as per their
capabilities and prioritise them for entrepreneurial development related activities.
• To provide unemployed youths with necessary skills, technology, aid and low interest rate loans in
order to encourage self-employment. Enterprises that create employment opportunities for such
youth will be entitled to tax free facilities.
Education
• To open and merge public schools as well as upgrade classes for the benefit of the society.
Registration, renewal and monitoring of private schools. Providing free education up to basic
and secondary levels.
• To provide children of low-income families with uniforms, lunch and textbooks and to enhance
the quality of public schools.
• To introduce behavioural and technical education in public schools; and encourage children from
low income and marginalized families to pursue higher studies by providing special scholarships
for them.
• To regulate private tuition and coaching centres, language training institutes and consultancy
centres.
• To establish a metropolitan research centre for the study of astronomical sciences, natural sciences
and social sciences.
Health
• To allocate biodegradable and non-biodegradable containers and bins to manage waste.
• To convert the biodegradable waste to produce energy (electricity and gas) and to produce
compost manure.
• To build and operate a minimum of 5 toilets inside the metropolitan city.
• To provide free basic health services and vaccines.

Snapshot of Pokhara
• To avail ambulance facility and build health centres, where patients will be treated by capable
doctors.
• To provide free mobile health services to children and pregnant women and provide stipend to
pregnant women and infants to ensure balanced diet.
• To implement health insurance programs compulsorily and ensure convenience in obtaining
medicines.
• To manage and regulate private hospitals.xv
Land
Rapid urbanization and unmanaged land plotting has led to a shrinking city spacexvi
. Fewa Lake,
which is a major touristic attraction has slowly started to shrink due to haphazard encroachment,
pollution, heavy sediment deposits and uncontrolled growth of weeds. The same is the fate of other
major lakes such as Rupa and Begnasxvii
. Even though some entities have started realizing this
and making efforts towards lake conservation, a more urgent and coordinated effort is required.
Furthermore, the unsustainable land use practices have given rise to multiple hazards and risks such
as sinkholes, floods, land subsidence, edge falls, landslides, fire and earthquakes.xviii
Land prices in the area have skyrocketed especially given the dearth in supply. Businesses, mainly
those that require a huge area for operation are not able to acquire the land they need. It therefore
becomes even more important for proper management of public land. The local government has
recently mapped all public lands under the MPC with the help of its wards. It would be extremely
beneficial to further identify those plots that are sizeable enough to lease out to local businesses.
Moreover, parking in the city, especially in the lakeside area is a huge problem. Using a similar
approach to either publicly operate a parking facility or lease out to a private party interested in
building a parking lot could ease the city’s traffic problems, at least in the lakeside area. Basundhara
Park and Dikopatan are two such areas that have been suggested by a number of locals and
business owners during our interactions.
According to discussions with relevant stakeholders, under the Local Self-Governance Act, the
Metropolitan city had decided not to increase the integrated property tax for 5 years. However,
businesses have complained that this agreement has been broken and the tax rate has increased.
Industries such as hotels that own large areas of land stand to lose the most with the newly increased
tax rates.xix
The PLMPC has laid out the following plans for the fiscal year 2074/75 in terms of Land Management:
• To provide land certificates to the landless; convert temporary land title certificates to permanent
land title certificates.
• To manage land maps, houses and land certificates and house numbers by GIS records.

• To discourage the fees charged by various institutions such as schools, mother-groups, clubs and
bring ownership under the municipality.
• To discourage the distribution and sale of smaller plots (of a larger land) and to prohibit the
construction of infrastructure in such lands.
• To create a public land protection manual.xx
Infrastructure
The need for better road infrastructure has been highlighted time and again, not only domestically
but by international visitors as well. Chinese and Indian tourists often complain about the long and
arduous journey they have to make through narrow, dusty, broken and unmanaged roads to get to
Pokhara.xxi
This is a huge deterrence when it comes to promotion through referrals.
The new regional international airport brings with it a lot of hope for local businesses. Business
associations collectively have been urging the government for the fast completion of this project. The
airport which occupies 3627 ropanis of land at Chinne Danda, is expected to have a runway with
a length of 2500 meters. It is being constructed by China CAMC Engineering with a soft loan of
$215.96 million from China Exim Bank. The national pride project is estimated to be completed by
Ashadh 26, 2078.xxii
Lack of clean drinking water has been a serious problem in the city. The Nepal Water Supply
Corporation (NWSC) has been recently distributing cloudy tap water that is unfit for drinking. This
has forced locals to buy drinking water from private companies. The corporation attributes the
problem to landslides, increased settlements and road expansion near the water sources in Pokhara.
Currently, water is transferred from Mardikhola through 16-to-20-inch pipelines without any treatment
and dropped in the corporation’s tank located in Bindhabasini, where it is then treated with chlorine
and distributed throughout the city. This problem of direct water distribution is expected to last up
to a period of 4 years. JICA has been commissioned to build a drinking water treatment plant for
water distributed from Mardikhola. However, Pokhara also receives water from other sources such as
Bhotikhola, Kalimuda, Majhkula and Ghattekuna where there are no such treatment plans till date.
According to the corporation, Pokhara currently has 40,000 drinking water subscribers, with a total
daily demand of 65,000,000 liters of water. However, only 45,000,000 liters of water is distributed
daily in the monsoon season and 40,000,000 liters distributed in other seasons.xxiii
PLMPC’s other pressing infrastructure needs at the moment include: constructing a Tourist Bus Park,
relocating overhead electrical and telecommunications wires underground, constructing a cycle and
foot track around Fewa Lake, prohibiting activities that encroach footpath and roads, reducing
sound pollution, blacktopping roads, proper parking management, constructing Pokhara Ring Road,
building public toilets and proper waste management.xxiv

Snapshot of Pokhara
The PLMC has laid out the following plans for the fiscal year 2074/75 in terms of infrastructure:
• To build toilets and install solar lights on the roads, clean drinking water taps and service stations
at necessary locations.
• To make land use policies for long term environment-friendly sustainable development by creating
separate residential areas, public areas, open and green spaces, public parks, forests, agriculture
land and secured land.
• To conduct a feasibility study for metro-rail, mono-rail and Pokhara-Lumbini fast track.
• To ensure internet connectivity in all wards along with bus terminals, airports and other public
areas as well as to offer different telephone facilities and virtual libraries in all wards.
• To build road connectivity from every ward’s focal point to villages and nearby areas.
• To expand agro roads; increase road connectivity of agricultural as well animal husbandry areas
with major markets.
• To conduct a feasibility study to construct three ring roads within and outside Pokhara; a 500-metre
tunnel as a prototype; a bypass road for east-west highway and bridges.
• To manage ‘One house, one tap’ system in the rural settlements; to provide clean drinking water
(directly through taps) in busy and public areas of the city.
• To construct micro-hydropower projects in Seti, Bijayapur, Suraudi and other rivers by employing
capital obtained mainly through remittance to create ‘remit hydro projects’.
• To support organizations that install biogas plants in public toilets by offering necessary grants.
• To connect every ward office with the metropolitan city through high speed internet connection in
order to create a paperless and e-governance system.
• To make public services more accountable and working procedures more transparent by availing
citizen charter, help-desk, public gathering, public hearing and monitoring mechanism at every
ward office.xxv
Access to Finance
As of July 2015, there were 57 Commercial Banks, 79 Development Banks, 20 Finance Companies
and 19 Micro-Finance Institutions making up a total of 175 Banking and Financial Institutions in
Kaski District. They collectively served a total population of 492,098 thus making the population per
branch 2,812.xxvi

Source: Banking and Financial Statistics, Nepal Rastra Bank, 2015.
During consultations with members of various associations/businesses spanning different industries
and through desk research researchers have gathered that the haphazard increment in interest rates
stand to sour the relationship between businesses and banks. This greatly discourages entrepreneurs
from borrowing to either start a new business or expand existing ones. The unpredictability also
poses a serious threat of foreclosure for businesses already in debt. Businesses have complained that
banks started lending at cheap rates starting from as low as 7% and have one-sidedly increased
their rates which have now even reached up to 14%.xxvii
Overdraft ceilings have also been reduced
without proper warning creating problems for businesses. Banks and the Nepal Rastra Bank (NRB)
have both attributed the increase to the impending cash crunch. NRB has refused to intercept directly
in the matter between businesses and private banks which are governed by the contracts signed
during loan disbursement. These contracts always include a clause stating that interest rates might
be increased in case of need.xxviii
Further conversations with banks suggest that they are tied to the
changing base rates directed by the NRB. This problem has severely dampened private sector
investment and expansion.
PLMPC has laid out the following plans for the fiscal year 2074/75 in terms of access to finance:
• To manage and regulate cooperatives as well as to collaborate with banks and cooperatives to
initiate ‘One-ward, one-bank’ policy.
• To encourage traditional knowledge and skill-based micro and small entrepreneurs by connecting
them with financial institutions and providing them collateral-free loans.
• To provide cooperatives that produce, distribute and sell daily consumption, agriculture, forest,
fishery as well as animal husbandry products with special concessions and aid.xxix

Analysis of the growth trend of registered industries in the past 5 years from the Office of Small and
Cottage Industries (OCSI) industry details clearly demonstrates that Tourism and Agriculture are the
two sectors that have shown maximum growth in Kaski District over that period. While tourism has
consistently grown over 10% each year, agriculture shows a more aggressive growth pattern upto
45.5% in the fiscal year 2071/72.xxx
Source: Office of Small and Cottage Industry, Kaski
HIGHEST GROWTH POTENTIAL INDUSTRIES IN
POKHARA-LEKNATH METROPOLITAN CITY
gg
gg5

A brief review of OCSI’s latest Industry Registration Progress Details of Kaski shows that Tourism
had the highest number of industries registered – 401, the highest amount of investment – NRs.
653,340,000, highest revenue earning – NRs. 2,387,000,000, highest number of people employed
– 1,935 and the second best female: male employment ratio – 1:2. Agriculture on the other hand
had the lowest number of industries registered (despite having the highest rate of growth), but still
had the second highest amount of investment – NRs. 373,000,000, second highest revenue earning
– NRs. 1,570,700,000 and the best female: male employment ratio of 5:8 with a total of 669 people
employed during the year.xxxi

Highest Growth Potential Industries in
Pokhara-Leknath Metropolitan City

Through desk research and extensive consultations with local entrepreneurs, regulators and business
associations during field visits, researchers have been able to establish that Leisure Travel and
Adventure Tourism show the highest growth potential in the region. Additionally, agriculture with
forward linkages to tourism, particularly Fish Farming and Coffee Production also look promising.
The research further showed that Handicrafts Industry, though officially under Manufacturing, has
strong ties to the Tourism sector. Moreover, it not only holds abundant export prospect but also plays
a crucial role in empowering disadvantaged women in the locality.
6.1 Leisure Travel and Adventure Tourism
Last year, 1,060,000 international tourists visited Nepal. According to the Vice-President of Nepal
Hotel Association Mrs. Srijana Rana, the number is expected to double to two million by the year
2020 through the association’s efforts.xxxii
Blessed with abundant natural resources, the Pokhara
Lekhnath Metropolitan City has been able to establish itself as a popular tourist hub. The already
flourishing sector is estimated to receive even larger cohorts of international guests after completion
of the new international airport that is underway. Therefore, the city stands to gain a lot through the
additional influx of international tourists in the country. While tourism related enterprises had to visit
the Nepal Tourism Board in the center earlier, they now have easy access since a Pokhara Chapter
of the same has been created.
Businesses in the sector have called for Ward No. 6 and 17 to be branded as special tourism zones
due to their strong ties to the industry. xxxiii
Some of the major touristic attractions in the city include:
• Barahi Temple, Bindhabasini Temple, Gupteshwor Temple, Bhadrakali Temple
• Davis Fall, Sita Cave
• Matepani Gumba, World Peace Pagoda
• Fewa lake, Rupa lake, Begnas lake, Maidi lake, Dipang lake, Khaste lake, Nyureni lake, Gunde
lake and nearby panoramic wetland areas
• Foot trails from Kalikachowk to Rakhi, Shanti Maidan and Majhthana (Royal Track)
• Foot trails from Pachbhaiya to Begnas Tal
• Bio-diversity, dense forests and Helmet Forest as well as the varieties of flora (orchids and golden
queen)
• Hundikot Viewpoint
• Pandeythum Viewpoint xxxiv
INDUSTRY SPECIFIC CHALLENGES AND
OPPORTUNITIES
gg
gg6

The PLMPC has laid out the following plans for the fiscal year 2074/75 in terms of tourism:
• To control landslides and prohibit encroachment and pollution of lakes; policy enactment to utilize
the land obtained from the protection of biodiversity, lakes and water resources for communal
and modernized farming.
• To protect and regulate forest and jungles; to encourage tree plantation in public barren lands.
• To create special protection zones for animals.
• To enhance the standards of the Pokhara museum by identifying the natives and their customs;
identification and development of cultural villages to promote tourism.xxxv
1. Leisure Travel
A large number of businesses cater
to the international and national
vacationers that visit Pokhara for
leisure travel. The accommodation
industry comprising of hotels and
restaurants alone has an annual
transaction volume of NRs. 5.9 Billion
spanning almost 800 individual
businesses. Collectively, they employ
approximately 44,524 people and
have a production capacity of 36,667
beds/night and 13,571 seats at
a time. The hotel industry which
normally runs at a 40% occupancy
has collectively invested around NRs.
200 billion. Over the past 5 years, The
Paschimanchal Hotel Association of
Nepal (PHAN) has seen a steady 19%
growth in its membership. Similarly,
the Restaurant and Bar Association
OF Nepal (REBAN) has enjoyed
an 8% growth in its members in the
same period. In an effort to increase
the number of leisure travelers, both
PHAN and REBAN conduct various
promotional activities. Some of the
major ones include:

Industry Specific Challenges and
Opportunities
PHAN
1. ‘Chaliye Pokhara’ B2B Campaign in Bihar, Uttar Pradesh, West Bengal and Delhi
2. ‘Jaaun Hai Pokhara’ Campaign in Nepal
3. ‘Bhai Tika’ Mahotsav (Annual)
4. Fewa Mahotsav (Annual)
REBAN
1. Street Festival (Annual)
2. Holi Festival (Annual)
3. World Tourism Day Festival
REBAN also conducts staff training
during off seasons around 4-5 times a
year. The government through Nepal
Tourism Board (NTB) lends its support
(cash or in-kind) through partnerships
during its campaigns. NTB also
helps REBAN during festivals. For
example, during the street festival in
December, 2017, the NTB brought in
cultural performers from all 7 states.
Additionally, Nepal Rastra Bank’s
directive to maintain a certain percent
of Banks’ portfolio in the tourism
sector has helped channel funds to
the hotel industry. The sector however
faces its own challenges with banking
institutions. This and more industry
specific challenges that threaten
local entrepreneurs’ profitability and
sustenance are discussed below.
• Although getting access to finance
through BFIs is fairly easy, industry
leaders believe that a provision
that would allow Equated Monthly
Installments (EMIs) to start only a year
after loan disbursement would really
help investors. The bigger challenge
however is the very unpredictable and

fluctuating interest rates. Business owners have even appealed (but to no avail) to Nepal Rastra
Bank to control this trend they suffer from – banks start out by lending at low interest rates and
steadily keep increasing the rates. This growing frustration threatens to sour the relationship
between BFIs and entrepreneurs as well as discourage potential investors.xxxvi
• Foreign tourists usually travel through packages. Since they have to visit different places like
Pokhara, Chitwan, they will be spending a long time in the road. The road infrastructure in
Nepal is very bad. Thus, Indian and Chinese tourists that have visit Nepal could go back and
communicate their experiences of the long arduous journey amongst their acquaintances; some
tourism entrepreneurs also shared such instances with researchers. Investing in better road
infrastructure is very important to retain tourists and promote Pokhara’s reputation as a tourist
destination through referrals.
• The average length of stay in Pokhara is 1.75 days. People will only stay in Pokhara until
they have certain activities to do. Instead of looking to increase the tour trip, local guides have
reduced their tour time. This directly affects occupancy and subsequently the profitability for both
hotels and restaurants in Pokhara. Creating a Tourism Profile that identifies different touristic
attractions, destinations and activities to do within the Pokhara-Leknath area is important to
increase the length of stay of tourists. This can be done through Public Private Partnership (PPP)
with collaboration of the Municipality, local businesses and the Tourism Board. Since the PTB
has shown interest in creating a working group, they can potentially help with the funding for
creating the Tourism Profile.
• Trafficcongestion,limitedparkingavailability,absenceofcleandrinkingwater,wastemanagement
and road infrastructure are all issues that have been identified in Pokhara that reduce the flow
of tourist.
• Getting to Nepal itself is expensive. Since Nepal is an end destination and not a transit destination,
air tickets are very expensive. If possible, the local government should tap into the prospects of
religious tourists (especially from India) and build a program around it.
• There is a lack of information for tourists. Last year only 500 maps of Pokhara were printed
which did not fulfill the demand. Tourist information centers should be built around areas such
as Tourist Bus Parks, Airports, Base camp bus parks, and in the lakeside area. Such information
centers can contain maps that promote local businesses through coupon systems. This should be
a coordinated effort between businesses, government and the tourism council.
• More street festivals during off-seasons will help foster their businesses. However, the municipality
should be ready to provide police security during special events such as street festivals, which will
allow restaurants to operate for even 24- hours if there is a demand for it.

Opportunities
2. Adventure Sports and Activities
The boost in both domestic
and international tourism
has fostered the growth of
adventure sports and activities,
especially given Pokhara’s
scenic landscape. The Nepal
Association for Tours and
Travel Agents (NATTA) claims
that of all incoming tourists in
the Pokhara-Lekhnath MPC,
73% are adventure tourists.
In the past years, MPC has
seen an exponential growth
in the sector. For example, the
Nepal Air Sports Association
(NAA) which focuses mostly
on paragliding companies
in 2015 alone saw a 72.7%
increase in its membership.
Moreover, the Trekking
Agencies’ Association of
Nepal (TAAN) and NATTA
have also seen steady 11%
and 16% membership growth
rates respectively in the past 5
years. The industry - including,
trekking, trekking equipment,
travel and tours and air sports – collectively employ 4146 employees approximately. However, the
growth comes with its own challenges.

• The number of paragliding companies has increased exponentially. This has led to a price war.
Businesses focus on reducing their prices even at the cost of quality due to tough competition.
Since sound policies for licensing do not exist, businesses have been able to acquire licenses
haphazardly. This poses a serious threat to the safety of the clients who use these services.
Furthermore, a number of shadow businesses also exist. Upholding basic safety standards
requirements becomes very necessary, especially when dealing with the risk of loss of life of
clients. It will be important to ensure that new companies are quality service-oriented and not
just short-term players who would bring in more long-term cost to local tourism than benefits.
Therefore, new licenses could only be provided to legitimate companies with high operating
standards. Furthermore, shadow businesses should be identified and dealt with accordingly. To
address the problem of unhealthy competition among paragliding companies, alternate takeoff
and landing strips could be carried out through a PPP model.

• Walking trails are not properly
managed. The local government could
help put up sign posts in walking trails.
This could also operate in a PPP model.
Further, the sign posts could be a good
source of revenue if a portion of it is
used to run adds. Information centers
and security features in trekking routes
should also be guaranteed. Lack of a
dependable year-long tracking system
is a major concern.
• Trekking agencies have been trying
to find new routes, but they require
help. Finding new trekking routes will
ultimately attract more tourists into
Pokhara, and is therefore beneficial
for the entire economy. Thus, the
municipality could provide trekking
agencies the necessary help they
require in finding new routes.
• Trekking agencies have to
continuously work with the concerned
forestry department while identifying
new routes. However, since people
within the department are constantly
changing or transferred, it becomes
difficult for them to have to build new
working relationships. The lack of
institutional memory is problematic. Proper record keeping should be a priority so that change of
personnel within the forestry department does not disrupt business operations.
• When it comes to access to finance, businesses in this industry face the same problem as businesses
in leisure accommodation - unpredictable increases in interest rates by banks.
• NATTA also believes that the syndicate in the transportation sector is a major problem as it
creates entry barriers to new markets. Moreover, conflicting policies and changing rules also
makes compliance difficult. For example, the Motor Vehicle and Transport Management Act and
the Tourism Act define the term “tourist” differently. As per the Tourism Act, 2035, a ‘tourist’ is a
non-Nepali from a foreign country that comes to Nepal for travel, and a ‘domestic tourist’ is any
Nepali citizen who moves from one place to another for travel. On the other hand, Motor Vehicle
and Transport Management Act 2049 defines a ‘tourist motor vehicle’ as a public motor vehicle
having obtained the certificate of registration to provide the transport service to foreign tourists.
This lack of consistency creates unnecessary confusion. Additionally, the more recent requirement
of embossed number plates has added extra cost to doing business.

Opportunities
Related associations have carried out various activities listed below both independently and with the
government to promote the industry.
TAAN:
1. Identification of trekking routes.
2. Exploration of Lake Kopuche,
which is the lowest glacial lake in
Nepal, has just been completed.
Currently, they are designing a
5-day tea-house trek itinerary on it
while simultaneously undertaking
mapping and marketing activities.
3. Memorandum of association has
been signed with PUM.
4. Training and capacity building of
internal staff.
5. Awareness campaigns in
villages focusing on hygiene and
sanitation.
6. Guide/porter training in
accordance with National
Academy of Tourism and Hotel
Management (NATHM).
7. Annapurna Day/Manaslu Day
celebrations.
8. Lake conservation.
NATTA:
1. Tourism promotion in accordance with NTB and local businesses.
NAA:
1. Pilot training
2. Safety course
3. Awareness program
4. Lobby for reforms

Trekking Equipment Shop Association (TESA):
1. Domestic promotion of events.
2. Capacity-building trainings for staff.
3. Social activities like lake cleaning, blood donation, flood response, etc.
6.2 Forward linkage-oriented agriculture
The PLMPC has laid out the following plans for the fiscal year 2074/75 in terms of agriculture:

Opportunities
• To identify lands that are suitable for farming but barren, and to provide necessary irrigation
facilities to increase the agricultural produce.
• To identify expensive and high export possibility crops and encourage their production so as to
prioritise their exports.
• To promote and expand organic farming by identifying special farming areas.
• To use modern agricultural processes to develop the agricultural areas.
• To collaborate with Libird to establish an agricultural research centre in ward #31 of Pokhara.
• To ease the process of obtaining agricultural loan and charging low interest rates to agro-farmers.
Special provisions to be made to engage youth who have returned from foreign employment in
agriculture.
• To maintain proper coordination within authorities to provide pension to farmers and to manage
land-bank.
• To conduct a feasibility study to construct an agriculture market centre, store house, and cold
store for the collection and sale of agriculture and animal-based production.xxxvii
3. Fish Farming
Fish farming has immense potential in the Pokhara- Lekhnath MPC. The abundance of lakes and
rivers in the region makes it a prime location for such activity. Since majority of Kaski district’s fish
farming is carried out in the three largest lakes Fewa, Begnas and Rupa (all located in the MPC),
plenty of untapped water resources remain. The region’s climate has been proven suitable for both
warm water and cold-water fish, and also highly suitable for trout farming.xxxviii
Additionally, fishing
can be offered as an activity for the numerous tourists that visit Pokhara. Moreover, expanding the
preservation and breeding of exotic ornamental fishes such as Guppy, Platy, Sword tail, Fancy Carp
and Kolisha can be profitable ventures.xxxix

Kaski District’s Fish Farming Statisticsxl
FY 2072/73 FY 2073/74
Total Fish Production (In Metric Tonnes) 504.4 512.7
Private Sector Hatchling Production (In Lakhs) 8.4 10
Private Sector Fry Production (In Thousands) 750 950
Private Sector Fingerlings Production (In Thousands) 800 850
Total number of fish farmers 400 420
Number of people directly employed in fish farming 250 270
Communities whose livelihoods are dependent on fishing in natural
water sources
1300 1350
Total direct and indirect revenue from fish farming (NRs. in thousands) 138697 145020
Source: District Agriculture Development Office, Pokhara, Kaski

Opportunities
The annual production capacity of the existing fish farms in the MPC amounts to approximately 175
tonnes. The current supply of fish does not even fulfill the local demand, let alone the national. At
present, only 40% of Pokhara-Lekhnath’s demand is met by local farmers. Nepal has the ability to
be self-sufficient in fish, and fish farmers in the Pokhara Lekhnath Municipality can play a significant
role in bridging the existing supply-demand mismatch. However, the industry has not been able to
operate at its highest potential.
Through key informant interviews, consultative dialogues and meetings with fish farmers and
members of Fish Farmers’ Associations, and secondary research, researchers have identified the
following challenges in the sector:
• Fish farmers are not treated equally as other farmers in the country. There is a government policy
of tax concession on import of seeds. However, when fish farmers import eggs, the process is
treated as commercial trade and the eggs are taxed at 10% + 13% VAT + 2% service charge.
Since breeding can happen only in December and January in Nepal, the discriminatory tax
regime creates a big disincentive for fish farmers to expand their businesses. The category of
‘fish’ has failed to be included in the list of agriculture seeds in the Finance Bill. Thus, importers
of fish eggs do not currently benefit from the government’s agriculture development plans and
programs. Such discriminatory tax regimes should be put to an end. Fish farmers should be given
the same treatment as other farmers, to provide easy access to inputs so they can tap into the
immense potential for fishery growth in Nepal.
• The Pokhara-Lekhnath region currently produces Rahu and Naini fishes which have a gestation
period of 2 years, as well as Grascart and Bhyakur fishes with a gestation period of 1 year.
Despite a lot of local demand, fisheries have not been able to deliver. Since there are limited
hatcheries and nurseries in the area, fish farmers cannot obtain enough fry/fingerlings/hatchlings
to expand their businesses. Additionally, the survival rate of fry/fingerlings are low which further
exacerbates the problem of unfulfilled demand of seeds. The limited supply of fry/fingerlings
from existing hatcheries and nurseries is clearly not enough to meet local businesses’ demand.
Pokhara’s Fishery Research Station has provided guidelines on preparing nursery ponds, stocking,
post stocking management and healthcare. They have also conducted studies on how to improve
survival rate of fry/fingerlings.xli
Despite this, high real estate prices, low profit margins, technical
limitations, low survival rate of fry/fingerlings have prevented further investment by fish farmers
in such hatcheries and nurseries. Although creating nurseries within their ponds could potentially
help curb the supply-demand mismatch, farmers refrain from doing so in the hope that someone
else, that is some other farmer, the government or donor agencies will pick up the burden. The
Fishery Research Station currently nurses and sells fry/fingerlings itself as well. However, they are
unable to produce a lot since it is only one of their secondary activities. They have provided aid
to open hatcheries; however, they have not been able to operate at full capacity due to technical
limitations. There is a Rupa Fisheries Corporation that operates its hatchery. However, they only
release the fry/fingerlings into their own Rupa Lake and do not distribute externally.xlii
While the
government can do more by identifying government land that can be used for fish breeding by
nurseries and leasing it out to interested private parties, the will to invest in such endeavors has
to come from the fish farming community itself.

• It is difficult for fish farmers to get easy access to loans as compared to other sectors. Even
though Nepal Rastra Bank (NRB) mandates that 5% of the banks’ loan portfolio should include
agriculture, the actual borrowing process is cumbersome. Banks seek documentary compliances
in the form of market analysis, output targets, turnover, etc. However, producing such technical
information is difficult for even those farmers that have a solid vision for their businesses. It is
imperative that agricultural lending is simplified to improve access to finance and subsequently
increase investments in the sector.
Box Case 1. Policy hurdle created by missing information in fish farming
After having spent 12 years in Hong Kong and then 1 year in the United Kingdom, trying hands on multiple
businesses, Lachchin Gurung (then aged 46), returned to Nepal, struck a partnership with his brother-in-law
Amrit Gurung (then aged 45), and started farming Rainbow Trout in Bhurjung river in Machchhapuchhre
VDC in Kaski in the year 2010.
The Gurungs built their facility with an investment of NRs. 40 million in the year 2010 and started farming
fish since 2011. In the beginning, at a time when rainbow trouts were selling for NRs. 1200 per kilogram in the
district of Nuwakot, they started selling their fish for NRs. 800 per kilogram. With an annual production of 22
metric tonnes of fish (roughly 50% of total district production), today, their annual turnover is over NRs. 30
million. There are huge prospects of building forward linkage between this product and the growing tourism
in Pokhara, which is also their major market. Today, the duo has also been giving free trainings to farmers of
nine other farms in Kaski.
According to the duo, government policy is one of the biggest hurdles to their growth. While the import of
all other agricultural seeds are taxed at a concessional rate of 4% in the country, the duo shares that fish seeds
are not treated as agricultural inputs, and taxed at a total of 25% (spread across three headings). This, they say
affects their cost of production for the breeding of this species happens only in December-January period,
which is too short a period to achieve economic viability. At present, they have been importing seeds twice a
year from countries like Denmark and the United States.
Upon further consultation with official at the District Agriculture Development Office and the entrepreneurs,
researchers learned that the problem originated as a classic case of missing information where in the initial
days the category of ‘fish’ failed to make it to the list of agriculture seeds in the Finance Bill. While it has been 29
years since Rainbow Trouts were first farmed in Nepal, the breed has still failed to make it to the government’s
agriculture development plans and programs. The duo shares that they have been consistently following up
with the regulators about the anomaly; however, no progress has been made in terms of recognizing seeds of
this breed as an agricultural seed. The problem continues to persist as a result of lack of coordination between
the Ministry of Agriculture and Ministry of Finance.

Opportunities
4. Coffee Production
Currently there are
approximately 2467 coffee
producing businesses in the
Pokhara Lekhnath MPC, 1700
of which are members of the
District Coffee Producers’
Association (DCPA). Although
the number of members in
the association has been
declining in the recent years
- from a total membership
of 2350 a few years back –
coffee production still looks
promising. The industry has
an annual transaction volume
of approximately NPR 1.3
million which accounts for
the farmers alone and the
annual production capacity
is approximately 120 tonnes
of cherry beans. More
importantly, only 60% of the
local demand is being met
by local producers at the
moment. Organic coffee has
a large international market,
and subsequently profitable
export prospects. Therefore,
due to limited production
capabilities most coffee
producers opt to export, given
the higher return on their
investment (ROI). It is however
heartening to hear that they would be willing to supply more locally, if they had abundant production.
The coffee industry directly employs almost 2500 people in the Pokhara Lekhnath MPC. It is also one
of the few industries that have majority women ownership in a ratio of 60:40. Consultative dialogues
with coffee producers and the president of the District Coffee Producers’ Association have presented
some of the challenges the industry currently battles with.

• The gestation period for coffee is 3 years. As new players often do not have the capital to
invest, they have to take out loans. However, since they do not get any ROI for three years,
making regular loan payments during that time is difficult. It is expected that new players may
be interested in coffee production given its high potential, especially in exports, if they get the
right financing mechanism. Allowing delayed loan repayments - ideally after 36 months - will
make it easier for farmers to invest. Therefore, increasing proper access to farm insurance is very
important so that banks have an incentive to provide loans with delayed re-payment facilities.
• At present, even the Agriculture Development Bank provides a loan at 12%, which is very high.
Even though the government does have different schemes, farmers at the grassroot level do not
have access to those subsidies and programs. Hence, access to government subsidies should be
available at the grassroots level.
• To get an Organic Coffee Certification, coffee producers need to bring in the inspectors
themselves. Certain certifications can only be done by foreign inspectors which makes the cost of
getting certified even higher. Thus, they either have the option of foregoing the market benefits
of organic coffee, or paying the high costs to bring in the inspector. Facilitating the creation of
certifications for pockets and a local brand could help with lowering certification costs. Further,
the municipality could explore the role of bringing in an inspector by taking certain fees from the
coffee producers to not only lower costs but also make compliance easier.
• There is a yearly quality test requirement for equipment (Dhak Taraju test) conducted by the
Nepal Bureau of Standards and Metrology. Further there is also a quality sample test that needs
to be completed to export coffee. Since this test is not available locally, samples have to be sent
to Bhairahawa. Sometimes, the samples sent in the month of Asar do not come back till Mangsir
or Poush. This yearly equipment test mandate is burdensome and the time lag of 5-6 months for
quality tests is problematic for exporters. It would be a lot easier for coffee entrepreneurs if these
compliance issues could be solved at the ward level.
• There have been some efforts by the government in the past to create market linkages for the
farmers. Capacity building trainings have also been carried out. Additionally, grants do exist.
However, entrepreneurs from the industry share that in many cases ones who can forge and
wield political connections have been the ones to benefit from these government efforts.

Opportunities
Export Oriented Manufacturing
The PLMPC has laid out the following plans for the fiscal year 2074/75 in terms of business promotion:
• To manage and regulate small and large businesses.
• Establish a mini-market to aid the street vendors to operate effectively.
• To operate supermarkets and malls with good parking facilities at different parts of the city.
• To establish a ‘haat bazar’ to encourage the sale local products.
Box Case 2. Reversing roles to lessen the opportunity cost…but will the local governments buy it?
Mr. Arujun Lamsal, owner of Pachabhaiya Deurali Coffee Uddyog started out by farming a humble 30 coffee
plants on some 2,700 sq. ft of his total land (off his total holding of 22,000 sq. ft) in 1993. Within the past 25
years his coffee farming has now grown to over 700 plants covering his entire land. While in the initial days
he was farming other products like maize, millet, apple, ginger, turmeric as well for household consumption,
coffee farming has given him the prospect of shifting to commercial agriculture. Today, his annual production
capacity is over eight quintals. He also collects coffee from other nearby farmers (including cooperatives)
which then makes him a trader who trades over ten metric tonnes of coffee annually, roughly 15 % of which,
he exports to international markets like Japan, New Zealand, Taiwan and many more.
He shares that one of the biggest problems facing entrepreneurs like him today is having to visit numerous
government agencies, and some even multiple times a year, to comply with various regulatory procedures.
While complying with regulations in itself is not a problem, the time that one has to spend in these procedures
is definitely one for these entrepreneurs. “An entrepreneur has to easily set aside one month every year just to
deal with government agencies like Inland Revenue Office, Office of Cottage and Small Industries, Municipality
and the Bureau of Standards and Metrology,” says Mr. Lamsal.
Another challenge for an entrepreneur coming from his industry is the lack of testing labs in the surrounding
regions. He adds, “I have to send my coffee samples to Bhairahawaa Office before I can export them, but many a
time, it takes upto six months before I have my test results.” Traders like him also have to measure their weights
and weighing machines through the Bureau of Standards and Metrology Office every year.
Mr. Lamsal and many other entrepreneurs like him think that one of the ways to lessen the huge opportunity
cost that is associated with complying with standards is that the representatives/employees of the local
government go around various wards and set up camps at regular intervals; for example, a week-long camp in
a particular area to collect business taxes from entrepreneurs from the area. We can draw from our experience
with the recent elections that local governments can reach out to every telephone user via text messages when
they need to. Employing the same to enhance public service delivery could be one of the small steps that local
governments could take to make a big difference in entrepreneurs’ lives.

5. Handicrafts
The handicrafts industry plays
a crucial role in not only
contributing to the MPC’s
economic growth but also
serves an important social
cause of empowering local
women. This majorly female-
run industry – one of the very
few – has approximately 85
firmsoperatinginthePokhara-
Lekhnath MPC. The industry’s
association experienced a
whopping 218.75% increase
in membership from the
year 2012 to 2018. Directly
and indirectly, the industry
manages to employ 5000
employees. People employed
include economically and
physically disadvantaged
women as well as single,
divorced, orphaned and
abused women. Businesses
that are members of the
Kaski Pokhara Handicrafts
Association individually
contribute to approximately
NRs. 7000 in taxes per year.
The handicrafts industry
not only caters to a local
market that consists mostly of
tourists, but also to a thriving
international market. Apart
from the local market, domestic markets for handicrafts include neighboring districts like Syangja,
Tanahun, Baglung and the capital city of Kathmandu. The Women’s Skills Development Organization
(WSDO), one of the largest players alone directly employs over 500 disadvantaged and single
women, has given vocational trainings to over 11,800 women and exports over NPR 2.5 million
worth of handicraft items annually. More than 80% of their production are exported to Europe,
America, Australia and Asia.xliii
Highlighted below are some pertinent issues the local government can help with in order to improve
investment climate in Pokhara’s handicraft industry.

Opportunities
• The law lacks a clear definition of the handicrafts industry. This absence of a definition which is
accepted by all relevant government agencies and regulators leaves a lot of discretionary power
to regulators who may arbitrarily define handicrafts for various reasons. A nationally accepted
definition is crucial for uniform regulation of the industry.
• Handicrafts come under the VAT bracket once they cross the mark of annual transaction of
over NRs. 5 million. This diminishes the price competitiveness of Nepali handicraft products in
the international market. Even domestically, handicraft businesses face a stiff competition with
Kashmiri shawls enterprises who do not have to pay anything other than business tax for running
their outlets. Since most of the raw materials for handicrafts have to be imported, entrepreneurs
have to pay VAT on wages as well. This VAT provision comes as a conflicting government agenda
which directly contradicts its commitment to promote handicrafts.
• Small entrepreneurs cannot afford to bring in fiber based raw material processing machines. For
example, the material allo produces black spots in their finished products. Removal of these spots
has to be done through technology that is not easily accessible to these handicraft entrepreneurs.
Even though there is room to promote local raw materials such as bamboo, hemp and allo,
businesses face technical and financial barriers. Receiving technical help would not only expand
and diversify the industries’ production capacities, but also create markets for local raw material
producers.
• There is a government loan provision to promote women entrepreneurship. Women entrepreneurs
receive NRs. 100,000 collateral-free loan, but due to lack of connections and information, the
loan reaches very few women. Moreover, NRs 100,000 is not sufficient to carry out any substantial
expansion or operation project. Ministry of Industry also offers a loan of up to NRs. 500,000
through the Employment Development Fund. However, burdensome documentation requirements
create a lot of hassles for entrepreneurs, thus limiting the use of such benefits. Furthermore, banks
prefer to engage in wholesale lending through Microfinance companies or even bear the fines
associated with overlooking Nepal Rastra Bank’s policy of lending to the deprived sector and
SMEs, instead of easing their lending requirements. Microfinance institutions in turn charge very
high interest rates; therefore access to finance is difficult.
• NRB prohibits taking advances for orders more than one month in advance. This severely limits
businesses’ capacities to take and fulfill large orders. Such a rule should be removed so that
entrepreneurs will have ample to time to complete their orders and will have the freedom to
accept large export orders.

Box Case 3. Empowering Women in Thousands
Born in the rural district of Humla in Western Nepal, Ms. Ramkali Khadka first came to the city of Kathmandu
post her 10th grade examinations. After getting a six-month training in the capital at the Women Training
Centre, she became a trainer herself and spent the next 21 years of her life as a government employee.
She was a part of the Women’s Skills Development Organization (WSDO) when the government started it in
1975 as an institute offering handicraft skills training to poor and illiterate women. She, and some of her close
friends revamped the organization in 1990 and started offering employment opportunities in order to make
independent women out of those poor and illiterate women. So far, they have trained over 13,000 women in
various areas like hand weaving, sewing, crocheting, knitting, tying and dyeing, making braid basics, toy-
making to name some. Today, the Women’s Skills Development Organization has 586 members, over 400
among which are working actively.
Since the year 2008, they have started trading as well, exporting their products to countries like Japan, Korea,
Italy, Taiwan, Hong-Kong, United Kingdom, Australia and Germany. Ms. Khadka proudly shares that the
WSDO today exports over USD 250,000 worth of handicrafts across these countries.
As a handicraft person, her problems start from the very fact that there is no clear legal definition of handicraft
in Nepal. This means that the administration and regulation of the sector is largely dependent on the
bureaucracy’s discretion.
Another major problem for enterprises like hers, she shares, is the central bank’s policy which makes it difficult
to accept advance payments more than one month prior to the delivery of their products. She shares that
depending on the volume of orders, sometimes they have to receive advance payments three (or even more)
months before the delivery date (for they procure their raw materials for that particular order from the very
advance amount). This business policy however, does not fare very well with the central bank’s policy, giving
entrepreneurs a very hard time.
Ms. Khadka shares that handicraft is one of the major contributors to the local economy in that it is not only
a majorly women entrepreneur-led industry, but one that empowers women in thousands. The WSDO, in
particular, also runs their own cooperative savings and credit program which further allows women to try
their own hands on entrepreneurship. It is therefore that Ms. Khadka and other handicraft entrepreneurs like
her in Pokhara Lekhnath Metropolitan City believe that the local government should own development of the
industry as one of the priority agendas for creating shared prosperity in the city, and beyond.

Multiple rounds of discussions with entrepreneurs, regulators and local government representatives
concluded that there a number of issues concerning regulatory compliances and knowledge/
resource management that span across all or multiple growth industries which were identified.
Among the various issues that were identified during engagements with stakeholders at local levels,
researchers have selected burdensome business registration and tax compliance requirements at
multiple agencies, lack of comprehensive industry-specific knowledge on prospects and challenges,
lack of land area to carry out business activities, and finally, the low average length of stay of tourists
in Pokhara, to be some of the most pressing, yet workable issues for Pokhara-Lekhnath Metropolitan
City at present.
With the new constitution, local governments no longer have to depend on federal or provincial
governments for plans and programs. Given that, the local governments could focus their energies
straight to resolving some of the following issues related to market entry and operation for new
businesses:
Involvement of multiple regulatory agencies and dual role of regulators:
Source: Index of Economic Freedom 2017, Heritage Foundation
Heritage Foundation’s Index of Economic Freedom, 2017 ranks Nepal 127 out of 180 countries.
Even though the graph might show that Nepal fares on par with the World average on Business
Freedom, it cannot be complacent. In fact, both the world average and Nepal are only moderately
free, with Nepal more recently on a declining trend since 2015. More business freedom means less
regulatory hurdles and lesser avenues for disruption. For example, the more signatures entrepreneurs
require to get an approval, higher their odds are for processes to get delayed due to unavailability
of certain officers or being victim of rent seeking behavior.
PRESSING COMMON ISSUES SPANNING ALL
INDUSTRIES
gg
gg7

World Bank’s Ease of Doing Business ranks Nepal at the 105th position out of 190 countries. It
currently takes 17 days just to register a company. This is without accounting for the time taken
to acquire various licenses and permits from different agencies before even being eligible to start
a business in Nepal. Furthermore, Fraser Institute’s Economic Freedom of the World, 2015 report
ranks Nepal 107 out of a total 159 economies. The same report gives Nepal a score of 4.9 out of
10 in terms of Bureaucratic Costs. Our poor performance in the ranking is justified when considering
ground realities in PLMPC.
Aspiring entrepreneurs need to make rounds to a number of government agencies just to register
their business. Some of these agencies (like the Office of Company Registrar and Department of
Industries) are still centralized and one has to travel all the way to the capital city of Kathmandu to
get works done through them. Additionally, entrepreneurs still need to register at both the Office
of Cottage and Small Industries (OCSI) and the municipal office. Now that OCSI has come under
the Municipality, the need to register at both places should not exist anymore. Unnecessary visits to
multiple offices robs aspiring entrepreneurs of the time they could have spent in actually building
their businesses.
Box Case 4. Improved Public Service Delivery in Portugal through a Simplex Model
20 different forms and documents, 78 days and 11 procedures – this is what it took to start a business in
Portugal in 2005. Now it takes less than an hour to set up a firm. Applicants do not have to fill an application
as all required information is internally exchanged among relevant public agencies such as the registry, social
security, tax and economy.
This drastic will to improve public service delivery in Portugal started with the election of the new government.
Riding the momentum of their victory, the government initiated their attempt of simplifying public service
procedures by starting with a low hanging fruit. For 10 years a single step for car registration had been attempted
to no avail, but within three months the new government was able to achieve this goal. This quick win allowed
them to start the drafting of business registration reform on a high note. Within two months the drafting was
finished and the reform was fully operational within four months.
The entire reform plan was a product of public officials - especially mid-level bureaucrats - who were responsible
for implementing the process in the field every day. Rigorous training ensued, first successfully in a select few
locations which slowly expanded nationwide. Simplifying business registration was part of the larger Simplex
plan.
A cross-departmental body called Office of Public Reform (UCMA) was created soon after the formation of the
new government to serve as a platform for co-ordination among various government departments to oversee
effective implementation of the government’s modernization plans of public services. This was made up of a
taskforce of 7 people who were responsible for making sure tasks were properly carried out and deadlines met.
There were also working groups within each ministry that worked closely with the UCMA which had strong
support of the prime minister who was directly involved in the enforcement process.xliv
Simplex aims to reduce red-tape and promote e-governance by reducing administrative burden to make the
everyday lives of citizens and businesses easier. Each year, government officials pitch ideas to simplify certain
processes and set deadlines for implementation while also participating in the Simplex Idea Awards. Moreover,
entrepreneurs, associations and citizens also propose ideas during public consultations. Transparency and

Pressing Common Issues Spanning All
Industries
Procedural hassles:
Fraser Institute’s Economic Freedom of the World, 2015 report scores Nepal a mere 3.5 out of 10
on administrative requirement and 2.8 out of 10 on extra payments. A World Bank study shows that
Nepal is the most expensive place in South Asia to register a business where the cost of starting a
business is 25% of the per capita income. This is just the direct seen cost. It is no secret that under the
table payments are a common occurrence, and so a disgracefully low ranking of 131 out of 176 in
Transparency International’s 2017 Corruption Perception Index should come as no surprise.
The Pokhara-Lekhnath Metropolitan City has come up with a one-page application that has to be
submitted to register a new business locally. However, businesses that are perceived to have a
potential impact on the environment need to produce supporting documents along with the one-
pager application. For instance, one needs to produce a consent from the neighbors to start a
workshop, but in order to get the document from the ward office, s/he needs to run an advertisement
on a newspaper for up to 20 days.
All of these procedural hassles not only drain resources that could be invested in the business itself,
but also stand to create frustration amongst enterprising individuals who may be discouraged from
taking the plunge into starting their businesses in the region or the country.
accountability have been a crucial part of the movement whereby project results are shared with the general
public each year along with explanations for delay in any implementation. Municipalities have also partnered
with the central government to strengthen local government implementation through a joint simplification
programme.
Following the simplex model, Portugal has been able to achieve numerous successes similar to the On-the-spot
firm.
• Firms can alternately be created completely online.
• Earlier, financial and accounting information had to be reported to the Directorate General for Taxation,
Business Register Centre, National Statistics Agency and the Portuguese Central Bank through four
different forms. Now entrepreneurs can submit one online form that is accessed by all these different
departments.
• One counter is capable of handling all property related services such as tax payment, contract drafting and
signing, municipal tax exemption and property registration.
• One-stop office can reissue and renew several IDs at once.
• The citizen’s card not only replaces five different cards from different public services but also acts as an
important tool for online identification and digital signatures.
PLMPC can draw valuable lessons from Simplex in terms of simplifying administrative procedures by
modifying the model to fit the immediate needs of the city.

Paying taxes:
The Ease of Doing Business Ranks Nepal 146th out of 190 nations in paying taxes and the Economic
Freedom of the World, 2015 report gives Nepal a score of 6.2 out of 10 on tax compliance. The
time spent on paying taxes is a whopping 339 hours annually. That is time a business could have
spent on actually doing business and creating wealth.
Since businesses are registered at both OCSI and the Municipality, they need to pay taxes - business
tax at Municipality and renewal fee at the OCSI - at both places. Both these institutions represent the
same local government; thus, many entrepreneurs look at this as a case of double taxation.
Box Case 5. SARE- “System of Fast Opening of Firms”
In Mexico, the federal government made a commission known as ‘Federal Commission of Regulatory
Improvement’ in the year 2000 which implemented system of fast opening of firms (SARE) to reduce the
number of administrative procedures and time period to register a firm and make the procedures more
transparent. SARE is a federal program that ensures that micro, small and medium firms which carry no risk
for health and environment can register and open in two days after filing with municipality’s SARE office.
The aim was to achieve an objective to register and operate a firm in one municipal office capping the number
of federal procedures at only two. SARE not only sped up registration but also clearly defined the procedures,
fees and identified the entries involved in the registration process, thus making the procedure transparent.
Not all firms can register and obtain a license through SARE. The Federal government has identified 685 “non-
risky” industries as eligible for the program. The result of decreasing number of procedures and the time to
register a firm increased firm startups by 4 percent, decreased informality and increased tax revenues.
Box Case 6. Local Economic Development through Export Oriented Industrialization
The government of Philippines passed the Republic Act No.7160, also known as the Local Government Code,
in 991. This Act enabled the Local Government Unit’s providing power, authority, responsibility and resources
to take active partners in nation-building. Through this Act the Local Government Units were able to come
up with different ways on how to achieve economic growth and contribute to the whole development of the
Philippines.
One strategy these local Government Units adopted was the establishment of Special Economic Zones (SEZs).
The local Government mainly focused to adopt the Export Oriented Industrialization (EOI) strategy by
encouraging foreign investors to invest in SEZs within the municipality.
The Philippine government established a number of Export Processing Zones (EPZs), Information Technology
parks and Tourism economic zones in different parts of the archipelago when the country decided to adopt
the EOI strategy. The Philippines has IT parks with two hundred sixty-five (265) operating firms; tourism
economic zones with five (5) operating firms; four (4) public economic zones namely: Baguio City Economic
Zone, Bataan Economic Zone, Cavite Economic Zone and Mactan Economic Zone with four hundred
twenty-three (423) operating firms within these economic zones. Private investors were also encouraged to

Pressing Common Issues Spanning All
Industries
Environmental standards:
When industries open up in certain areas and create new employment opportunities, new settlements
form around them. However, the same settlements are then affected by the noise, smell and waste
produced by these industries. As a result, residents of these neighborhoods file a complaint at the
local government and the investors are asked to shift their business elsewhere. This has been a
nightmare for businesses.
put up economic zones. There are five hundred twenty-eight (528) firms operating in these private economic
zones. The number of EPZs operating in the archipelago is testament to the success of the EOI strategy in
fulfilling the goal of attracting foreign investors in the country.
In Cavite Province, there are eight (8) Special Economic Zones. One of the eight (8) SEZs, the Gateway
Business Park (GBP), is considered the most expensive industrial estate in the country, and is one of Asia’s
most sophisticated industrial estates. The Municipality of General Trias’ decision of adopting the EOI strategy
through the establishment of Gateway Business Park (GBP) has provided impetus to the development of Cavite
and more specifically to that of the municipality of General Trias. The municipality of General Trias, Cavite
used to be an agricultural area but now it is one of the most progressive municipalities in the province of
Cavite. According to the municipality planning officer, this economic growth was due to the LGU’s decision to
adopt the EOI strategy by encouraging foreign investors to invest in the area through these SEZs located within
the municipality.

1. Administrative Division:
Carries out works related to:
• Employees; particularly, maintaining accounts of attendance, occupational management as well
as leave updates including both mandatory leave and voluntary leaves.
• Registration and processing of letters from Ramana and other offices.
• All directives by the Chief, Deputy Chief and Chief Administrative Officer.
2. Planning Division:
Carries out all development plans of the Metropolitan City.
3. Earthquake Protection and House Map Division
Carries out works related to map passing and monitoring criteria of buildings inside the metropolitan
area.
4. Law Division
• Compliance complaint
• Constitutional commission proceedings received from court
• Action related to the proceedings
• Instructions received by the judicial committee/ proceedings.
5. Environmental Division
Responsible for protection of gardens, parks, lakes and greenery inside the MPC.
6. Social Development Division
• Class targets
• Female targets
• Children
• Social security and more.
ORGANIZATIONAL TASK MAPPING OF POKHARA
LEKHNATH METROPOLITAN CITY
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gg8

7. Security and Monitoring Division
Carries out tasks related to:
• Monitoring and controlling construction work, which has become distinct from the rules
• Regulating the widespread framework
• Monitoring the market
8. Public Health Division
Carries out tasks related to:
• Effective management of health clinics within the city
• Provide services through daily health organizations.
9. Education Section
Responsible for providing quality education in all community schools within the city as well as for
management and training of teachers.
10. Animal Section
Responsible for:
• Improvement of breeds of animals inside the MPC
• Animal control of dogs
• Meat monitoring
• Other animal related work.
11. Agricultural Section
Responsible for:
• All agriculture-related work in the metropolitan area
• Potent seeds distribution
• Soil test
• Method of use of medicine
• Distribution of insecticides and pesticides, drug,
• Providing training in organic farming etc.

Organizational Task Mapping of
Pokhara Lekhnath Metropolitan City
• Necessary cooperation.
12. Revenue Administration Section
Responsible for fixing land, house and other taxes as directed by the Council of the Metropolitan
City.
13. Economic Administration Division
Responsible for:
• MPC’s budget making
• Managing advance payments of plans
• Employee salaries
• All other financial matters.
14. Sanitation Section
Responsible for managing waste in the metropolitan area.
15. Internal Audit Section
Responsible for examining the internal accounting of expenditure details of the Metropolitan City.
16. Fewa Tal Protection Project
Responsible for:
• Management of all criteria related to Fewa Lake
• Water Hyacinth Management
• Protection of Fewa Lake.

gg LEGAL MANDATE FOR PLMPC9
The enactment of the Constitution of 2015 paved way for the federal organization of government
design in Nepal from an erstwhile model of a unitary system. This not only affected the administrative
divisions in the country but also introduced a separated jurisdictional control of territories with
sub-regional entities. Sub regional entities existed in the previous unitary format in the form of
development regions or administrative zones and village development committees or cities at two
separate hierarchies. However, both these entities did not have a constitutional entrenchment and
were subject to devolved power by the central government. In the current format, all previous
government structures have been reorganized to give rise to seven states and seven hundred and
fifty-three local bodies. While the states gain their legitimacy from the constitution itself via Schedule
4, the number and size of local bodies was set forth by the Local Body Restructuring Commission
formed by the transition government.
Local Bodies derive their constitutional legitimacy in terms of structure, power and responsibilities
through Parts 4, 17, 18, 19 and 20 of the Constitution of Nepal. These detail out the structure
of the Nepali State, legislative procedure, executive control, fiscal structure and the terms of
intergovernmental relations between the three orders of government, respectively. Part 4 clearly
marks the local bodies as a constitutional government with a defined mandate and powers detailed
in Schedules 8 and 9 while the process and functioning procedures are outlined in the chapters 17-
19. Further dissemination is also outlined in the cabinet Unbundling report published by the Ministry
of Federal Affairs and General Administration (MOFALD).
Apart from the Constitution itself, the Local Governance Act of 2017 passed by the transition
government in power also sheds light on the structure, type and form of local governments. A first
categorization is between generic rural and urban centers wherein rural local bodies are referred
to as village municipalities (460) whereas the urban local bodies are referred to as municipalities
(293). The urban municipalities are further categorized as metropolitan cities (6), sub-metropolitan
cities (11) and municipalities (276). The distinct features of the same are found in the same act.
Furthermore, based on the geographical terrain these bodies lie on; given Nepal is divided in separate
geographical zones, local bodies are also categorized on the basis of the region they lie in: Himal
(mountains), Pahad (hills), Bhitri Madesh (Inner plains) and Madesh (plains). Thus, considerations
and criteria of population and area differ while categorizing municipalities accommodating these
terrain differences.
Lastly, the Intergovernmental Fiscal Arrangements Act of 2017 also allocates a 15% share of revenues
from the common government tax coffer to local governments and another 15% share from the
royalty procured through natural resources. However, this would change given the pending report of
the Fiscal Commission that is yet to finalize these details.

Functional Analysis
Local level bodies have sole jurisdiction on the following matters as per Schedule 8:
S.N Matters
1 Town police
2 Cooperative institutions
3 Operation of F.M.
4 Local taxes (wealth tax, house rent tax, land and building registration fee, motor vehicle tax),
service charge, fee, tourism fee, advertisement tax, business tax, land tax (land revenue),
penalty, entertainment tax, land revenue collection
5 Management of the Local services
6 Collection of local statistics and records
7 Local level development plans and projects
8 Basic and secondary education
9 Basic health and sanitation
10 Local market management, environment protection and biodiversity
11 Local roads, rural roads, agro-roads, irrigation
12 Management of Village Assembly, Municipal Assembly, District Assembly, local courts,
mediation and arbitration
13 Local records management
14 Distribution of house and land ownership certificates
15 Agriculture and animal husbandry, agro-products management, animal health,
cooperatives
16 Management of senior citizens, persons with disabilities and the incapacitated
17 Collection of statistics of the unemployed
18 Management, operation and control of agricultural extension
19 Water supply, small hydropower projects, alternative energy
20 Disaster management
21 Protection of watersheds, wildlife, mines and minerals
22 Protection and development of languages, cultures and fine arts
Apart from the powers mentioned above, Local Bodies also have the following concurrent powers
as per Schedule 9:
SN Matters
1 Cooperatives
2 Education, health and newspapers
3 Health

Legal Mandate for PLMPC
4 Agriculture
5 Services such as electricity, water supply, irrigation
6 Service fee, charge, penalty and royalty from natural resources, tourism fee
7 Forests, wildlife, birds, water uses, environment, ecology and biodiversity
8 Mines and minerals
9 Disaster management
10 Social security and poverty alleviation
11 Personal events, births, deaths, marriages and statistics
12 Archaeology, ancient monuments and museums
13 Landless squatters management
14 Royalty from natural resources
15 Motor vehicle permits
Further dissemination is outlined in the Local Governance Operation Act 2017 and is as outlined
as follows:
Schedule 8:
1. Local market management, environment conservation and biodiversity
a. Local business, demand of goods, supply and monitoring, consumer right and welfare
related policies, law, criteria, implementation and regulation
b. Market and Haat bazaar management
c. Local goods production, supply and export estimation, price determination and monitoring
d. Local business and commerce related infrastructure construction
e. Monitoring and regulation of the price and quality of local goods and service business
f. Registration, permission, renewal, dismissal and regulation of local level business
g. Statistics system and research study of local level business
h. Coordination and cooperation of private and non-governmental areas
i. Promotion, facilitation and regulation of local business
j. Protection, promotion and record of local intellectual property
k. Consumer awareness enhancement, cost management of targeted consumer and quality
examination of local products and services

l. Environmental conservation and biodiversity related local policies, law, criteria, plan
formulation and its implementation and regulation
m. Environmental risk minimization at local level
n. Controlling pollution and injurious products’ regulation and control at local level
o. Cleanliness and waste management at local level
p. Adoption of minimum carbon and environment friendly development policy at local level
q. Promotion of green zone at local level
r. Environment conservation zone declaration and management at local level
s. Local business management, environment conservation and biodiversity
2. Agriculture and animal husbandry, agriculture product management, animal health,
cooperatives
a. Agriculture and animal husbandry, agriculture product management and animal health
relation local policies, law, criteria, plan, implementation and regulation
b. Agriculture and livestock market information, infrastructure construction of market and hat
bazar, small irrigation constructions, training, technology handover, technical help, farm
equipment supply and farmers capability development relation programs operations and
regulation
c. Disaster management of agriculture and epidemic control of livestock
d. Medical support management of livestock
e. Agricultural environmental conservation and biodiversity protection and promotion
f. Development and management of improved animal breeds
g. Promotion, development and marketization of high cost agro products
h. Development and management of local grazing lands
i. Regulation of quality diet for animals
j. Information center and statistical management of livestock at local level

Legal Mandate for PLMPC
k. Management and regulation of animal slaughter house and cold storage
l. Facilitation of animal related insurance and loan
m. Other tasks related to animals and animal husbandry
3. Management, operation and control of agriculture promotion
a. Agriculture promotion related local policy, law, criteria, plan, implementation and
regulation
b. Agriculture promotion and human resource estimation, management and mobilization
c. Capacity enhancement of farmers, technical service, help, skill development and
empowerment
d. Agro seeds, breed; supply, use and regulation of chemicals, medicines and manure
e. Coordination, management and regulation of farmers group, agriculture cooperatives and
organizations related to agriculture
f. Protection and handover of agricultural technology at local level
g. Information dissemination related to agriculture
h. Development and management of local level resource center
Schedule 9
1. Service fee, fee, penalty fee and royalty obtained from natural resources, tourism fee
a. Local service fee, fee, penalty fee related policy, law, criteria, plan, formulation,
implementation and regulation
b. Coordination and regulation of royalty from natural resource and service fee
c. Excavation of minerals and royalty collection from them
d. Royalty collection from community forest operation and management
e. Royalty collection from service operation of waterfall

gg OBSERVATIONS OF THE RESEARCHERS10
This exercise of identifying the highest-potential carrying growth sectors in Pokhara-Lekhnath
Metropolitan City and conducting targeted engagements with stakeholders – the regulators, the
business operators and local government representatives has definitely helped identify some of
the local challenges, resolving which can unlock the city’s vast economic potentials. The targeted
engagements have also helped researchers identify some of the potential way-forwards that can
be worked upon. In this exercise, researchers have identified links between these potential way-
forwards and the newly-elected local government’s mandate to work upon those solutions. Under
ideal circumstances, an elected leader could pick these issues up, one (or a few) at a time, design
dedicated and well-thought-out intervention plans, and implement these solutions towards unlocking
the city’s potentials and harnessing the rich dividends the city stands to offer. Yet, there are multiple
other factors that could likely affect whether or not these fall under the priority economic agendas of
the local government(s), and whether or not they will be implemented.
a) To begin with, there is lack of a clear legal framework for the enforcement of some of the
powers of the local government over these areas. While Schedule 8 of the Constitution
of Nepal, 2015 guarantees that the growth sectors identified by the study fall under the
prerogative of the local governments and Local Government Operation Act, 2017 further
elaborates on the local government’s specific powers over these industries, clear directives
and guidelines that enable the local governments to employ their powers towards improving
business-environment at the sub-national level are missing.
b) Secondly, there is lack of clarity over specific roles of the three governments–Federal, State
and Local—in relation to these industries. For example, Schedule 5 (List of Federal Power),
Schedule 6 (List of State Power), Schedule 8 (List of Local Level Power) and Schedule 9
(List of Concurrent Powers of Federation, State and Local Level) all mention ‘tourism fee’
(except Schedule 6) as a prerogative of the respective governments. Schedule 6, furthermore,
mentions only ‘tourism.’ Many problems could arise from these texts:
i) Is there any difference between the nature of tourism fees that these governments are
allowed to charge, or are they the same? What is the definition of tourism fee? Who
defines this?
ii) Who collects these tourism fees, and how is the revenue distributed?
iii) What guarantee is there that while one of the governments goes about enforcing this
power, the other governments do not charge it of stepping on others’ toe?
Overall, the way certain provisions have been laid out in the Constitution could potentially lead
to a lot of interpretational challenges, which will surely have a bearing on the employment of
these powers by the different governments.
c) The fact that the local government machinery had been non-existent for almost two decades
and that All-Party Mechanisms (APMs) had assumed the functions of the local governments
means that now, on one hand, the new local governments need to build their capacities
and strengths again for efficiently delivering their functions, and on the other hand (and
presumably more importantly) strike a balance with the political beneficiaries of the APMs.
A successful transition towards elected local governments also implies for these beneficiaries
that some of the economic rents that the APM members had exclusive access to will be cut off.

d) As evidenced by many of the engagements with local stakeholders, there are immense
expectations from the local governments. But citizens also understand that the newly elected
officials are not necessarily experts in many of the areas where the municipality is struggling.
Furthermore, as new structures are being built at local level (for example bringing in the
Office of Cottage and Small Industry (OCSI) under the Municipality as Industrial Development
Section), there is room for potential mismatch between the interests and capacities of these
formerly central government’s functional units at district levels1
. This means that the local
governments will have to leverage on as much of the local knowledge and expertise as it can
borrow from the local sectoral experts and other relevant stakeholders.
e) There are conflicting interests between some of the important actors within the growth sectors
as well, mitigating which will be one of the top priorities for the current local government
(and governments to come) before the municipality can harness more from its potentials.
For example, it would be in the Restaurant and Bar Association’s best interest if the Lakeside
market would extend to be a 24-hour market. However, it could also have a negative impact
on the occupancy of hotels in the surrounding area as a result of all the noise. In this case, the
growth of hotel occupancy will lead to growth of consumption of restaurant products, but the
growth of restaurants could potentially impact the performance of hotels in the neighborhood
negatively.
Required Action
These observations point to the situation that many of the recommendations for reform (including
those identified by this very study, and beyond) will face varying degrees of resistance from various
stakeholders. As such, a practical way forward would be to form a team of local experts and
relevant stakeholders who will engage in deliberations over what should be the priority reform
agendas for Pokhara Lekhnath Metropolitan City going forward. Many of the issues identified by
this very study and others will lend important insight to these deliberations. Researchers have, in this
study, identified a bank of reform agendas that can be picked up.
Deliberations over these issues will ensure that there is ownership of all local stakeholders towards
these ideas. What can also be expected is that these deliberations will add some local contexts to
some of the potential solutions identified here and create what are local solutions to local problems.
One of the most important activities during this process would be identifying stakeholders related
to the picked reform issues and mapping their interests—Political Economic Analysis of the reform
agenda. What does Pokhara stand to gain as a result of the reform and where all does it have to
make adjustments to enable those gains? Who are the key actors involved? What do they stand
to gain/lose? How does Pokhara create win-wins for all stakeholders that will be affected by the
reform? These are some of the questions that the PEAs should look to find answers to.
1 This statement assumes the OCSI as a district-level functional unit of the central government via the Department of Cottage and
Small Industries (DoCSI)

LOCAL POLICY OPTIONS FOR CREATING A
CONDUCIVE ENVIRONMENT FOR GROWTH
gg
gg11
1. The local government has recently completed mapping of all public lands under the PLMPC
with the help wards within its jurisdiction. With businesses in the region suffering from limited
land availability for operation and expansion, it would be extremely beneficial to identify
those plots that are sizeable enough to lease out to local businesses. This process should be
fast-tracked.
2. Parking in the city, especially in the lakeside area is a huge problem. Identifying and utilizing
public lands to either publicly operate a parking facility or lease out to a private party
interested in building a parking lot could ease the city’s traffic problem, at least in the lakeside
area. Basundhara Park and Dikopatan are two such areas that have been suggested by a
number of locals and business owners during the researchers’ interactions.
3. According to discussions with relevant stakeholders, under the Local Self-Governance Act,
the Metropolitan city had decided not to increase the integrated property tax for 5 years.
However, businesses have complained that this agreement has been broken and the tax rate
has been increased. Industries such as hotels that own large areas of land stand to lose the
most with the new increased tax rates. The city should honor its commitments.
4. The need for better road infrastructure has been highlighted time and again, not only
domestically but by international visitors as well. As per tourism sector entrepreneurs, Chinese
and Indian tourists (who are also a target market for Nepali tourism sector) often complain
about the long and arduous journey they have to make through narrow, dusty, broken and
unmanaged roads to get to Pokhara. This is a huge deterrence when it comes to promotion
through referrals. A “Golden Triangle” that connects Kathmandu, Chitwan, Bhairahawa and
Pokhara that will allow easy commute for local as well as international tourists should be built.
PLMPC needs to start a dialogue with local governments from these regions and collectively
make an effort to improve road infrastructure.
5. Lack of clean drinking water has been a serious problem in the city. The Nepal Water Supply
Corporation (NWSC) has been recently distributing cloudy tap water that is unfit for drinking.
This has forced the locals to buy drinking water from private companies. JICA has been
commissioned to build a drinking water treatment plant for water distributed from one of the
water sources - Mardikhola. However, Pokhara also receives water from other sources such
as Bhotikhola, Kalimuda, Majhkula and Ghattekuna where there are no such treatment plants
till date. This problem of direct water distribution is expected to last up to a period of 4 years.
It is very important that the NWSC also implements plans to build drinking water treatment
plans for all other remaining sources.
6. Constructing a Tourist Bus Park, relocating overhead electrical and telecommunications wires
underground, constructing a cycle and foot track around Fewa Lake, prohibiting activities
that encroach footpath and roads, reducing sound pollution, blacktopping roads, proper
parking management, constructing Pokhara ring road, building public toilets and proper
waste management are all pressing infrastructure needs of the city that need to be addressed.

7. The average length of stay in Pokhara is 1.75 days. This directly affects the occupancy and
profitability of many businesses involved in leisure travel in the region. Creating a Tourism
Profile that identifies different touristic attractions, destinations and activities to do within the
Pokhara-Lekknath area is important to increase the length of stay of tourists. This can be
done through Public Private Partnership (PPP) with collaboration of the Municipality, local
businesses and the Tourism Board. Since the PTB has shown interest in creating a working
group, they can potentially help with the funding for creating the Tourism Profile.
8. There is a lack of information for tourists. Last year only 500 maps of Pokhara were printed
which did not fulfil the demand. Tourist information centers should be built around areas
such as Tourist Bus Parks, Airports, Base camp bus parks, and in the lakeside area. Such
information centres can contain maps that promote local businesses through coupon systems.
This should be a coordinated effort between businesses, government and the tourism council.
9. There are two peak tourist seasons in PLMPC throughout the year: March-May and September-
November. Local businesses are willing to carry out various festivals and programs on their
own to increase the flow of tourists during off-season. However, they will require extra security.
PLMPC should provide its security forces to help support such innovative local initiatives.
10. The haphazard growth of paragliding companies has led to an unhealthy price war amongst
businesses in the industry which threatens to compromise on quality. It will be important to
ensure that new companies are quality service-oriented and not just short-term players who
would bring in more long-term cost to local tourism than benefits. Therefore, new licenses
could only be provided to legitimate companies with high operating standards. Shadow
businesses should be identified and dealt with accordingly.
11. PLMPC should enlist the help of PTB to help trekking agencies put up signs, find new routes
and acquire a dependable tracking system. All of this can be carried out through a PPP
model. Additionally, sign posts can also be designed to run advertisements and serve as an
additional revenue source.
12. Two important problems that have been preventing the growth of more hatcheries and
nurseries in the region is a shortage of land and lack of technical expertise. The Fishery
Research Station has been doing a good job in producing and selling fry/fingerlings as well
as providing some help in opening hatcheries/nurseries. However, more can be done. The
fishery station itself is limited by technical capabilities and thus the help it has been able to
provide is also limited. More research and investment in building such capacity is important.
13. Farmers at the grassroots level have not been able to benefit from existing government
subsidies. Efforts should be made to make sure that such farmers are able to access existing
benefits.
14. Facilitating the creation of pockets and a local brand could help with lowering certification

Local policy options for creating a
conducive environment for growth
costs for organic coffee producers. Further, the municipality could bring in a certification
inspector as well as find ways to conduct yearly equipment tests at the local level to not only
lower costs but also make compliance easier. This could be funded by taking certain fees from
the coffee producers themselves.
15. Small entrepreneurs cannot afford to bring in fiber-based raw material processing machines
that are important for using local raw materials like hemp and allo as inputs. Helping business
owners in the handicrafts industry with required technical help would not only expand and
diversify the industries’ production capacities, but also create markets for local raw material
producers.
16. Lastly, task forces should be formed to carry out sectoral reforms as well as general reforms to
ease business registration and compliance challenges. The task forces should enlist the help of
study teams as well as sectoral and field experts while carrying out their functions. For example,
the team responsible for easing the business registration process in PLMPC could consult
the former Lekhnath Municipality officials to learn from their experiences of outsourcing the
registration process to the Lekhnath Chamber of Commerce. Similarly, the team responsible
for creation of the Tourism Profile should work closely with private stakeholders, PTC and PTB.

RECOMMENDATIONS THAT REQUIRE SUPPORT
FROM PROVINCIAL AND FEDERAL GOVERNMENTS
1. Unpredictability and rapid one-sided increase in interest rates has severely dampened private
sector investment and expansion. This also poses a threat of souring relationships between
banking and financial institutions and entrepreneurs. The PLMPC should start a dialogue with
NRB and financial institutions in the area on how to overcome this problem.
2. Fish farmers are currently taxed for their egg imports. However, there is a government policy
of concessional taxes on import of agricultural seeds. This problem arises from the fact that
the category of ‘fish’ has failed to be included in the list of agriculture seeds in the Finance
Bill. Such discriminatory tax process creates a huge disincentive for fish farmers to expand
their businesses and should be addressed as soon as possible.
3. Both fish farmers and coffee producers face problems in access to finance. Cumbersome
documentary requirements, high interest rates and rigid payment plans that prevents ideal
delayed payments pose problems for business owners. Finding ways to simplify agricultural
loans and implement agricultural insurance should be priority areas.
4. Handicrafts come under the VAT bracket once they cross the mark of annual transaction of
over NRs. 5 million. This diminishes the price competitiveness of Nepali handicraft products
in the international market. This VAT provision comes as a conflicting government agenda
which directly contradicts its commitment to promote handicrafts and should be reviewed.
5. The government provision to promote women entrepreneurship by providing a collateral
free loan of up to NRs. 100,000 is not sufficient to carry out any substantial expansion or
operation project. Furthermore, accessing the NRs. 500,000 loans through the Employment
Development Fund is extremely difficult due to burdensome compliance procedures. The
amount and documentation requirements should be reviewed to address the realities of
women entrepreneurs.
6. NRB regulations make it difficult for handicrafts businesses to accept advance payments for
orders more than one month in advance. This severely limits the handicraft industry’s capacity
to take and fulfill large orders. Such policy hurdles should be removed so that entrepreneurs
can have ample time to complete their orders as well as the freedom to accept large export
orders.
gg
gg12

gg CONCLUSION13
The recent devolution of powers to local governments has given the Mayor and Municipal Team
of Pokhara-Lekhnath Metropolitan City the perfect opportunity to harness the immense potential
of the largest city in the country. Given the abundant natural resources - such as plentiful serene
water sources, panoramic vantage points and majestic mountain views - the city has been able
to establish itself as a hub for leisure and adventure travelers. As a result, hotels, restaurants, air-
sports institutes, trekking, tours and travels institutes have been identified with the highest growth
potential in the region. Furthermore, fish farmers, organic coffee producers and the handicrafts
industry with its forward linkages to the tourism sector also show a lot of promise for growth. The
fastest growing sectors currently face a range of industry-specific challenges as well as more general
problems that restrict their expansion and profitability. Problems span from inadequate infrastructure,
weak access to finance, poor co-ordination among concerned stakeholders to excessive regulatory
hurdles. A wide-range of recommendations have been proposed to help the municipal team deal
with the plethora of challenges. Formation of task forces to address the recognized problems and
recommendations by seeking the advice and help of sectoral experts has been recognized as an
effective way to spearhead the reform process. This is an opportune time for the Mayor and PLMPC
team to ride the momentum of their recent victory and collectively tackle challenges with concerned
stakeholders to lead the city to greater heights of prosperity.

gg ENDNOTES:14
i. Pokhara Lekhnath Metropolitan City. 2017. Annual City Development Plan, Year 2074/75.
ii. The Kathmandu Post. 13th March 2017. Pokhara Lekhnath becomes largest metropolitan city. Post
Report, Lekhnath. Accessed from: http://kathmandupost.ekantipur.com/news/2017-03-13/
pokhara-lekhnath-becomes-largest-metropolitan-city.html
iii. Pokhara Lekhnath Metropolitan City. 2017. Annual City Development Plan, Year 2074/75.
iv. ibid
v. ibid
vi. ibid
vii. ibid
viii. District Education Office Kaski, 2015. School Lists, Year 2072. Ministry of Education. Government of
Nepal. Accessed from: http://www.deokaski.gov.np/allcontent/Detail/26
ix. District Education Office Kaski, 2015. ECD/PPC Enrollment, Year 2072. Ministry of Education.
Government of Nepal. Accessed from: http://www.deokaski.gov.np/allcontent/Detail/26
x. District Education Office Kaski, 2015. Education Bulletin - 2072. Ministry of Education. Government
of Nepal. Accessed from: http://www.deokaski.gov.np/SoftAdmin/content/Bulletin_2072_DEO_
Kaski.pdf
xi. Women’s Skills Development Organization. Organization’s Introduction and Activities.
xii. Fishery Research Station. 2016. Annual Report (2015/016). Nepal Agricultural Research Council
(NARC). Government of Nepal.
xiii. Nyupane, Prabhat. Fisheries Development Officer. 12th March 2018. Telephone Communication.
xiv. Paschimanchal Hotel Association Pokhara. 2018. दक्षता बढाउन पुमसंग समझदारी. News Bulletin.
Vol. 1/No. 7.
xv. Pokhara Lekhnath Metropolitan City. 2017. Annual City Development Plan, Year 2074/75.
xvi. The Kathmandu Post. 13th March 2017. Pokhara Lekhnath becomes largest metropolitan city. Post
Report, Lekhnath.
Accessed from: http://kathmandupost.ekantipur.com/news/2017-03-13/pokhara-lekhnath-
becomes-largest-metropolitan-city.html
xvii. The Himalayan Times. 8th June 2017.EDITORIAL: Pokhara Masterplan. Opinion. Accessed from:
https://thehimalayantimes.com/opinion/editorial-pokhara-masterplan/
xviii. Rimal. Bhagwat et.al.2015. Growing City and Rapid Land Use Transition: Assessing Multiple Hazards
and Risks in the Pokhara Valley, Nepal. MDPI. Land. 4(4), 957-978.Accessed from: http://www.
mdpi.com/2073-445X/4/4/957/htm
xix. Paschimanchal Hotel Association Pokhara. 2018.महानगर होटल संघको २५ बुंदे ध्यानाकर्षण. News
Bulletin. Vol. 1/No. 7.
xx. Pokhara Lekhnath Metropolitan City. 2017. Annual City Development Plan, Year 2074/75.
xxi. Paschimanchal Hotel Association Pokhara. 2018.दिक्क लाग्दो सडक सुधार्न भारतीय पत्रकारको
सुझाब. News Bulletin. Vol. 1/No. 7.
xxii. Dhakal. Rup Narayan. 2nd August 2017. Chinese contractor vows to complete Pokhara Regional
Int’l Airport on time. The Himalayan Times. Accessed from: https://thehimalayantimes.com/nepal/
chinese-contractor-vows-to-complete-pokhara-regional-intl-airport-on-time/
xxiii. Paschimanchal Hotel Association Pokhara. 2018.सफा पानी माग्दै होटलकर्मी संस्थामा. News Bulletin.
Vol. 1/No. 7.
xxiv. Paschimanchal Hotel Association Pokhara. 2018.महानगर होटल संघको २५ बुंदे ध्यानाकर्षण. News
xxv. Pokhara Lekhnath Metropolitan City. 2017. Annual City Development Plan, Year 2074/75.
xxvi. Nepal Rastra Bank. 2015. Banking and Financial Statistics. No. 61. Bank and Financial Institution

Regulation Department, Statistics Division. Accessed from: https://nrb.org.np/bfr/statistics/bank_
fina_statistics/Banking_and_Financial_Statistics--No_61%20July%202015.pdf
xxvii. Paschimanchal Hotel Association Pokhara. 2018. बैंकहरुको मनोमानीविरुद्ध होटलकर्मी राष्ट्रबैंकमा.
News Bulletin. Vol. 1/No. 7.
xxviii. Paschimanchal Hotel Association Pokhara. 2018. बैंकहरुको मनोमानीविरुद्ध होटलकर्मी राष्ट्रबैंकमा.
News Bulletin. Vol. 1/No. 7.
xxix. Pokhara Lekhnath Metropolitan City. 2017. Annual City Development Plan, Year 2074/75.
xxx. Office of Small and Cottage Industry, Kaski, 2015 Industry Registration Progress Details 2071/72
xxxi. Office of Small and Cottage Industry, Kaski, 2015 Industry Registration Progress Details 2071/72
xxxii. Paschimanchal Hotel Association Pokhara. 2018.होटल संघको साधारण सभा. News Bulletin. Vol. 1/
No.7
xxxiii. Paschimanchal Hotel Association Pokhara. 2018.महानगर होटल संघको २५ बुंदे ध्यानाकर्षण. News
xxxiv. Pokhara Lekhnath Metropolitan City. 2017. Annual City Development Plan, Year 2074/75.
xxxv. Pokhara Lekhnath Metropolitan City. 2017. Annual City Development Plan, Year 2074/75.
xxxvi. Paschimanchal Hotel Association Pokhara. 2018. बैंकहरुको मनोमानीविरुद्ध होटलकर्मी राष्ट्रबैंकमा.
News Bulletin. Vol. 1/No.
xxxvii. Pokhara Lekhnath Metropolitan City. 2017. Annual City Development Plan, Year 2074/75.
xxxviii. Kaski District’s Fish Profile
xxxix. Fishery Research Station. 2016. Annual Report (2015/016). Nepal Agricultural Research Council
xl. District Agricultural Development Office, Pokhara Kaski. 2017. Agriculture Department. Ministry of
Agricultural Development. Government of Nepal.
xli. Fishery Research Station. 2016. Annual Report (2015/016). Nepal Agricultural Research Council
xlii. Nyupane, Prabhat. Fisheries Development Officer. 12th March 2018. Telephone Communication.
xliii. Women’s Skills Development Organization. Organization’s Introduction and Activities.
xliv. Marquez, Maria Manuel Leitao. 2007. One-stop-shopping in Portugal. Smart Lessons in Advisory
Services. International Finance Corporations.

Annex I: Key Private Stakeholders
Industry Specific Stakeholders General: Key People and
Organizations
Tourism Pokhara Chamber of Commerce &
Industries(PCCI)
Pokhara Tourism Council (PTC) Lekhnath Chamber of Commerce & Industries
(LCCI)
Pokhara Tourism Board (PTB) Hon. Rabindra Adhikari
Pashchimanchal Hotels Association of Nepal
(PHAN)
Hon. Rajiv Pahari
Trekking Agents Association of Nepal (TAAN) Hon. Bindu Kumar Thapa
Restaurant & Bar Association of Nepal (REBAN) Niranjan Shrestha
Nepal Association of Tours & Travels Agents
(NATTA)
Ganesh Bhattarai
Trekking Equipments Support Association
(TESA)
Biplav Paudel
Nepal Airsports Association (NAA) Ram Krishna Gyawali
Nepal Mountaineering Association (Annapurna
Chapter)
Anand Raj Mulmi
Begnas & Rupa lake conservation & Tourism
Development Committee.
Hotels Association of Lekhnath
Women Empower Nepal
Agriculture
District Coffee Producer’s Association
District Coffee Cooperatives Union
Manufacturing
Kaski Pokhara Handicraft Association
Women Skill Development Organization
gg ANNEXURES15

Annex II: Stakeholders consulted during Pokhara-Lekhnath field visit
S.N Title Name Position/Organisation
1. Mr. Agni Prasad Kandel Former PTB Official turned entrepreneur
2. Mr. Arjun Lamsal Pachavaiya Deurali Gharelu Coffee Uddyog
3. Mr. Arun Manandhar Standard Hotel and Language Training
4. Mr. Ashwin Karki Pokhara Kastha Uddyog
5. Mr. Baburam Giri
Past President, Lekhnath Chamber of Commerce and
Industry
6. Mr. Baibhav Paudel Restaurant and Bar Association of Nepal
7. Mr. Bala Ram Dhakal
Vice President, Lekhnath Chamber of Commerce and
Industry
8. Mr. Baruram Panta Pokhara Noodles Pvt. Ltd.
9. Mr. Bhimsen Bhujel Restaurant and Bar Association of Nepal
10. Mr. Bikal Tulachan
President, Paschimanchal Hotel Association of Nepal
(PHAN)
11. Hon. Bindu Kumar Thapa Member of Federal Parliament
12. Mr. Bishwo Bandhu Pokharel President, District Coffee Producers’ Association (DCPA)
13. Mr. Bishwo Shankar Palikhey President, PCCI
14. Mr. Chau Bdr Gurung President, Restaurant and Bar Association of Nepal
15. Mr. Deepak Raj Adhikari President, TAAN/ LN Treks
16. Mr. Dhan Raj Acharya District Governor, Lions Club
17. Mr. Dilli Prasad Gauram President NATTA
18. Mr. Dol Raj Pandey Srijana Ma. V/ PABSON
19. Mr. Ganesh Bhattarai Boomerang Restaurant
20. Ms. Ghale/Pahari Member of Municipal Assembly
21. Ms. Goma Dhakal Rainbow Handicraft Udhyog
22. Mr. Hari Ram Adhikari
General Secretary, Nepal Association of Tour & Travel
Agents (NATTA)
23. Ms. Hira Bhattarai KPHA/ Padmawati Hastakala Udhyog
24. Mr. Jagat Pahari Ward Chief, Ward #6
25. Mr. Jhalak Jalari Secretary, District Fish Farmers’ Association, Kaski
26. Mr. Jiban Prasad Bhurtel Jaya Kaamana Fish
27. Mr. Kamal Koirala CEO, Restaurant and Bar Association of Nepal
28. Mr. Kedar Sharma Chairman, PTC
29. Mr. Keshab Chief Tax Officer, Kaski Inland Revenue Office
30. Mr. Krishna Bhandari VP, Nepal Air Sports Association (NAA)
31. Mr. Krishna Hari Bhandari President, Lekhnath Chamber of Commerce and Industry

Annexures
32. Mr. Lachchhin Gurung Gandaki Rainbow Trout Farm
33. Mr. Laxmi Prasad Tripathi IPP, Lekhnath Chamber of Commerce and Industry
34. Mr. Maharaj Dhakal Office Chief, Office of Cottage and Small Industries
35. Mr. Man Bdr GC Mayor, Pokhara-Lekhnath Metropolitan City
36. Mr. Narayan Jung Khatri
Former Information Officer, District Agriculture
Development Office, Kaski
37. Mr. Narayan Shrestha Pokhara Ultralight Pvt. Ltd
38. Mr. Prabhat Nyupane Fisheries Development Officer
39. Hon. Rabindra Adhikari Member of Federal Parliament UML
40. Mr. Rajesh Bomjan Sunrise Paragliding
41. Hon. Rajiv Pahari Member of Provincial Assembly, UML
42. Mr. Ram Krishna Gyawali Journalist
43. Ms. Ramkali Khadka Women Skill Development Organisation
44. Ms. Sita Gurung Secretary, Kaski Pokhara Handicraft Association
45. Mr. Surya Thapaliya Manager, Nepal Tourism Board
46. Mr. Sushil Paudel
Secretary, Trekking Agencies’ Association of Nepal
(TAAN
47. Mr. Top Bahadur Thapa
Office Manager, Pokhara Chamber of Commerce and
Industry
48. Mr. Yubaraj Paudel Dolphin Hotel Training and Language Institute

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