Economic growth and employment generation potential of forest-based industries in Nepal

A recent study has shown that the forest-based industries have very high potential for economic growth and employment generation in Nepal. A national level study – Private Sector Involvement and Investment in Nepal’s Forestry: Status, Prospects and Ways Forward – conducted by ANSAB and its consortium partners Relief International/EnterpriseWorksVita (EWV) and Nepal Herbs and Herbal Products Association (NEHHPA) on behalf of the Multi Stakeholder Forestry Programme (MSFP) of Nepal came into this finding along with other important findings regarding Nepal’s forestry sector.

Based on the market opportunities and supply potential of four major subsectors – timber, non-timber forest products (NTFPs), forest ecosystem services, esp. forest carbon and ecotourism, and forest bio-energy, the study shows that that the forest-based industries can generate economic value worth about NRs 88 billion, whereas it could go over NRs 370 billion under the optimistic scenario. Detailed assumptions are made for the two different scenarios for each subsector that has been described in detail in the study report. In general, the conservative scenario assumes the products and services are utilized with modest changes to the sector, taking into account the recent positive trends in investment. The optimistic scenario assumes forests are managed using science and at least some significant value chain improvements are made.

Regarding the employment generation potential, the study shows that under the conservative scenario, the forest-based industries can generate over 400,000 sustainable, full time jobs and in the optimistic scenario it can go up to 1.38 millions. Presently, in the forestry sector, the private sector provides nearly 99,000 formal full time jobs per annum, whereas Community based organizations including Community forest user groups (CFUGs) provide about 31,000 jobs making a total of 130,000 jobs. This reveals a great potential for creating significantly more number of additional sustainable jobs in Nepal’s forest sector that ranges from 3 to 10 times higher than the present level depending on the performance. Transition of the informal workforce to formal employment opportunities could be done by involving them in enterprise-oriented forest management and production of goods and services as well as in other functions of the value chains.

The following table presents the breakdown of the economic growth and employment estimated by the study for each subsector under conservative and optimistic scenarios.

Subsector Economic value (million NRs) No of sustainable, full time jobs
Conservative Optimistic Conservative Optimistic
Timber 55,127 270,697 206,725 812,090
NTFPs 11,635 58,173 87,259 290,865
Forest Carbon 4,235 13,572 37,054 118,755
Ecotourism 14,572 21,567 72,860 107,833
Forest Bioenergy 2,126 9,107 15,633 53,571
Total 87,694 373,115 419,531 1,383,114

ANSAB and its consortium partners RI/EWV and NEHHPA conducted the national level study on the Private Sector Involvement and Investment in Nepal’s Forestry from April to December 2013, and is one of the major eleven outcomes of the Multi Stakeholder Forestry Programme. The study developed a thorough understanding of the current status and future potential of private sector investment and involvement in the forestry sector of Nepal, and used this to develop strategic plan with appropriate interventions.