Killing investment in Nepal in 10 easy steps

Eight years ago, at a busy Thamel restaurant, a promising new plan to set up an animal vaccine facility in Nepal was born during a meeting with a professor from the University of California-Davis.

The idea was to innovate a cold chain-free viral vaccine that could be transported to rural Nepal without logistical problems and, ultimately, to increase the accessibility of vaccines for small farmers. A government agency in the Netherlands agreed to chip in almost half a million euros to the project as a matching fund.

A few Dutch investors along with Nepali companies were interested in the project as well. So a Foreign Direct Investment (FDI) company called BIOVAC Nepal was established in 2017.

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Data from the poultry sector showed that the venture made business sense and had high social impact. So we prepared to get this innovative high-tech company up and running.

The Australian government also pledged money for additional research and enhanced manufacturing capacity. Everyone was excited.

But very quickly, as happens often in Nepal, that excitement turned into frustration. Ahead of the Nepal Investment Summit 2024 from 28-29 April in Kathmandu, this is an account of how deep the rot has set in. Fix this before trying to attract any investors.

Registration for the FDI company alone took almost a year, followed by senseless bureaucratic hurdles. We thought the Department of Livestock was the main agency for permits for an animal vaccine facility, only to find out a year later that it was the Department of Drug Administration (DDA).

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There was no clear instruction and guidance and we were kept running around in circles trying to figure out the procedure. Finally, after six grueling years of effort, we set up a state-of-the-art animal vaccine research, development and manufacturing facility. It took another year and half to get a commercial license for our first product.

The business culture in Nepal is so primitive that contracts are not worth the paper they are signed on. For vaccine commercialisation, we signed an agreement with a local distributor for exclusive partnership with volume commitments and a joint marketing effort.

That did not go according to what was planned and agreed upon. But there was little we could do other than almost beg for help. Recovering money from issued invoices was excruciatingly difficult, if not impossible.

After producing our thoroughly researched and tested vaccine, we then had to go the extra mile to prove that it actually worked. We published all our testing and validation data in internationally recognised and peer-reviewed scientific journals. Even then, we had to constantly face the doubts of Nepali farmers as we attempted to convince them that our product was as good as if not better than imported ones. But there seemed to be little faith in ‘Made in Nepal’.

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Nepal’s poultry industry is inefficient in terms of production. For example, the productivity of the Cobb 500 broiler chicken in the US is almost 99%, meaning there is only a 1% loss due to mortality. The same breed of chicken in Nepal sometimes has a production efficiency of less than 70%.

Disease outbreaks due to poor biosecurity and immunisation are the main reasons. BIOVAC provided a comprehensive disease prevention service, but was unable to convince farmers to sign up for measures that would guarantee better production success. There was a resistance to new ideas.

The unpredictability in business projections meant that we had to look for additional funds. Local banks, although very approachable, are often boxed into traditional ways of lending money through real estate collaterals. Government directives are often lacking or confusing. Every investment loan is looked at from a real estate prism.

Two of Nepal’s major universities produce hundreds of biotech graduates every year. A majority of them eventually emigrate. Over 16 years ago, we opened up one of Nepal’s most modern biotech companies. Since then, many of these graduates have been able to learn and work on cutting edge vaccine research and production. But instead of appreciation, we have been harassed and obstructed by government agencies every step of the way.

Even ‘social impact investment’ providers who scrutinised our books told us we did not have a sound commercial plan. Some of the criticism was constructive, but they saw it as yet another ‘hydro’ project. The project was in the national interest, building not only vaccines but also the highly skilled human resources needed to go from a trading and importing nation to a country of cutting-edge innovation. The narrow definition of rate of return meant that the ‘social impact’ was lost in translation.

Ever since I returned to Nepal from the US 16 years ago, I have seen a gradual breakdown of governance. The overall mood of the country is cynical and gloomy. Scientists and innovators are valued even less, which is why there is an exodus of our best and brightest.

After dedicating almost seven years of my life to build something that we believed the country needed, my entrepreneurial urge is dampened. The odds are stacked against innovation and invention, this has become a land of rent-seekers and traders.

Dibesh Karmacharya has a PhD in Conservation and Microbiome Genetics from Griffith University, Australia. He is the Founder/Chair of the Center for Molecular Dynamics Nepal, Intrepid Nepal and BIOVAC Nepal.