Proposal for the Small Grants Initiative

Beahrs Environmental Leadership Program

University of California, Berkeley

 

 

 

Development of Business Strategies and Marketing Plan for the

Community-based Pro-poor Enterprises and NTFP Trade

(Business and Marketing of Non-timber Forest Products from the Community Forests in Nepal)

 

 

Submitted by

 

Dinesh Paudel

Nepal Swiss Community Forestry Project /SDC

Post Box 113

Kathmandu, Nepal

 

Tel – 977 1 5551702-4

Fax – 977 1 5551701

Email – d_paudel@nscfp.org.np

 

In collaboration with

 

Sebastian Teunissen
Adjunct Professor and Executive Director
Clausen Center for International Business and Policy
Haas School of Business, University of California, Berkeley
Berkeley, CA 94720-1900 USA
Tel -  510-643-4999
Fax -  510-642-8228
teunisse@haas.berkeley.edu
http://www.haas.berkeley.edu/HaasGlobal/

 

 

1.    Problem statement/ Justification

 

Community forests are making a significant contribution to rural income and employment through NTFP trade. NTFP consists of all the products other than timber, fuelwood and fodder for the domestic purpose. Rural employment is also being generated for men and women (including the poor) through work in processing factories and self-employment is being generated through the collection and sale of raw material. Every year, between 10,000 to 15,000 MT of Non-timber Forest Products are harvested in the mid-hills and high mountains of Nepal. The value of these NTFP is approximately US$ 10 million per year (Edwards 1996). Most of these NTFP come from community forests which are handed over to the community forestry user groups (CFUG).

 

However, recent studies undertaken by the Nepal Swiss Community Forestry Project (NSCFP) have shown that Forest User Groups (FUGs) are currently not getting full value in commercialising their resources. In Ramechhap in 2003-2004, only 2% of the total income from forest based enterprises supplied by Forest User Groups (FUGs) was going into the FUG fund.

 

The Project recognises that enterprise development has a significant potential to transform the livelihoods of the rural poor, but also recognises that this opportunity has been missed through approaches that emphasise income generation (through sale of raw materials) or rural employment (in existing enterprises that may be managed and/or owned by rural elites). With this realisation in mind, it is embarking on an innovative programme for piloting enterprise development through a pro-poor entrepreneurship approach. If poor people are trained as entrepreneurs then they can be supported to lift themselves out of poverty through a change in their livelihood strategies.

 

1.1.  Progress in Enterprise Development in the Project Area

 

A recent analysis of the status of forest-based enterprises in Dolakha, Ramechhap and Okhaldhunga Districts, between 2002 and 2003, identified a total of 36 operating enterprises (Nurse and Paudel 2003). In Ramechhap alone, 14 species of Non Timber Forest Products (NTFP) were being traded in this period, of which up to 66% of the raw material supply came from community forests. Total forest based revenue was estimated as NRs 11,000,000. There is also significant trade in NTFPs as raw materials, for which data has not been collected. This trade is likely to more than double the total revenue.

 

The poor are largely involved in the collection and sale of raw materials. In parts of Nepal, up to a quarter of the total household income is derived from the sale of non-wood forest products (Malla 2000, quoted in Scherr et al 2004). Community forests are therefore making a significant contribution to rural incomes and employment through NTFP trade.

 

However, recent studies in the Project area (NSCFP 2003a, 2003b) have shown that Forest User Groups (FUGs) are currently not getting full value in commercialising their resources. More than 80% of the timber for furniture industries in Ramechhap comes from Kathmandu, because of the ‘cumbersome official procedures’ for selling timber outside the FUGs (NSCFP 2003b). Local (usually poor) people primarily benefit from forest based enterprises through employment opportunities as wages received for collection and transportation, while the FUGs are primarily receiving royalties rather than capturing the market value of the resource. Elites generally capture the benefits of products sold from Community Forests; for example, through Committee members selling timber (NSCFP 2003a). There are also concerns regarding the manner in which some NTFPs are being harvested and whether this is sustainable (Gronow et al 2003, NSCFP 2003a).

 

1.2.  Concept and prospect of pro-poor entrepreneurship

 

A new concept of enterprise development through a pro-poor entrepreneurship approach is now being tested. This is a kind of joint venture among three partners- firstly, forest user groups, similarly identified poor groups from the forest user groups separately and the private sector as a main business partner.

 

The concept recognises the limitations of previous approaches that relied on income generation and self-employment alone. These previous approaches have not resulted in significant improvement in poor peoples’ lives. If poor people are trained as entrepreneurs then they can be supported to lift themselves out of poverty through a change in their livelihood strategies, which previously relied on income from wage labour and/or the sale of raw natural products.

 

A recent analysis of enterprise development opportunities for low income producers, showed that opportunities for trade in NTFPs with high national or international demand, that have strong community organisation, few domestic substitutes and a sustainable management plan for wild resources, offered the greatest market opportunities for the poor (Scherr et al 2004).

 

Community forestry therefore offers an ideal institutional and resource base for this approach. Institutionally, FUGs that have had their poorer members identified can be externally supported for more equitable outcomes than if support is provided outside the FUG institution. This is because the elite members of the FUG are also identified and supported, so that they do not capture benefits and/or manipulate outcomes. FUGs often have rights to manage large areas of community forest and to receive full benefits from commercial sale of products. A network of FUGs provides an even larger potential resource. At the same time, the involvement of the private sector is the business, together with the forest user groups, is an additional advantage. The private sector can bring resources for investment. They have the specialised capacity to run the business and they could be efficient in taking business decisions.

 

The pro-poor entrepreneurship development model brings three types of shareholders into one enterprise. The forest user groups are the owners of raw material and they are investing their money to buy a share in the enterprise. The identified poor households’ group work in the factory and collect the raw materials. They are supported to buy their separate share from the enterprise by the forest user groups and other support organisation(s) so that they have their own shareholding as an additional benefit. As a third partner, private sectors have been investing their financial resources and business expertise. The private sector includes local existing entrepreneurs and the national traders for the market linkages.

 

1.3.  The remaining problems and way out

 

Existing enterprises, which are mostly run by outside business people, have made raw material supply unsustainable and provide only very low income to the local people. This new model brings the private sector and local communities together. The institutional setting for the enterprise development is bringing all the concerned parties together. However, it must still run business on a full scale. Examining efficiency and sustainability of such a business model by business experts (institution and individuals) is a very important first step to scale up enterprise development activities for the NTFP of Nepal. At this stage of NTFP trade and enterprise development in Nepal the following points need to be well researched prior to the formulation of greater scale initiatives for the promotion of NTFP based business for the local income, employment and forest resource management in an efficient and sustainable way.

  • Which model works best for the business of community forest resources, mainly NTFP, in Nepal? (Best Practices)
  • How should a business plan be prepared and what should it contain for the local NTFP based enterprises targeting to international buyers and market places? (Business Plan Development.)
  • What should be the marketing strategies and plan for such enterprises and how to make marketing efficient to help the poor people get more financial benefits from the business? (Marketing Strategies)

 

The proposed project is designed to answer the above questions.  Based on the findings, a large scale project will be designed for the promotion of NTFP based enterprises in Nepal. This proposal is a part of bigger programme development process to involve a team of consultants from the International Business Development Program (IBD) of the Haas School of Business, University of California, Berkeley.

 

The objective of the IBD team’s work is to obtain a clear, precise actionable set of recommendations for the above concern on enterprise development. The team will review the NTFP based enterprise sector in Nepal, the previous works and initiatives taken by Nepal Swiss Community Forestry Project (NSCFP), and national and international market situation. The joint team will come up with the clear models for the enterprise development, business plan and marketing strategies and plan. A further program and projects will be developed for the implementation of recommendations and plan.

 

2.    Activities to be undertaken

 

  • Identification, understanding, and conceptualisation of different existing and potential entrepreneurship models for the business of NTFP from the community forests (community and private partnership, private small scale, community owned, small scale poor households in a group, etc.)
  • Collection of information about the market situation of main NTFP at local, national and international levels to analyse the existing marketing patterns
  • Compile opportunities and constraints of the existing marketing system for the local enterprises focusing to local, national and international market places.
  • Develop a model business plan (after the visit to existing pro-poor enterprises) for one or two enterprise models.
  • Develop marketing strategies for the finished products targeting to the international markets
  • Implementation of business plan and marketing plan by the existing enterprises
  • Continue facilitating support to implement the recommend plans, follow up, feedback and final report on lesson learnt.

 

3.    Collaboration mechanism for the implementation of project

 

The Nepal Swiss Community Forestry Project and the Clausen Center for International Business and Policy at the Haas School of Business (HSB) at U. C. Berkeley are the two main collaborators for the implementation of this proposed SGI project. Dinesh Paudel (ELP 2004), forestry development coordinator, will lead a team of professionals from NSCFP, and Sebastian Teunissen, Executive Director at the Clausen Center for International Business and Policy at the Haas School of Business will lead the business experts for the implementation of the project.

 

4.    Connection to the summer course 2004 at Berkeley

 

This project is founded on an integration of lessons learnt and skills developed during the summer course (ELP) at Berkeley in 2004 particularly in the following broad topics:

  • Entrepreneurship and the environment, including core concepts gained at the course in leadership and management;
  • Collaborative processes;
  • Economic valuation and environmental decision making
  • Rural community development and equity
  • Community based adaptive management; and
  • Natural resources and ecosystem management.

 

5.    Expected outcomes

 

  • A clear model will be developed for the setting up of enterprises for the business of Non-timber Forest Products from the community forests in Nepal.
  • Enterprise facilitators are better informed about the model and process of setting up enterprises.
  • Selected enterprise(s) will have a clear and precise business plan which can be replicated to the wider communities.
  • Clear marketing strategies and plan will be developed for the entrepreneurial business and international trade of NTFP of Nepal

 

6.     Timeline and duration

 

The project period, with the support of SGI, is from January 2005 to October 2005

 

The IBD team, consisting of 4 consultants, will work in Berkeley from January through mid May, 2005, will continuing with their MBA studies. They will travel to Nepal on May 21, returning on June 11. They will provide preliminary reports prior to traveling to Nepal and will present their final reports and recommendations on or about June 10, 2005. Clarification and follow up will continue, from Berkeley, over the ensuing months.

 

7.    Possible risks

 

The internal conflict of the country (Maoist movement) is a main security problem in Nepal at the moment. Sometime some rural areas are blocked and stopped for the public movement. This is one of the potential associated risks for the execution of the field information collection activities. However, such longer blockades are not happening in the project sites where we will visit for the information collection. This can affect only for the field trip outside Kathmandu and if the field trips are made flexibly and shorter, then the field visit of HASS business expert in May/June 2005 can easily be adjusted. In a worst situation, all the meetings, discussions and information collection can be done in within Kathmandu. Looking at the present scenario of conflict I don’t think that such situation will come. There are not any other risks that can be foreseen now for the implementation of this project. In a bad security situation all the activities will be confined to Kathmandu and surroundings and shorten the field visits outside Kathmandu.

 

 

References

 

Gronow, Jane; Kanta Singh, Peter Branney and Govinda P. Kafley (2003). Nepal Swiss Community Forestry Project External Review –June 2003. Prepared for His Majesty’s Government of Nepal and the Swiss Agency for Development and Cooperation. SDC, PO Box 113, Kathmandu, Nepal.

 

NSCFP (2000). Project Document for Phase IV. July 2000 – June 2004. NSCFP, PO Box 113, Kathmandu, Nepal. 53 pp + X.

 

NSCFP (2001). Participatory Inventory Guidelines for Non-Timber Forest Products. Volume 1, Edition 1. Nepal Swiss Community Forestry Project, PO Box 113, Kathmandu, Nepal. , December, 2001. 74 pp.

 

NSCFP (2003a). Forest Based Enterprises and Trade Status in Dolakha District. Internal Report, NSCFP, PO Box 113, Kathmandu, Nepal.

 

NSCFP (2003b). Forest Based Enterprises and Trade Status in Ramechhap District. Internal Report, NSCFP, PO Box 113, Kathmandu, Nepal.

 

Nurse, Mike; Hem Tembe, Dinesh Paudel and Usha Dahal (in preparation). From Passive Management to Health and Wealth Creation from Nepal’s Community Forests. Experiences with the Community Forest Management School Approach in Ramechhap, Okhaldhunga and Dolakha Districts of the Middle Hills of Nepal. To be Presented at the Fourth National Community Forestry Workshop, Kathmandu,, Nepal. 4-6 August 2004. Community Forestry Division, Department of Forests, HMG/N.

 

Nurse, Mike, and Dinesh Paudel (2003). Rural Entrepreneur Development: a Pro-poor Approach to Enterprise Development through Community Forestry. NSCFP Discussion Paper 2/03, Nepal Swiss Community Forestry Project, PO Box 113, Kathmandu, Nepal

 

Pokharel, Bharat, Dinesh Paudel and Mike Nurse (in preparation). Are We Achieving FUG Sustainability? An Internal Assessment of the Nepal Swiss Community Forestry Project. Discussion Paper, NSCFP, PO Box 113, Kathmandu, Nepal.

 

Rai, Chandra Bahadur; Robin aus der Beek and Shambu Prasad Dangal (2000). Simple Participatory Forest Inventory and Data Analysis. Guidelines for the Preparation of the Forest Management Plan. Nepal Swiss Community Forestry Project, PO Box 113, Kathmandu, Nepal. 70 pp.

 

Scherr, Sara J.; Andy White and David Kaimowitz (2004). A New Agenda for Forest Conservation and Poverty Reduction. Making Markets Work for Low Income Producers. Forest Trends, Washington DC.

 

Subedi, Bhishma P.; Hemanta Ojha; Ken Nicholson and Surya B. Binayee (2002). An Assessment of Community Based Forest Enterprises in Nepal: Case Studies, Lesson and Implications. Asia Network for Sustainable Agriculture and Bioresources (ANSAB), Kathmandu, Nepal.109 pages.