Nepal's handicraft sector, once wary of foreign investment’s impact on local businesses, has finally opened itself for foreign technology to foster innovation and improve its global competitiveness.

The Foreign Investment and Technology Transfer Act, 2019, prohibits foreign direct investment in the handicraft sector. However, it allows foreign investors to transfer technology to Nepali industries. However, the technology transfer has been dismal so far.

“We need foreign technology in two or three key sectors,” said Prachanda Shakya, President of the Federation of Handicraft Associations of Nepal (FHAN). “The metal sculpture industry alone requires technology worth millions. We also need technological support for jewellery and pashmina production to meet evolving market demands.”

The handicraft sector, particularly metal sculpture production, faces significant health and environmental challenges. The technology capable of mitigating these issues is available abroad.

Read: Nepal Exported Handicraft Products worth Rs 12 Billion in a Year: FHAN  

Shakya also noted that such a technology could enhance the quality of raw materials used in Nepal.

Lack of technological advancement in the country has hampered the  production of goods that meet international standards.

Sanam Shakya, the proprietor of Ritual Handicraft, said there was a growing interest among the entrepreneurs in the sector to adopt foreign technology. 

“In order to increase the production and export of handmade paper, technologies for refining pulp, drying paper, making cotton from naturally available fibres, and spinning yarn need to be introduced," Shakya told NBA.

While small handicraft factories and businesses may require the technology costing over Rs 10 million, for sectors such as gold-plating, technology worth Rs 40 to 50 million might be needed, industry insiders say.

Read: Stakeholders Concerned about Handicraft Business after Nepal Graduates from LDC

“Since the products undergo pesticide testing for export, the fumigation technology is being sought to meet the international standard,” added Shakya. 

Uttam Devkota, Director General of FHAN, noted that foreign technology is also being sought for the Common Facility Centre (CFC). 

“Technology is being sought to establish another CFC as it has not been possible to produce goods on the commercial scale by working from home, where space is limited,” Devkota said. “Environmental concerns have also pushed towards conducting a feasibility study for developing such a facility.”

One of the studies has suggested that such a facility could be set up in Lalitpur.

Read: Handicraft Exports to Europe Dwindle by 20 Percent   

At the same time, Bagmati Province has passed a bill to establish handicraft villages and put forward a plan to set up such a village in all 119 local levels. 

Shakya calls for the establishment of handicraft villages across the country.

According to FHAN, the handicraft sector provides direct employment to around 1.1 million people, with handicrafts worth Rs 12 billion exported annually, alongside a similar transaction domestically. 

Shakya, however, argued that only 10 percent of the sector’s potential has been utilised so far.  “To unlock the full potential, innovative international technology is essential,” he concluded.