Hiccups in the herbal industry

Illegal trade is a major challenge in the local herbal industry

Abhilasha Rayamajhi

Herbs have always been an indispensable part of our lives since ancient times for holistic wellbeing. They have immense healing power for almost all illnesses and increases immunity and balances overall human system. The Himalayan region of Nepal is a rich reservoir for medicinal plants and aromatic herbs that have exceptional benefits to the human body and mind. Similarly, rich bio-diversity and climatic conditions makes it possible for thousands of herbs to grow all over the country.

There are numerous herbal companies that have emerged and there are a few well-established local industries in Nepal. But the herbal industry of Nepal is dominated by foreign companies and the industry is fragmented. Despite numerous advantages of herbs and medicinal plants the herbal medicines and food supplements do not occupy significant market share. The herbal industry of Nepal struggles and faces uncountable challenges.



Illegal trade of herbs

Govinda Sharma Dhakal, Senior Pharmacist of Sighadurbar Vaidyakhana, oldest ayurvedic and herbal government owned company in Nepal run under Ministry of Health, says, “Illegal trade is a major problem in ayurvedic and herbal industry. Some of our valuable raw materials are traded illegally to India and we again have to purchase them back at a higher rate”. He adds that due to this difficulty they do not get the quality and quantity of raw materials required to manufacture standard herbal and ayurvedic products. This challenge further creates price fluctuation in the market.

Lack of standardised certification

Most of the herbal products are limited only to the local market. The Nepali food supplements and ayurvedic medicines do not get access to international markets because of certification issues. As per the industrialists, there is no institution that provides certificate of standardisation to the herbal products. Similarly, according to Abeeral Thapa, Owner of Nepal Sanjiwani Herbal Industry, “There is no proper lab in Nepal where we can certify or test our products which makes it difficult for us to export in the international market”.

Dr Pankaj Raturi, Head of Medicinal Plant Division, Dabur Nepal, says, “Herbal adulteration is one of the common malpractices in trading herbal products in Nepal. As there the laboratories in the country have limited capability to test and certify the herbs, there is a practice of mixing or substituting the original herbs with inferior and even with similar looking plants. Furthermore there are challenges with respect to storage and packaging of these herbs.”



Ambiguous legal policies

Dhakal also emphasised on the delay in operations created due to ambiguous policies and bureaucratic hurdles. He says, “The legal policies regarding allopathic and herbal products are unclear”. He adds that private herbal companies enjoy freedom in pricing and decision making. However, the government companies cannot make prompt decision which is a setback to the entire industry.

He shares, “Shringa Bhasma is an ayurvedic medicine prepared from deer horn which helps cure gastric and abdominal pain. Now, government has put a ban on trading deer horn but some private companies still manufacture and sell it”. The laws are ambiguous and strict monitoring is not in place, according to him.



Competition in the domestic market

“The market for herbal industry is limited to domestic market and competition is stiff,” says Lumesh Kumar Mishra, Marketing Manager, Gorkha Ayurved, a private joint venture. He says that it is difficult for small herbal companies to compete with giant multinational players in the market. He suggests that the government must make strict policies to support the growth and expansion of local herbal industries. Dhakal says that the government has allocated less dealer margin. Therefore, they struggle to compete with other medicinal products in the market.



Lack of technology and innovation

Foreign companies brand and package their products using advanced technologies. However, the local companies struggle in packaging and labelling as advanced technologies are yet to be introduced in Nepal. In the words of Thapa, “We have to import packaging materials from other countries as it is unavailable in the Nepali market.” He also claims that herbal companies produce similar products and lacks innovation.


Nil marketing and branding

Herbal products and food supplements of local industries are ignored by majority of the customers also because of lack of marketing and branding efforts. Mishra says, “The local herbal industries must aggressively market its products if it aims to increase its market share.” Marketers must come up with innovative ideas and strategise to promote its products. In case of herbal industries mostly traditional media has only been used to create demand.

What can be done?

Industrialists suggest that government should be clear about segregation of policies for allopathic and herbal products. Further, certification system, testing labs and research centres must be encouraged to be established. Moreover, the government should introduce policies specifically to product the local herbal industries of Nepal as per the industrialists.

According to Raturi, to ensure sustainability of the herbal industry in Nepal certain policies must be made at the governmental level outlining the norms of both herbal trade and its usage. He says, “As adulteration and substitution has become a major issue, these policies should also incorporate stringent quality control measures and requisite procedures to counter the same. Furthermore, necessary infrastructure needs to be set up in order to facilitate proper production, storage and processing of herbal products.”

(The article was published on September 6, 2015 on The Himalayan Times Perspectives, page 5, industryinsight.)


photo: plentywell.com

A man who wears different hats

“Consulting brings all my diverse interests and knowledge into one place ”


Abhilasha Rayamajhi
Kathmandu

Sohan Babu Khatri since the beginning of his career knew that 9 to 5 jobs were not for him. He understood that it would be difficult for him to work under someone and follow specific procedure. As a student he never believed in mugging up formulas, he always enjoyed deriving them. Connecting the dots and problem solving always fascinated him. He is an excellent communicator who expresses his ideas freely without being calculative.


Khatri currently spearheads Three H Management as the CEO of the company. He is a man wearing different hats and has performed all his roles to the best of his ability. He is a Licensed International Financial Analyst (LIFA) charter, an MBA in Finance and Marketing from Bangalore University, a Civil Engineer from the Institute of Engineering (IOE), Pulchowk. He is a lecturer at reputed universities in Nepal and a Technical Advisor and Consultant at a number of national and international organisations. Further, he is an avid reader and a passionate painter. He has done four painting exhibitions all for social causes.


He shares, “I am a critical thinker. I analysed even hoarding boards, their positioning and their marketing strategies.” He says that everything has a meaning and he likes to reflect on them. As a person with a management background, he felt that the modern concepts of management are not yet applied in organisations in Nepal.

“I chose consulting other organisations because I observed that management practices are quite poor in the country. Consulting brings all my diverse interest and knowledge into one place and helps organisations solve their existing or potential problems.”

Talking about his leadership technique he says he follows one grand style, “I strive to develop people along with me as they are the greatest asset of the organisation. As a leader I value the human side and to be more empathetic.” He also mentions that as a leader he focuses on the process of any work rather than the end result. He points out, “You cannot use human beings just as a tool to get your work done. I don’t even like to use the term ‘resources’ to refer to people who are working in my organisation.”

According to him, in this day and age it is irrelevant to simply delegate work and expect them to complete it just because you pay them. He adds, “Every human being has aspirations, families and societies. It is very crucial to treat human beings as human beings.” He further adds that people have short term, medium term and long term aspirations. In short term they make sure that they are compensated fairly. In the medium and long term their job enrichment, learning, challenges and growth are considered.


He questions, “Nobody can compensate people at work for the negative externalities that come with the work. For instance, how will I pay for the sacrifice for the social life that my juniours have made for working in my organisation? How will I pay for the mental and emotional burnout that person has gone through for my organisation?” He believes that he cannot put a value on these things; however he tries his best to make sure that his employees are treated right.
Lastly he concludes, “My vision is to see my organisation as a top consulting firm that works not only with the big branded businesses but also with the bottom of the pyramid.”

Khatri’s management tips
1. Have the 3 Cs (Confidence, Capability and Credibility)
2. Nothing can substitute hardwork and diligence
3. Be empathetic to employees


Three H Management at a glance


Three H Management, established in 2010, is a 360 degree professional service organisation that specialises in business/management consultancy, research and training. It thrives on solving existing and potential organisational and management related problems, issues and dilemma through innovation, better methods and the application of the best of human faculties - Head, Hand and Heart.


The core service profile of Three H consists of business management advisory and structuring, strategy formulation, planning and audit, business modeling and business plan development, financial portfolio management and restructuring, strategic brand management, policy formulations, marketing management and solutions, digital marketing solutions, commercial and social research, customised training related to various aspects of management skills, design, documentations and graphics solutions.

Photo: Samir Limbu

(The article was published on The Himalayan Times Perspectives on September 18, 2016)

(With Sohan Sir after the interview in front of one his painting..Interviewing and writing about him was a great experience.)

Don’t bank on it

BANKS FACE A STEEP UPHILL TASK TO RAISE PAID UP CAPITAL BY FOUR FOLDS IN TWO YEARS

Abhilasha Rayamajhi

Kathmandu

Nepal Rastra Bank (NRB) has directed commercial banks to raise their paid- up capital four folds to Rs eight billion with the main objective to strengthen their capital for a sound and stable economy. The minimum paid-up capital that must be maintained by commercial banks until date is two billion. The Monetary Policy for the fiscal year 2015/16 requires that capital be increased four-folds within two years.

Development banks and finance companies must also in- crease their capital requirements as per the recent policy. National-level development banks will have to raise their paid-up capital to Rs 2.5 billion, while development banks that work in four to 10 districts must raise paid-up capital to Rs 1.2 billion. Likewise, development banks that have work in one to three districts will have to increase their capital base to Rs 400 million.

AIM TO CREATE FINANCIAL STABILITY

The Governor of NRB, Chiranjibi Nepal says, “This policy aims to create a stable financial sector. We envision banks and financial institutions (BFIs) with stronger capital base that can invest in big projects and infrastructure.” He further said that investors and stakeholders are content with this decision of the central bank and even Governors of other SAARC nations are positive regarding the policy. He elaborates that BFIs had mushroomed in the past. NRB introduced this policy to control the quantity BFIs in the country. He adds, “The consolidation of BFIs will also strengthen their public image and reputation. In addition there will not be liquidity risks and the management can be innovative.”

To raise the required capital, BFIs will need to go for merger and acquisitions and issuing of right shares or bonus shares. Since NRB has also introduced regulations to allow the entry of foreign banks in Nepal, this could also be an option to raise capital. Another option is the issue of Follow on Public Offer through which shares can be issued to the public.

DIFFICULT TASK AHEAD

“The explicit purpose of this policy is to strengthen the capital base of banks for financial stability. However, it is difficult for some banks to increase paid- up capital by four folds by mid July 2017,” says Upendra Poudyal, President of Nepal Banker’s Association. He adds, “There are limited options to raise capital. NRB’s direct indication is towards mergers and acquisitions.”

Anil Shah, CEO of Mega Bank Nepal Limited says, “In order to increase paid-up capital we strategise to use more than one method of raising capital in the coming two years.”

Poudyal says the Supervision Department of NRB has actively worked towards formulation and implementation of rules to create an effective and transparent banking system and he believes that NRB is a strong regulator. Similarly Shah shares that the central bank has been an effective regulator and BFIs have followed the rules set out by NRB and the banking sector has continuously improved. All BFIs have been supportive and responsive to the policies. How- ever, according to experts the success of this policy hugely depends on effectiveness mergers and acquisitions.

THE PROBLEM WITH MERGERS

According to Poudyal the major problem that comes along with mergers is human resource and value system integration. The process of a merger is complex and must be well-planned and strategised which requires time. The strategies, vision and culture of merging institutions must have common ground.

He shares, “A merger is like a marriage between two or more institutions. If it is not planned systematically it can affect the entire economy.” Every institution has its own value system and culture. It is often difficult for human resource to adapt and adjust to the integrated organisation structure. Operational risks and failure to address each customer’s need is also a setback in a merger.

“Each and every BFI has different products and approach towards its customer. An integrated bank does not ensure financial inclusion,” he says. He further says the prime focus of every financial institution is its customers. A policy cannot be successfully implemented if the customer is not satisfied. He elaborates, “For instance, a regional bank may be providing door-to-door facilities to its customers, which might be the need of customers in that area. Now, it is not possible for larger institutions to work on a local level.”

Besides, Shah also pointed out complexity in the integration of i n f o r m a t i o n t e c h n o l o g y platforms. Each institution has incorporated different software and systems which become difficult to amalgamate.

REQUIRES REVISION

Economist Bishwamber Pyakurel says, “The monetary policy to raise paid-up capital by four times must be reviewed and revised. Escalating the paid- up capital is not the solution to

reduce the present eco- nomic problems. The monetary policy cannot operate in isolation.” He explains that there must be linkage in the mone- tary policy and fiscal poli- cy for long-term healthy growth of the overall economy.

He further clarifies, “There must be a stable lending and borrowing environment in the finan- cial system of the country for collection of such huge amounts of wealth in a limited time frame.” He adds, “There are many bureaucratic hurdles that will hinder the process of raising capital.”

MERGERS CAN FAIL

Mergers and acquisitions encourage partner- ship, synergy and open doors to opportunities. However, according to re- search, the rate of failure of mergers is at least 50 per cent. Factors such as corporate culture, capacity of the management, strategies and resources must be considered before entering into a contract of merger according to experts. The evaluation of these factors requires adequate time and such decisions cannot be made forcefully.

The central bank aims to decrease the number of BFIs and enhance financial ability. By mid July 2017 it is expected that there will be 15-20 BFIs depending upon the success of these mergers and acquisitions.

STATUS OF PAID UP CAPITAL IN COMMERCIAL BANKS AS OF JULY 2015

List of commercial banks	Current Paid up	Capital Required
		Capital (in Billions)
Agriculture Development Bank Limited	9.86	-
Rastriya Banijya Bank Limited	8.58	-
Nepal Bank Limited	6.46	1.54
Global IME Bank Limited	5.01	2.99
Nepal Investment Bank Limited	4.77	3.23
Nabil Bank Limited	3.65	4.35
Himalayan Bank Limited	3.33	4.67
Prabhu Bank Limited	3.2	4.8
Prime Commercial Bank Limited	3.14	4.86
Nepal SBI Bank Limited	3.05	4.95
Civil Bank Limited	2.88	5.12
Machhapuchhre Bank Limited	2.77	5.23
NIC Asia Bank Limited	2.65	5.35
Mega Bank Nepal Limited	2.6	5.4
Sanima Bank Limited	2.55	5.45
Kumari Bank Limited	2.43	5.57
Nepal Bangladesh Bank Limited	2.43	5.57
NMB Bank Limited	2.4	5.6
Sunrise Bank Limited	2.39	5.61
Citizen Bank International Limited	2.37	5.63
Laxmi Bank Limited	2.33	5.67
Standard Chartered Bank Limited	2.24	5.76
Everest Bank Limited	2.13	5.87
Bank of Kathmandu	2.12	5.88
Century Commercial Bank Limited	2.12	5.88
Janata Bank Nepal Limited	2.06	5.94
Siddhartha Bank Limited	2.03	5.97
Lumbini Bank Limited	2	6
Grand Bank Nepal Limited	2	6
NCC Bank Limited	2	6

				Source: Compiled

 (This article was published in The Himalayan Times Perspectives on August 30, 2015)