USAID Trade and Competitiveness Activity: Firm Performance Survey (CLIN II, Year 1)

The program supports broad-based, market-led growth and competitiveness through an integrated and sustainable market-systems approach. The Activity works towards three objectives and measures progress across two outcomes: increased competitiveness in target sectors and increased sales through upgraded capacity. The Activity conducted a Firm Performance Survey in FY 2023 under CLIN 1 to determine the effectiveness of the Activity's support through the adoption of improved practices and increases in sales of firms. The survey was conducted among firms that received support from Trade and Competitiveness to assess the business performance of the firms and gauge the extent of their recovery from the COVID-19 pandemic. The specific objectives of the survey were to better understand the types of products, services, and export destinations of the firms, document sales levels prior to the COVID-19 pandemic and at the present, and identify major issues, challenges, and opportunities perceived by firms. The survey adopted mixed methods (qualitative and quantitative) and gathered data from 44 firms using a structured questionnaire. The survey questionnaire remained active online for a week, and a total of 44 firms participated in the survey and provided responses to the questions. All the firms are export-oriented, and 14% of firms are owned and managed by women. The survey findings revealed that 50% of the firms have multiple branches within the country, 2% have branches abroad, and 48% have only one branch. 86% of the firms are SMEs and 14% are micro-enterprises. The survey findings also revealed that 91% of the firms had at least one or more women managers working in their firms. 55% of the firms are exporting agriculture commodities such as tea, 21% exporting handicrafts, 17% exporting garments, and 7% exporting other commodities. The respondents identified India, the U.S., the UK, the EU, the Middle East, Australia, Switzerland, Germany, Taiwan, Hong Kong, South Korea, China, the Czech Republic, France, Lithuania, Denmark, Canada, the Netherlands, New Zealand, Japan, Slovakia, Belgium, Italy, Spain, and Romania as export destinations. The survey results suggest that businesses have more than recovered from the COVID-19 pandemic, with a majority (77%) of firms surveyed planning to expand their businesses within Nepal as well as outside of the country. Key challenges at the firm level that are affecting firms' business performance include difficulty in accessing markets (75%), difficulty in accessing and utilizing financial services (68%), and the absence of appropriate management systems and access to digital systems (50%). There is an overwhelming interest to utilize financial services, seek expert support to improve the quality of their products and services, and expand their businesses. The survey also found that Nepal's graduation from Least Developed Country (LDC) status will affect Nepalese export both negatively and positively in several ways. The respondents identified India, the U.S., the UK, the EU, the Middle East, Australia, Switzerland, Germany, Taiwan, Hong Kong, South Korea, China, the Czech Republic, France, Lithuania, Denmark, Canada, the Netherlands, New Zealand, Japan, Slovakia, Belgium, Italy, Spain, and Romania as export destinations. The survey results demonstrate that India and Europe are the major export destinations for the firms, with 52% of the firms exporting to U.S., Europe, and Asian countries, 33% exporting to India only, and 15% exporting to several other countries excluding Europe. The survey findings also revealed that 55% of the respondents export agriculture commodities including tea, spices, herbs, essential oils, raw herbs, vegetables, ghee, oil (Chiuri and Dhatelo Oil), cardamom, ginger, turmeric, coffee, milk, and milk products. Almost two-thirds of these firms (64%) are exporting tea to India, 28% to Europe, and 10% to the U.S. 38% of respondents export handicrafts and garment products such as felt handmade products, hand-knotted woolen carpets, rugs and carpets, footwears, etc. to diverse destinations in Europe, the U.S., Asia, and Australia.