Social Responsibility in the Growing Handmade Paper Industry of Nepal potx

Five principle sources of socially responsible practices are identified: 1 traditional commitment to community development, 2 fair trade codes of conduct, 3 corporate social responsibilit

Social Responsibility in the Growing Handmade

Paper Industry of Nepal

STEPHEN BIGGS University of East Anglia, Norwich, UK

and

Independent Research Anthropologist, Pullman, USASummary — This study examines the recent dynamics in the rapidly growing handmade paper industry in Nepal The paper argues that the industry is sustainable from social responsibility as well as natural resources and economic perspectives Five principle sources of socially responsible practices are identified: (1) traditional commitment to community development, (2) fair trade codes

of conduct, (3) corporate social responsibility, (4) the industry’s business service organization (Nepal Handmade Paper Association), and (5) the general policy and legal framework The paper concludes with a discussion of this industry as a case study of ‘‘positive deviance’’ and with lessons for contemporary innovation systems theory and for development policy and practice.

Ó 2005 Elsevier Ltd All rights reserved.

Key words — Asia, Nepal, handmade paper, fair trade, positive deviance, innovation

1 INTRODUCTION

In recent years, there has been a growing

interest in understanding the complex processes

that give rise to the emergence and spread of

technological and institutional innovations in

the agricultural, forestry, and other natural

re-sources sectors In the light of empirical

evi-dence, simplistic pipeline and linear theories

and frameworks have given way to broader

innovation system approaches, where the

behavior of actors in the broader political,

cul-tural, aid donor, trade, and economic arenas

are seen as important as any of the specific

ef-forts on the part of natural and social scientists,

who might come up with new technologies and

new research methods and institutions.1While

innovations systems approaches have long

been established as useful ways to understand

and help direct policy at the national science

and technology level (Freeman, 1987; Nelson,

1993), it is only recently that these more holistic

and politically aware frameworks are being

used in the agricultural and natural resources

* The authors gratefully acknowledge colleagues who have read and commented on this paper, including M Bhattarai, S Chitrakar, L Colavito, R.J Fisher, C Heath, D Lewis, P Maharjan, H Matsaert, M Odell,

C Richard, S Smith, J Sternin, B Subedi, and H Wedgwood Many of their suggestions have been incor- porated We also acknowledge personal (nonmonetary) assistance given during the original research (mid-1980s) and during this new study (2002–05) by officers and staff

of UNICEF’s Nepal Country Program, the Agricultural Development Bank of Nepal (ADBN), and the Small Farmer Development Program (SFDP), as well as the Bhaktapur Craft Printers (BCP), private companies, various NGOs, wholesalers, retailers, and representa- tives of the trade associations involved in Nepal’s hand- made paper and crafts production industry and, not least, the rural paper makers and urban factory workers who talked at length with us and who make this industry function so well We also acknowledge and thank the unseen reviewers whose comments were most helpful, and Liesl Messerschmidt for her insights and editorial assistance Final revision accepted: June 22, 2005.

Ó 2005 Elsevier Ltd All rights reserved.

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doi:10.1016/j.worlddev.2005.06.002

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1821

sectors (Douthwaite, 2002; Hall, Bockett,

Tay-lor, Sivamahan, & Clark, 2001) Much of the

emphasis in past innovation studies in these

sectors has been on the creation and spread of

technology per se, and not so much on

under-standing the role of different actors in processes

of institutional innovation and change In this

study, we use an innovation system approach

to investigate institutional innovation in a part

of the forestry sector—the handmade paper

industry in Nepal In particular, we go beyond

the normal concerns of the national innovation

systems approach to identify specific actors,

and to explore poverty reduction and social

inclusion dimensions As we found many

exam-ples of positive institutions (as regards

contem-porary social development indicators) in our

case study, we investigated the implications of

this in the context of the growing literature on

positive deviance (Sternin, 2002, 2003) and for

development planning and intervention in

gen-eral The period under study in this research

included a phase when a large project was

de-signed to promote the handmade paper

indus-try This allowed us to reflect on the behavior

of past development actors in influencing the

growth of the industry and their role in

influ-encing the initiation and spread of socially

responsible institutions in the industry

The main purpose of the paper is to present

the findings of an exploratory study looking

at recent social dynamics in the handmade

paper industry While two earlier studies

(Messerschmidt, 1988, 1995; New ERA, 1995)

reviewed the outcomes of the innovative

hand-made paper project described (in part) here,

this is not a ‘‘restudy’’ in the conventional

sense, as we do not analyze the recent historical

processes and outcomes of the components of

the original project.2 Rather, this is a new

study, whose primary purpose is to ask

ques-tions of the rapidly growing overall industry:

What has happened in the industry in recent

years? What are the long-term prospects of the

industry? In particular, what are the answers

to these questions when viewed from the

perspectives of resource sustainability, social

responsible institutions, and economic

sustain-ability? The paper also discusses the role of the

Community Development Through the

Produc-tion of Handmade Paper Project (CDHP

pro-ject) to help rejuvenate the industry, and what

lessons can be learnt for innovation theory

The authors felt the timing of this study was

pertinent given the current development

dis-course on: (1) the promotion of private for

profit based entrepreneurship in the context ofglobalization, and (2) criticism of Nepal’s cur-rent development vis-a`-vis responsible socialand environmental practices, good governance,rural livelihoods, poverty reduction, and gen-der equity (‘‘second generation’’ issues).3 TheInternational Labor Organization (ILO), in itsrecently released Economic Security Index,ranks Nepal at the bottom of the world scale,based on job security, income, union represen-tation, workplace safety, health care, socialsecurity, etc (ILO, 2004) While this picture istrue for some economic sectors, we found that

a wide range of diverse practices within thehandmade paper industry are socially inclusive,responsible, egalitarian, and sustainable (both

in terms of continuation and environmentalresources), and these are part of policies andinstitutions of good governance and civil soci-ety This case study shows how innovativeNepalese actors are doing this and, because it

is a dynamic local indigenous process, why itappears the systems are institutionally sustain-able (Thus, our approach stands in contrast

to institutional models transferred from where, and to models that are relevant only tothe ‘‘special conditions’’ of projects and pro-grams.) The secondary purpose of this study

else-is to explore these cases of positive deviance

as regards socially responsible behavior withinNepal’s economy

2 RESEARCH FRAMEWORKAND METHODSThe main research framework for our explor-atory study is an actor innovation systemsframework There is a growing literature oninnovation systems research (Biggs & Matsaert,1999; Douthwaite, 2002; Hall et al., 2004).Some of this has much in common with thegrowing number of studies on the ethnograph-ies of aid agencies (Rossi, 2004; Sharma, Kopo-nen, Gyawali, & Dixit, 2004) Our study alsotouches on unique circumstances of ‘‘positivedeviance,’’ in that we have unexpectedly foundthe industry to have many institutional innova-tions of this kind (seeSTC, 2003; Sternin, 2002,2003; Sternin & Choo, 2000) Major actors inthe industry were identified and key informantinterviews conducted with these actors Inaddition, secondary data on the industry werereviewed and are given in the bibliography.Reliable statistics on the industry are difficult

to find This is due not only to the normal

prob-lems of data collection, but also because it

would be very expensive to try and gather

reli-able figures on even such things as the number

of lokta paper production units actually

operat-ing at any one time, or the percentage of

hand-made paper products hand-made from lokta fiber or

from cotton waste and other natural fibers

Be-cause of this, we have tried whenever to

‘‘trian-gulate’’ our information from as many sources

as possible 4

3 HANDMADE PAPER IN NEPAL

In Nepal, handmade paper is made from the

fibers of lokta and other natural fibers Lokta is

the fibrous inner bark of the high elevation

forest shrub called Daphne bholua and Daphne

papyracea It grows gregariously and

abun-dantly on the south slopes of Nepal’s

Himala-yan forests between 1,600 and 4,000 m (c

5,250–13,000 ft) Long-lasting qualities and

resistance to insects and mildew make lokta

paper popular

Historically, lokta paper was a single purpose

product used primarily for recording

govern-ment records and religious texts Since at least

the 12th century AD, production of traditional

handmade paper has occurred at several

loca-tions in the rural hills of Nepal, most notably

the central district of Baglung As early as the

1930s, however, handmade paper production

began to decline due to paper craft imports

from Tibet By the 1960s, the traditional

Nepa-lese paper industry was virtually moribund due

to competition by mass produced paper made

by machine in India In the 1970s, before

rejuvenation of the industry began, only a few

families in Baglung and neighboring Parbat

District retained the traditional knowledge of

handmade lokta paper production (see Tables

1 and 2 for a summary of different phases in

the recent history of the Nepalese handmade

paper industry) Today the handmade paperindustry is growing at a rate of 15% per year,and harvesting lokta and rural papermakingoccurs in at least 16 hill districts It is currentlyestimated that about 70% of all handmadepaper products in Nepal use lokta fiber, and30% use cotton waste and other recycled natu-ral fibers

Lokta handmade paper production is a est-based industry It relies as much on a readysupply of Daphne bark as it does on the skills

for-of traditional paper makers and block printers,and on markets for end products There arefour main steps in manufacturing the paperand paper craft products: harvesting the loktabark, processing the paper pulp, producingcraft products from the finished paper, andmarketing the final products.5 Many paperproducers follow a participatory group ap-proach in organizing their works Examplesare the Community Forest User Groups(CFUGs) associated with the Malika Hand-made Paper Enterprise in Bajhang Districtand the Pandit Kamala Enterprise of DolakhaDistrict (Subedi, 2004) These groups have highinvolvement of women, poor and disadvan-taged members from their communities.6

Groups form primarily on a neighborhoodbasis for rural-level cutting, paper production,stove construction, and transport, as well asfor block printing, cutting, grading, and pack-ing at the factory Most paper-making groupsform with little regard for caste, gender, orethnicity (Messerschmidt, 1988, 1995) The pre-dominance of women working in this industry

is a result of Nepalese socioeconomic tradition,rather than of a conscious gender policy initia-tive Recently, the ongoing conflict and eco-nomic conditions have reinforced the localemployment of women, as men have fled vil-lages both in fear and in search of overseasemployment mainly in India, Southeast, andEast Asia, and the Middle East

Table 1 Phases in the recent history of the handmade paper industry in Nepal

—Decline of tradition, against imports of modern paper

—Revival of handmade paper making, based on tourist demand

—Rejuvenation: CDHP project implemented (UNICEF/SFDP)

—Rapid expansion industrywide

—Growth of formal commitments to social responsibility and fair trade

Interest in rejuvenating lokta craft

paper-making occurred as the tourism industry in

Ne-pal began to grow in the 1970s After a steady

decline in papermaking (in the late 1970s),

encouraging evidence of a potential

interna-tional market presented itself In this climate

of optimism for handmade paper and paper

craft products, the United Nations Children’s

Fund (UNICEF) and the Agricultural

Devel-opment Bank of Nepal/Small Farmer

Develop-ment Program (ADBN/SFDP) launched the

CDHP project in 1980 (hereafter called ‘‘the

project’’), with close government involvement

and coordination This was the first

donor-funded attempt to revive indigenous paper

making processes.7

In the late 1980s and early 1990s, with the

growth of popularity of lokta based and

re-cycled fiber products, Nepalese entrepreneurs

sought out and developed international trading

partners Currently, the Cottage Industry

Department reports 377 registered handmade

paper production industries, out of

approxi-mately 600 units operating in the country Of

these, 175 manufacture about 30,000 metric

tons of paper products each year Yet, despite

this major increase in handmade paper

produc-tion, large lokta resources remain untapped

Lokta-based handmade craft paper products

continue to offer considerable economic

sus-tainability due to their high-quality niche

mar-ket potential (Dhakal, 2004)

4 REJUVENATION OF

THE HANDMADE PAPER INDUSTRY

The early history of rejuvenation of

hand-made paper is dominated by the activities of

the UNICEF-sponsored project In 1980,

encouraged by the success of the (then) newly

created SFDP and a felt need to revive the

declining handmade paper industry in rural

Nepal, the CDHP project was launched The

goal of the project was to rejuvenate lokta

handmade paper and block-printing traditions

as an economic base for community development

The project had a rural development focus, and

its designers set out to achieve this goal by

addressing ‘‘basic needs,’’ starting ‘‘from

be-low’’ (at the local level), and using the structure

and processes of the ‘‘integrated rural

develop-ment’’ approach The assumptions and

operat-ing principles of this approach constituted

‘‘good development’’ practice at the time, the

early 1980s (Messerschmidt, 1988, 1995)

The project objectives were to (a) providecommunity development in rural areas, primar-ily among lokta cutters and paper makers, and(b) reduce poverty through new employmentopportunities in the same areas An anticipatedoutcome was active involvement of poor andmarginalized groups by improving livelihoodsfor small farmers and other rural lokta papermakers, landless laborers, and the disadvan-taged poor; developing self-reliance amongthese groups by enabling them to plan andcarry out community development projects;and adapting government and institutionaldelivery mechanisms to the local needs of therural poor (Messerschmidt, 1988; UNICEF &APROSC, 1981)

In addition, the project facilitated the tion of a private (quasi-governmental), Kath-mandu-based paper craft products factory,called Bhaktapur Craft Printers (BCP) TheBCP bought lokta paper stock produced inrural areas and then used another indigenousNepalese technology, block printing, toproduce high-quality paper products for aninternational market To ensure that market,UNICEF’s Geneva-based Greeting CardsOperation (GCO) guaranteed to buy the prod-uct Paper produced by the project for greetingcards was part of UNICEF’s Basic Services inLocal Development Program, combining eco-nomic and community development functionswith rural and urban components to revitalizeand expand a traditional craft production pro-cess (ADBN, 1982; UNICEF, 1980)

crea-A key ingredient of the project’s overalldevelopment objectives was that, in rural areas,small-scale loans from the SFDP assisted ruralhouseholds in paper production As handmadepaper production relies on labor-intensive tech-nology, the project supported neighborhoodgroups, mobilized by a social mobilizer called

a Group Organizer, posted to the papermakingvillages by ADBN.8 On the urban side, BCPbought all the highest quality handmade paperthat village participants could produce, andconverted it into greeting cards, stationary,and the like, for sale to GCO Twenty-five per-cent of BCP profits reverted back to supportcommunity development activities in the ruralsites, and social development activities amongthe BCP factory employees

When the project began in 1980, harvestedlokta resources came exclusively from the Hat-iya Forest in Baglung District, and papermak-ing occurred in the nearby villages of Pangand Nanglibang in Parbat District Eventually,

the project expanded to include lokta cutters

and paper makers in nearby Myagdi and

Lamjung Districts Prior to implementation,

UNICEF engaged a team of forest scientists

to study lokta ecology and growth in order

to inform project administrators and rural

participants of the most sustainable resource

management and harvesting techniques They

recommended specific strategies, such as

rota-tional cutting, and care in cutting stems (for

effective coppicing), and conducted training

with cutters and paper makers The project staff

also established small wood lots as sources of

fuel on which to cook the lokta pulp (called

‘‘bast’’), to make paper In some areas, forest

officers and CFUGs continue to follow those

comprehensive resource management

guide-lines today for lokta preservation (Acharya,

2003; Development Associates, 1997)

How-ever, even in some of the BCP areas of Parbat,

the guidelines for lokta maintenance are not

kept to (Subedi, Ojha, Nicholson, & Binayee,

2002, pp 10–13) Lokta resource sustainability

remains a high priority concern within the lokta

craft industry Sustainable harvesting, however,

is no longer considered to be a major long-term

technical problem, for even when over

har-vested, lokta coppice and new growth from

seed are ready for harvest within 8–10 years

Several studies of the project are important

to be mentioned here to provide historical

background and analysis, and a basis to

de-scribe other entrepreneurial activities within

the industry but outside of the CDHP project

The first study by Messerschmidt, entitled

‘‘Success in small farmer development:

Paper-making at Pang and Nanglibang, Nepal,’’

ap-peared in World Development in 1988 (revised

and reprinted in 1995) The 1988 study provides

a history of the SFDP, the basic program upon

which the project was set up, outlining its

insti-tutional style, structure, and functions That

study also described local sociocultural

tradi-tions, leading to the inception of the CDHP

project The important catalytic role of local

Group Organizers is noted, and the project’s

use of indigenous approaches, technologies,

and natural and human resources that enhance

rural family welfare are detailed The article

concludes with a discussion and observation

about what makes such forms of rural

develop-ment ‘‘successful,’’ including a comparison of

project assumptions and practices with

devel-opment thinking of the time 9

Here was a project that appeared to be viable

ecologically, socioculturally, and economically

(as long as UNICEF’s GCO continued buyingthe handmade paper products) Certain aspects

of the project’s initial ‘‘successes’’ are puted The most obvious is the rejuvenation

undis-of lokta-based handmade paper production,followed by an increase in rural employmentand income, as well as project-supported com-munity development initiatives such as access

to clean drinking water, sanitation facilities,preschool teacher training, education for villagechildren, and development of fuel wood planta-tions (Messerschmidt, 1988, 1995) It began as

a classic special project, which helped with thecontinuing opening up of a new niche marketthat, in the words of one observer, was anopportunity for ‘‘success just waiting to hap-pen’’ (Michael Thompson in Messerschmidt,

1995) The industry had a promising future,embodying many of the ingredients for longrange ‘‘success,’’ including goals of povertyreduction and improved quality of life throughcommunity development As we demonstrate,however, the actual growth of the industry tookplace in socially innovative ways that were, insignificant ways, quite different from the design

of the original project

From a purely economic perspective, CEF’s guaranteed market for lokta paper prod-ucts might appear to be the most importantcomponent of the project The 1988 analysis,however, argues that economic incentives aloneare insufficient for such a project to ‘‘succeed.’’Instead, attention to and support of preexistingsocial and cultural values in project design andimplementation, in addition to the guaranteedmarket, are as important as the underlyingeconomic rationale for success (In more con-temporary terms: ‘‘culture matters’’ as much

UNI-as economics; see Harrison & Huntington,

2000.) The 1988 article concludes:

Indications of success in human terms can be seen in participants’ dedication to project goals because, in part, the project is based on local technological tradi- tion, the proud renewal of the ancient craft of paper- making Success is also seen in the enthusiasm expressed as the people’s traditional knowledge is used by developers to solve project problems And, not least, it is evident in the strength of project work groups and of the style of leadership that developers established based on the simple logic of [adapting] the local social structure [Thus] project design and evaluation require early attention to variables

in the local socio-cultural environment ( schmidt, 1988, p 733 ).

Messer-A separate impact study of the project in

1995 reaffirms these successes, pointing to the

sustainable human development derived from

the initial objectives and activities, including:

.reviving traditional culture and skill, promoting

labor-intensive technology, providing employment

and income and thereby supporting the lives of

thou-sands of poor families, halting the accelerating trends

of migration, supporting development of children

and women, earning foreign currency, and more

importantly, providing basic services in the areas of

health, child care, water, education and sanitation

that affect the entire community ( New ERA, 1995,

p viii ).

Today the project activities continue in

atten-uated fashion, producing paper in the districts,

manufacturing paper crafts through BCP, and

channeling a percentage of the profits back to

community development in the rural districts

Current activities still reflect many of the initial

objectives (though UNICEF no longer funds it,

and SFDP has been restructured) BCP still

relies on lokta paper from rural villages, and

almost exclusively on its market contract with

GCO Until recently, UNICEF was closely

involved in advising BCP on management of

the project’s community development funds

Some of the original rural community

develop-ment objectives, however, have been difficult to

implement, and should GCO discontinue

buy-ing paper (as it did briefly durbuy-ing 1996–97),

BCP in its present form will face serious

prob-lems.10

The earlier assessments of the CDHP project

show what promotion of indigenous technical

knowledge in rural areas can achieve when

the designers are aware of and build on existing

socially responsible behavior The project was a

success, because its planners and implementers

built upon cultural values that already existed

Interestingly, as we shall now discuss, it

ap-pears that developments in the industry

rein-force this earlier conclusion for development

planners

5 RECENT GROWTH OF

THE INDUSTRY

The recent growth of the handmade paper

industry has been remarkable From a state

of a decline in the 1970s, it has been, until

recently, a rapidly growing industry During

1998–2004, the average yearly expansion rate

was 22% This figure began to decline, however,

in 2003–04, to 10% In 2003–04, according to

official statistics from the Handicraft

Associa-tion of Nepal (HAN), the export of handmade

paper products (the great majority of sales) wasabout US$4.25 million While the CDHP pro-ject and BCP concentrated exclusively on loktafiber for handmade paper, other firms haveconcentrated on recycled fibers, such as cottonwaste and other natural fibers Currently, it isestimated that lokta based products make upabout 70% of handmade paper and recycledfiber products 30% While in the early 1980s,BCP was the most important firm in the in-dustry, today BCP’s contributions to the totalindustrial output is small, between 5% and10% Today Get Paper Industries (GPI), thelargest company and the biggest exporter, usesalmost entirely recycled paper

By one recent estimate, the industry providesemployment to 4,155 families, or about 21,000persons, with women making up 80% of thoseemployed (Dangol, 2003) This may seem asmall impact on poverty in absolute numbers,but in an industry where (typically) wholeneighborhoods or communities are involved,

it has significant local socioeconomic impacts.While the project promoted ‘‘group’’-baseddevelopment at all stages in the handmade pa-per value added chain, the industry has alwaysbeen characterized by diverse institutionalstructures, and this diversity continues today

In rural areas, there are private microenterpriselokta producing units as well as community-based units However, most of the paper man-ufacturing companies are private enterprises(including nongovernmental organizations—NGOs) where, as we point out, there is a highdegree of socially responsible business practice

We now look at three aspects of the recentgrowth of the industry: (a) niche market devel-opment, (b) growth of private and social entre-preneurship, and (c) resource management andsustainability

(a) Niche market developmentUNICEF helped introduce Nepalese hand-made paper to the world through the CDHPproject, including the BCP factory and GCO,which provided an excellent platform to adver-tise and promote handmade paper productsinternationally At first, the global attraction

to Nepal’s handmade paper products was basedupon perceptions of an ‘‘exotic’’ handmadecraft and a culture of concern for people andthe environment—that is, humanitarianism, so-cial responsibility, social ethics, a remarkablyhigh-quality product, and resource sustain-ability Also marketed is a touch of romantic

idealism, by identifying lokta products as part

of an ‘‘age-old ethnic folk tradition’’ from the

‘‘remote’’ Himalayas This attraction continues

to be promoted by many private and NGOs

producing lokta paper in Nepal ‘‘Handmade

in Nepal’’ has become an international sales

slogan, and social and environmental

con-sciousness is part of the industry image The

result is a socially responsible, resource

sustain-ing industry

Handmade paper manufacturers in Nepal

stress two main features about their product:

First, paper is handmade following traditional

production technology, and produced from

pure lokta grown sustainably Second, the

industry also produces paper from other fibers,

recycled paper, fabric, etc.11The expansion to

other paper stock began in 1985, with the

intro-duction of a Japanese technology that employs

energy and resource-efficient factory methods

with labor-intensive handmade craft

produc-tion A key aspect of the Japanese technology

is a method of recycling and reusing lokta

paper trimmings and the use of cotton waste

and other recycled fibers.12 General Paper

Industries (now known as Get Paper Industries,

or GPI, founded in 1985), was the first to adopt

the new Japanese technology (seeTable 2) GPI

was Nepal’s first major private handmade

paper making company, and began by using

BCP’s lokta scraps as raw material, purchased

at the market price GPI continued to buy

BCP’s scrap lokta until 1991, when BCP itself

adopted the Japanese recycling technology

and scrap lokta was no longer available for

sale.13 Meanwhile, GPI expanded into

non-lokta recycled handmade paper products made

from waste papers and recycled cotton, which

soon dominated its product line The

explora-tion and development of internaexplora-tional niche

markets for handmade paper has been led by

the private/NGO sector

For example, Lewis (1998)describes how in

the early 1990s, Body Shop International

(BSI) had encouraged GPI’s rapid expansion

by taking a large percentage of GPI’s output

This created an overdependence on BSI so that

when the market shifted, GPS was left without

other buyers The implications and outcomes

were difficult for both partners However, it

led to BSI working with GPI to develop a

suc-cessful diversification strategy for both local

and international markets Now GPI is the

largest firm in the industry with about 30% of

all handmade paper export sales On the

devel-opment of international niche markets for

handmade paper and other craft products ithas also been the long-standing entrepreneur-ship of members of local NGOs such as theAssociation of Craft Producers, and othermembers of the Fair Trade Group, Nepal, thathave been particularly important (Limbu,

2002) Some of these local NGOs started ducing quality craft goods for local and inter-national markets in the 1970s This concernwith developing international markets is illus-trated by the discussions on globalization andNepal’s accession to the WTO at a recent fairtrade conference in Katmandu in 2003 (FairTrade Group of Nepal—FTGN, 2003) Thehandmade paper business organization calledthe Nepal Handmade Paper Association(HANDPASS) has made this a priority in itswork, and held a special industrywide market-ing strategy workshop in 2003

pro-(b) Growth of private and socialentrepreneurshipDuring the 1990s, many private sector busi-ness entrepreneurs, seeing the potential todevelop a growing international market forhandmade paper products, joined the paper-making industry.14(The ‘‘private sector’’ hereincludes both for-profit companies and NGOs.)Included among these were two previous BCPemployees; one had been a BCP previous gen-eral manager and one a technician Together,they founded Nepali Paper Products P Ltd.(NPP) in 1991 NPP allocates funds towardemployee adult education classes and a scho-larship fund for the children of its poorestworkers It also maintains a program for localcommunity development in areas where lokta

is procured NPP is a Nepalese company that

in recent years has been awarded the based international ISO accreditation for highbusiness standards, and is a member of GlobalCompact, an international alliance against theuse of child labor NPP is, therefore, subject

Geneva-to the moniGeneva-toring of two international ing agencies

certify-Besides being one of the first private nies to be established in the growing industry,GPI has also been a leader in social entrepre-neurship In 1991, GPI established an ancillaryorganization called General Welfare Pratishan(GWP), funded from 25% of the GPI’s profits;

compa-a trcompa-avel compa-and tour compa-agency opercompa-ated to genercompa-ateincome for social service activities; and (as withother philanthropic organizations and pro-grams) GWP receives additional funding from

international agencies, foundations, and NGO

grants GWP also renovates and builds schools,

provides scholarships to disadvantaged girls,

supports HIV/AIDS awareness among

vulner-able groups throughout Nepal, and maintains

a tree plantation program (Bhattarai, 1994)

GPI is a member of the Federation for

Alterna-tive Trade and is monitored under its code of

conduct Another influential firm in the

indus-try as regards promoting social responsibility

in business is Lotus Paper Crafts (LPC),15

which was formed in the early 1990s Its

man-ager came from an engineering background,

with no previous experience of the handmade

paper industry The company is dedicated to

producing high-quality lokta-based handmade

paper products for an international market

LPC comes under the umbrella of Lotus

Hold-ings (LHs), which provides financial and social

services to 11 associate companies LHs

ac-tively promotes corporate social responsibility

(CSR) in private business LPC was founded

in 1998 by its associate members who had been

pursuing socially responsible behavior in

busi-ness for many years Like all other associates

of LHs, LPC signs a Social Code of Conduct

under which it provides education and day-care

services to the children of employee families, as

well as health insurance and fair wages (as per

the law) to the workers LHs also supports a

Nepalese NGO called ‘‘Hoste Hainse,’’ which

is assigned to independently administer

em-ployee benefits, and provide regular,

inde-pendent, transparent, and publicly available

social audits of all LHs companies.16

GPI and NPP dominate the industry, each of

which contributed about 27% to the total

offi-cial export figures for Nepal in 2001–02.17

Their major markets are in the United States,

United Kingdom, France, and Japan Besides

the export market, some producers and buyers

supply a steady tourist and local Nepalese

mid-dle class market in Kathmandu and other

urban areas, as well as links to Internet-based

international markets Their web sites

pro-vide international access to Nepalese paper

products, information about traditional

manu-facturing techniques, and description of

associ-ated social programs and assistance to workers’

communities

Closely allied to these expressions of social

responsibility by major companies is the paper

industry’s current concerns with fair trade

eth-ics Several of the larger NGOs manufacturing

handmade paper products belong to FTGN

This was formed in 1993 by a group of seven

like-minded social entrepreneurs This groupwas formally registered as an NGO in 1996and now has 13 members, including the Associ-ation for Craft Producers (ACP), a professionalgroup providing design, marketing, and techni-cal services for low income, primarily femalecraft artisans ACP maintains welfare, retire-ment, and loan funds; counseling services; edu-cational allowances; and medical provisions forits employees Although ACP was formallyestablished in 1984, its director of long standinghas been active in ‘‘socially oriented commer-cially viable enterprises’’ since the mid 1970s(Limbu, 2002) Like many of the FTGN mem-ber, ACP is committed to the revival of Nepal’sindigenous handicrafts In the context ofhandmade paper, mention should be made ofanother FTGN member, the Women Develop-ment Service Center of Janakpur, which wasestablished in 1979 to promote productionand marketing of the popular Mithila culturalpaintings on handmade paper

Mahaguthi, one of Nepal’s oldest NGOs,also belongs to FTGN It goes by the mottoes:

‘‘Crafts with a Conscience’’ and ‘‘Fair Trade atGrass Roots.’’ Mahaguthi helps over 1,000poor and marginalized producers and artisangroups to supply many international marketingoutlets Another NGO is Sana Hastakala,whose name translates as ‘‘small handicrafts.’’Established under the auspices of the UNICEF(independently of the CHDP Project), it assistssmall, home-based handicraft producers, most

of whom are women, and provides a localstorefront outlet for many crafts includingBCP’s lokta paper products Together, theseand other FTGN members pursue a collectivemarketing strategy and publish a joint catalog(www.peoplink.org/ftgnepal)

Some prominent international buyers requiretheir suppliers to abide by codes of trade con-duct that include social and environmentalprograms Thus, fair trade and social con-sciousness activities feature prominently in theniche marketing strategies of many paperproduct wholesalers and retailers worldwide.18

Being part of the FTGN enables commercialunits to provide some of the socially responsi-bly assurances Only NGOs can be members

of the FTGN, however Several of the majoractors in the handmade paper industry (GPIand BCP) as well as ACP and FTGN are mem-bers of an international fair trade organization,the International Federation for AlternativeTrade (IFAT), established in 1989.19Fair tradeobjectives espoused by these organizations

include (a) working with low income and

marginalized producers (mainly women); (b)

supporting ethical work place practices; (c)

pro-moting safe working conditions, equal

employ-ment opportunities, and concern for workers’

health and quality of life; (d) respecting

work-ers’ cultural and ethnic identities; (e) providing

educational facilities and programs; and (f)

maintaining the environment to assure a

sus-tainable resource base and continued

employ-ment (see www.ifat.org; NRI, 1998) FTGN

administers the code of conduct procedures

for IFAT

As the industry further expanded during the

1990s and early 2000s, a number of government

and international agencies, private sector

orga-nizations, and associations have become

in-volved They serve such functions as the

regulation of employment practices, quality

control, fair trade, and export (Table 3 listssignificant actors and how they were instrumen-tal in the industry at different points in time.)These include the Nepal government’s Depart-ment of Small and Cottage Industries, theTrade Promotion Center, the Nepal Chamber

of Commerce, and the Federation of NepaleseChambers of Commerce and Industry Thereare also two handicraft associations: thegovernment-sponsored HAN, and the morerecently established private business serviceorganization, the HANDPASS

The creation of HANDPASS in 1996 marked

a significant change in the overall conduct ofthe industry This business service organizationwas founded to strengthen and promote hand-made paper enterprises; by 2003, it had 32 reg-istered members Membership dues follow asliding scale based on ability to pay The main

Table 3 Main actors in Nepal’s handmade paper making innovation system Private firms, NGOs

and associations

International agencies and associations

Nepal government agencies

Local and other

—International Federation for Alternative Trade (IFAT)

—Japan International Cooperation Agency (JICA)

—Small Industry Promotion Program (SIP-P)

—UNICEF/Nepal

—Community Development Through the Production of Handmade Paper Project (CDHP)

—Body Shop, International (BSI)

—Forest Stewardship Council (FSC)

—Agricultural Development Bank/Nepal-Small Farmer Development Program (ADBN/SFDP)

—Department of Forest Research and Survey (DFRS)

—Department of Forests (DOFs)

—Department of Small and Cottage Industries (DSCI)

—Nepal Tourism Board (NTB)

—Royal Nepal Army (RNA)

—Trade Promotion Center (TPC)

—Community Forest User Groups (CFUGs)

—Cookstove makers

—Lokta harvesters and porters

—Rural paper makers

—Urban factory workers

objectives of HANDPASS include (a)

develop-ing mutual understanddevelop-ing and fraternity among

the handmade paper production groups and

product manufacturers; (b) promoting paper

making enterprises in rural areas, and

improv-ing the lifestyle of low income communities;

(c) ensuring that the handmade paper making

industry continues to be an environmentally

sustainable and socially desirable enterprise;

(d) helping paper manufacturers in product

development and marketing, as well as in skill

enhancement; and (e) promoting handmade

pa-per as one of Nepal’s leading export

commo-dities The association assists rural and urban

paper makers, craft producers, exporters, and

product sellers by providing information,

consulting services, and technical advice in

order to assure maintenance of paper and

pro-duct quality It conpro-ducts workshops, seminars,

training programs, and exhibitions; carries out

market surveys and research; and publishes

bulletins, a newsletter, and other informative

materials It also lobbies government on

indus-try concerns and serves (informally) to monitor

the industry HANDPASS is mainly sustained

by receiving 1% of the levee imposed on the

export of handmade product by the HAN

HAN, founded in 1972, also plays an

impor-tant role in industrial development, not only of

handmade paper but also in all handicraft

sec-tors It serves as a government business

certifi-cation agency; conducts technical trainings,

workshops, and seminars; provides members

with information on trade and export policy;

publishes promotional materials; and sponsors

trade missions, exhibitions, and craft

competi-tions Financing comes from a small tax on

the sales of its members In 2003–04, the

US$4.24 value of handmade paper products

made up about 10% of the total exports of

handicraft goods (US$36.22 million) under

HAN

In 2003, HANDPASS and HAN, with the

support of the Swiss/Nepal Small Industries

Promotion Program, organized a two-day

sem-inar on ‘‘Lokta Production and Handmade

Paper Making in Nepal: Problems and Way

Out.’’20Further development of international

markets was a main discussion point While

many private companies and NGOs have been

innovative in investing in new product designs,

and seeking out new niche markets, several

smaller producers are simply producing inferior

copies This issue is now under discussion

among HANDPASS members, who are

provid-ing support and advice to businesses to

encour-age more creativity in the industry.21 Otherinternational connections have also helped theprivate industry entrepreneurs to improve theirmarketing For example, following the Loktaproduction seminar, Nepal’s Trade PromotionCenter put the HANDPASS secretary in touchwith an independent European consultancyfirm, the Center for the Promotion of Importsfrom Developing Countries (CBI) in The Neth-erlands, to help the association prepare a sectorwide international marketing plan

To some extent, there is now a ‘‘coming ofage’’ in the handmade paper industry wherethere is an overriding recognition that nichemarkets (international and local) have to bedeveloped and maintained by Nepalese socialentrepreneurs and overseas partners creatinghigh-quality new products and designs Thisawareness is reflected by the preoccupations

of HANDPASS, FTGN, ACP, etc., and flected in the frequent articles on the handmadepaper industry in the local press and monthlyjournals aimed at local expatriates, tourists,and the Nepalese middle classes in Kathmandu(Dhakal, 2004; Newar, 2003; Poudyal, 2004a,2004b)

re-(c) Resource management and sustainabilityThere exists a large natural resource potentialfor the lokta paper industry in Nepal Somemanufacturers estimate that the 2003 usage oflokta (30,000 metric tons) represents only asmall percentage of the estimated 110,000 met-ric tons national availability Nonetheless, insome districts, there is evidence of diminishinglokta resource due to over harvesting (see

Acharya, 2003; Poudyal, 2004a, 2004b; RSS,2002; Subedi et al., 2002, pp 10–13).22

In addition to lokta harvesting practices andthe use of wood for preparing lokta pulp, twoother aspects of resource management are ofconcern to the industry First, some members

of the industry estimate that illegal sales oflokta across Nepal’s southern border to Indiarepresent up to 10% of the yearly harvest.HANDPASS is working with government offi-cials to improve the regulatory system and en-sure that paper production occurs in the sameregion or district as lokta harvesting Second,the ongoing Maoist insurgency is affecting lok-

ta harvesting, with economic and poverty pacts The conflict, coupled with the RoyalNepal Army’s strategy of pursuit and engage-ment in remote forest tracts, has curtailedaccess to lokta forests in many areas The