Concept Paper

By Dr. Mahabir Pun

Why do we need Innovation Center in Nepal?

No developed countries in the world did get to the position they are now without giving topmost priorities for the development of science, technology, and innovation in their countries. Also, nobody can deny the fact that people are the most precious resources for the economic development of a country no matter whether it is a tiny country like Bhutan or a big country like Russia. However, the irony is that no government and political party in the 60 years’ history of modern Nepal neither practically cared about tapping the talents of its precious human resources nor gave any priority for the development of science, technology, and innovation in the country. As a result, many Nepali scientists, researchers, and innovative people left the country and are now successfully working in developed countries all over the world. The migration rate of the young Nepali innovative and creative minds has accelerated even more every year. On the other hand, the researchers, scientists, and innovators, who are still living in Nepal, have not been able to work in their capacity because of the lack of inductive environment. If a least developed country like Nepal keeps wasting and losing her creative minds in such a way, it will be very difficult to bring economic prosperity and to uplift Nepal from the list of the least developed countries to a developing country at any time in near future. This is not a sweeping statement but the fact.

The only way for keeping the precious human resources and tapping their talents for the economic development of Nepal is to involve the talented people in research and innovation activities. Therefore, there is an urgent need for the establishment of an innovation center to tap the talents and creativity of Nepali youths and scientists, to mentor their innovative ideas and help them to develop products and services for sale in the national and international market. This is the best ways to uplift Nepal from a “beggar” country to a developed country in the coming decades. As of now Nepal is one of the least developed countries and National Planning Commission of Nepal Government recently has made a vision to uplift Nepal to a developing country by 2022.

What are the vision and goals of the Innovation Center?

The single vision of the proposed innovation center is to tap the talents and creativity of innovative people and scientists in Nepal, who will otherwise be “drained” to developed countries if no initiative is taken. The goal of the center will be as follows.

  1. Utilize rich natural resources of Nepal including construction and operation of hydropower projects in an environment-friendly way to generate sustainable financial resources for the management and operation of National Innovation Center.
  2. Support transformation of Nepal into a developed nation by creating job opportunities in different national development sectors and by achieving prosperity through science, technology, and new innovations.
  3. Create a conducive environment to attract capable, innovative, research-oriented, and renowned human resources from different fields living in or outside Nepal to use innovation to achieve prosperity through economic, social, and environmental development.
  4. Provide opportunities in Nepal to innovative and intellectual talents of the country and create incentives for them not to migrate to foreign countries.
  5. Create a database of innovative knowledge and innovative personalities of Nepal.
  6. Support practical application of knowledge-based and invented technologies.
  7. Facilitate for the promotion and commercialization of the innovations.
  8. Assist for the registration of intellectual property and in seeking seed money investment for innovations.
  9. Identify and develop potential human resources for capacity building required for the development of the country in the fields such as management, arts, literature and, science and technology.
  10. Expand the usage of new technology through the transfer of technology.
  11. Assist government in policy formulation by doing study and research in the field of natural resources and the environment.
  12. Organize conferences on technology, competitions on technology and reward excellence.
  13. Encourage innovators to use information technology as far as it is possible for their work.
  14. Help twinning of educational institutions and business communities for cooperation for the economic development of Nepal.
  15. Have partnership and cooperate with national and international organizations and institutions with similar objectives.
  16. Support to and cooperate with the Government of Nepal on aforementioned similar policy and programs

How to make the innovation center autonomous and financially sustainable?

In Nepali context, the innovation center must be a fully autonomous and should be run by visionary people. If we rely upon the government grant, the bad thing that will definitely happen in Nepal is the political interferences from the political parties and bureaucratic hindrances as it is happening these days so badly. Such interferences and hindrances will not make the innovation center run autonomously, efficiently and productively. The government’s support is necessary to get a soft loan, to get hydropower survey license, and to get Power Purchase Agreement (PPA) done. Nepal Government can also provide one-time grant to pay for the equity if it deems necessary or put 30% share in the proposed hydropower project.

Thus, the wisest steps in Nepal at the present situation to start a small but very productive innovation center and make it sustainable will be to start a project that can bring cash income on a regular basis and make the center sustainable.

What is the Idea to Make Innovation Center Sustainable?

Nepal is the second richest country in the world in term of hydropower resource. Therefore, it has been concluded that the most feasible means to generate financial resource in Nepal is to build a hydropower station and sell the power to the government-owned grid line. Compared to other sources, the hydropower is the most reliable, stable and predictable source of income than any other sources for the proposed innovation center. If we build a 10 MW hydropower station and sell the power to Nepal Electricity Authority, it will bring enough money to set up the innovation center and run it. Nepal Electricity Authority owned by the government will buy the power through power purchase agreement (PPA). We have expertise in Nepal for building the hydropower station and manage it, therefore, there is no need to bring experts from abroad.

The following revenue calculation roughly shows how an innovation center will be self-sustained.  The revenues calculation is based upon the recent power purchase rate of Nepal Electricity Authority. The power purchase rate changes over time and is different according to dry and wet season.

  • Gross Income in 4 months from 10 MW (10,000 KW) during the dry season:

Income per day: 10,000KW x US$0.097 x 24 hour = US$23,280

Income in four Months (120 days): US$23,280x 120 days = US$2,793,600

  • Gross Income in 8 months from 10 MW (10,000 KW) during the wet season:

Income per day: 10,000KW x US$0.056 x 24 hours= US$13,440

Income in 8 Months (240 days): US$13,440 x 240 days = US$3,225,600

• Total Gross Income a Year =   US$2,793,600 + US$3,225,600 = US$6,019,200

There are different factors and hidden costs that will reduce the gross income. According to the hydro power experts, the approximate net income will be about 70% of the estimated total gross income.

Thus Approximate Net Income per year from 10 MW hydropower = 70% of US$6,019,200 = US$4,213,440

There will be operation and maintenance cost to make the hydro station run smoothly. Also, it is necessary to pay the principal and the annual interests of the loan taken to build the hydropower station. The tentative plan is to use 80% of the net income to pay for loan, interest, operation and maintenance cost and use 20% of the net income to establish and to run the innovation center as follows.

Amount that will be used to pay for loan, operation and maintenance = 75% of US$4,213,440 = US$3,160,080

The amount that will be available each year for the innovation center = 25% of US$4,213,440 = US$1,053,360

We prepared the rough estimate given above just to make our concept of making the center sustained. It is estimated that the loan will be paid off in seven or eight years. After the loan is paid off, about 30% of the net income will be required for operation and maintenance cost, and 20% will be kept for future development. Therefore 50% of net income, which is approx. $2,000,000 will still be available per year to run the innovation center.  This is how the innovation center will be financially self-supportive.

 

The Organizational Structure and Leading Personalities

 The project has been registered as a not-for-profit sharing private company according to the Company Act 2006 of Nepal. The name of the company is “National Innovation Center” or “Rashtriya Awiskar Kendra” in Nepali. It will run a hydropower company separately as one of its activities. All the income from the hydropower company will go to run the innovation center. The board members are not allowed to take any incentive or financial benefit from the not-for-profit sharing private company. They will not be the shareholder of the company as well.

Therefore, our present goal is to develop the company as not for profit sharing company.  The only reason we did not think about making it a public company is that if it is developed as a public company the shareholders of the company will take the dividend from the hydropower and no money will be left to run the innovation center.

However, we are flexible and opened to develop the company as a public company on PPP model if the government or private investors want to put 30% or less than 50% of share in it with the innovation center as the main partner.  The government of Nepal is positive and we are also looking for private investors either from Nepal or from abroad to make the innovation center happen. Therefore, we need angel investors for this project.

A board of directors with five members has been formed for now by taking visionary and well known action oriented personalities with proven track record of honesty, integrity, achievement as well as professionalism to guide the center in right direction. The present Board of directors are as follows.

  • Mahabir Pun – Well known Social Entrepreneur in Nepal
  • Rameshor Khanal – Well known economist and retired Secretary of Ministry of Finance, Nepal
  • Dambar Nepali – Well known hydro power expert in Nepal, who has built several hydro power stations
  • Dinesh Bhuju – Professor at Tribhuvan University and Scientist at National Academy of Science, Nepal
  • Pramod Dhakal – Non Resident Nepali & Senior Scientist in Canada now moved to Nepal and is working for the establishment of Open University

More members in the board can be inducted as needed depending upon need. A highly qualified management team will be formed to manage the center led by a Chief Executive Officer.

What are we seeking for now from the government or donor agencies or international investors?

It will not be difficult to find a mountain river and get permission from the government to build a 10 MW hydro power station. Also, highly qualified manpower is available in Nepal to build the hydropower station. The only problem we have is to find initial funding. The estimated cost for building a 10 MW hydropower station is $20 million. We are seeking for a soft loan or one time full or partial grant of $6 Million dollars (30% of the total hydro project cost) for equity from the government of Nepal or donor agencies or “angel” investors to build the 10 MW hydro power stations. If the money for the equity is received, the commercial banks will be ready to provide 70% loan for the hydropower project. We will get support from the government for getting site survey license and power production license, and for doing power purchase agreement with the Nepal Electricity Authority. It will take about 5 years to develop and complete the hydropower project if everything goes smoothly.

Thus, we are seeking support for initial investment from the government or interested groups. It is very much surprising fact that most of the donor countries or agencies, despite contributing billions of dollars over many years of time for the overall development of Nepal, did not see the need of establishing an innovation center to help Nepal keep its creative and innovative human resources for the development of Nepal. It may be because the government of Nepal did not approach the donor countries or agencies for help to build innovation centers for the development of science and technology in Nepal. Therefore, donor agencies are also welcomed very much to participate in the new endeavor and contribute for making the concept of the autonomous innovation center work in Nepal. Such support from the donor countries will certainly help Nepal to take its first step towards becoming a developing country and then to a developed country.

Conclusion:

It is clear that as long as Nepal does not give topmost priorities for the development of science, technology and innovation in the country it will always remain least developing country. Nepal will not cease to exist just because we don’t build innovation center to keep our precious human resources and to stop them from being drained to developed countries. However, Nepal will be a “paralyzed” country for sure.

There are already hydropower stations being built in Nepal by Nepal Government and private companies. The proposed hydropower project and innovation center will not be the duplication of works done by the government or private business sectors. The hydropower station will be established solely for making the innovation center sustainable. The innovation center will collaborate with Nepal Academy of Science and Technology, Tribhuvan University, Kathmandu University and other academic and research institutions in Nepal and abroad.

There is no doubt that the innovation center supported from the income of 10 MW hydropower station will have a tremendous impact on the economic and social development of Nepal in the long run. It is because the center will help to keep the creative and innovative people in Nepal and make good use of their ideas and innovation for the overall development through the creation of wealth in Nepal.

[Note: This concept paper was developed by the Executive Board of Directors of the innovation center by consulting with bureaucrats of the government and intellectual in Kathmandu Nepal. If you are interested; Contact Person: Dr. Mahabir Pun, Chairman, E-mail: mahabir@himanchal.org, Phone 977-9841592361]