Social Responsibility in the Growing Handmade Paper Industry of Nepal potx

Social Responsibility in the Growing Handmade
Paper Industry of Nepal
STEPHEN BIGGS
University of East Anglia, Norwich, UK
and
DON MESSERSCHMIDT
*
Independent Research Anthropologist, Pullman, USA
Summary. — 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.
1
While
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.
World Development Vol. 33, No. 11, pp. 1821–1843, 2005
Ó 2005 Elsevier Ltd. All rights reserved.
Printed in Great Britain
0305-750X/$ - see front matter
doi:10.1016/j.worlddev.2005.06.002
www.elsevier.com/locate/worlddev
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 of
globalization, and (2) criticism of Nepal’s cur-
rent development vis-a
`
-vis responsible social
and environmental practices, good governance,
rural livelihoods, poverty reduction, and gen-
der equity (‘‘second generation’’ issues).
3
The
International Labor Organization (ILO), in its
recently 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, social
security, etc. (ILO, 2004). While this picture is
true for some economic sectors, we found that
a wide range of diverse practices within the
handmade paper industry are socially inclusive,
responsible, egalitarian, and sustainable (both

in terms of continuation and environmental
resources), and these are part of policies and
institutions of good governance and civil soci-
ety. This case study shows how innovative
Nepalese actors are doing this and, because it
is a dynamic local indigenous process, why it
appears the systems are institutionally sustain-
able. (Thus, our approach stands in contrast
to institutional models transferred from else-
where, and to models that are relevant only to
the ‘‘special conditions’’ of projects and pro-
grams.) The secondary purpose of this study
is to explore these cases of positive deviance
as regards socially responsible behavior within
Nepal’s economy.
2. RESEARCH FRAMEWORK
AND METHODS
The main research framework for our explor-
atory study is an actor innovation systems
framework. There is a growing literature on
innovation systems research (Biggs & Matsaert,
1999; Douthwaite, 2002; Hall et al., 2004).
Some of this has much in common with the
growing number of studies on the ethnograph-
ies of aid agencies (Rossi, 2004; Sharma, Kopo-
nen, Gyawali, & Dixit, 2004). Our study also
touches on unique circumstances of ‘‘positive
deviance,’’ in that we have unexpectedly found
the industry to have many institutional innova-
tions of this kind (see STC, 2003; Sternin, 2002,

2003; Sternin & Choo, 2000). Major actors in
the industry were identified and key informant
interviews conducted with these actors. In
addition, secondary data on the industry were
reviewed and are given in the bibliography.
Reliable statistics on the industry are difficult
to find. This is due not only to the normal prob-
1822 WORLD DEVELOPMENT
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 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 paper
industry is growing at a rate of 15% per year,
and harvesting lokta and rural papermaking
occurs in at least 16 hill districts. It is currently
estimated that about 70% of all handmade
paper products in Nepal use lokta fiber, and
30% use cotton waste and other recycled natu-
ral fibers.
Lokta handmade paper production is a for-
est-based industry. It relies as much on a ready
supply of Daphne bark as it does on the skills

of traditional paper makers and block printers,
and on markets for end products. There are
four main steps in manufacturing the paper
and paper craft products: harvesting the lokta
bark, processing the paper pulp, producing
craft products from the finished paper, and
marketing the final products.
5
Many paper
producers follow a participatory group ap-
proach in organizing their works. Examples
are the Community Forest User Groups
(CFUGs) associated with the Malika Hand-
made Paper Enterprise in Bajhang District
and the Pandit Kamala Enterprise of Dolakha
District (Subedi, 2004). These groups have high
involvement of women, poor and disadvan-
taged members from their communities.
6
Groups form primarily on a neighborhood
basis for rural-level cutting, paper production,
stove construction, and transport, as well as
for block printing, cutting, grading, and pack-
ing at the factory. Most paper-making groups
form with little regard for caste, gender, or
ethnicity (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 local
employment of women, as men have fled vil-
lages both in fear and in search of overseas
employment mainly in India, Southeast, and
East Asia, and the Middle East.
Table 1. Phases in the recent history of the handmade paper industry in Nepal
Up to 1970s 1970s 1980s 1990s 2000s
—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
PAPER INDUSTRY OF NEPAL 1823
Table 2. Major events in the rejuvenation and growth of the Nepalese handmade paper industry
Up to 1970s 1970s 1980s 1990s 2000s
—Handmade lokta
paper making
tradition exists in
Nepal since the
12th century AD,
principally along
the trans-Himalayan
trade route through the
central hill districts
—Nepalese paper used
extensively for
government and religious

documents
—Tibetan paper imports
reduce market for
Nepalese lokta paper
(1930s+);
indigenous
handmade
paper
industry suffers
—Industrial quality
paper imports
from India further
undermine Nepal’s
lokta paper industry
—HAN established
(1972)
—Nepal tourism
industry grows,
with interest in
paper crafts
—SFDP starts in
Asia and Nepal
—ADBN named
SFDP‘‘lead agency’’
in Nepal (1975); first
projects in
agricultural and
forward and
backward linked
sectors

—Community
forestry
program starts
under the DOF
(1978)
—UNICEF project
feasibility studies
conducted (1980)
—UNICEF project
begins (1980)
—BCP established
with market
guaranteed through
UNICEF/GCO (1980)
—First SFDP loans
to rural paper
makers (1980)
—Sustainable lokta
harvesting
practices studied
(1983) and first
resource management
plans written and
implemented (1984)
—First Nepalese paper
UNICEF greeting
cards sold globally
—BCP encourages
international marketing
by private producers

—Major private lokta paper
craft company
(GPI) founded (1985)
—Japanese paper making
technology
introduced (1985)
—IFAT formed (1989)
—BCP adopts Japanese
technology (1991)
—Former BCP manager
starts private
handmade paper
company (1991)
—BCP joins IFAT (1990s)
—FTGN founded (1993) and
registered as NGO (1996)
—External evaluation
of SFDP paper
making project (1995)
—HANDPASS founded
and registered (1996)
—UNICEF temporarily
suspends orders
from BCP (1996–97)
—Nepalese paper product
NGOs and entrepreneurs
attend IFAT trade conference
in Italy (1999)
—GPI supplies Body Shop,
International, major

marketing crisis
—FTGN exhibition and workshop
on fair trade challenges and
opportunities (2000)
—FTGN issues first joint catalog
featuring handmade paper and other
handicraft products (2002)
—HANDPASS workshop on
participation in international
trade fairs (2002)
—HANDPASS and HAN training
on paper making techniques and
product development (2002)
—HANDPASS seminar with CBI
on sector marketing (2003)
—Industry lobbies for improved
regulatory process to protect lokta
resources and industry
—Estimated over 13,000
registered CFUGs
—Maoist insurgents and RNA
restrict access to the high forests;
thus, to the harvesting of lokta
resources and movement of
products/inputs
—Pilot experimentation with
Private Public Alliance (PPA) in
certification for NTFPs (2002)
—FSC accreditation award to
FECOFUN (2005)

1824 WORLD DEVELOPMENT
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) provide
community development in rural areas, primar-
ily among lokta cutters and paper makers, and
(b) reduce poverty through new employment
opportunities in the same areas. An anticipated

outcome was active involvement of poor and
marginalized groups by improving livelihoods
for small farmers and other rural lokta paper
makers, landless laborers, and the disadvan-
taged poor; developing self-reliance among
these groups by enabling them to plan and
carry out community development projects;
and adapting government and institutional
delivery mechanisms to the local needs of the
rural poor (Messerschmidt, 1988; UNICEF &
APROSC, 1981).
In addition, the project facilitated the crea-
tion of a private (quasi-governmental), Kath-
mandu-based paper craft products factory,
called Bhaktapur Craft Printers (BCP). The
BCP bought lokta paper stock produced in
rural areas and then used another indigenous
Nepalese technology, block printing, to
produce high-quality paper products for an
international market. To ensure that market,
UNICEF’s Geneva-based Greeting Cards
Operation (GCO) guaranteed to buy the prod-
uct. Paper produced by the project for greeting
cards was part of UNICEF’s Basic Services in
Local Development Program, combining eco-
nomic and community development functions
with rural and urban components to revitalize
and expand a traditional craft production pro-
cess (ADBN, 1982; UNICEF, 1980).
A key ingredient of the project’s overall

development objectives was that, in rural areas,
small-scale loans from the SFDP assisted rural
households in paper production. As handmade
paper production relies on labor-intensive tech-
nology, the project supported neighborhood
groups, mobilized by a social mobilizer called
a Group Organizer, posted to the papermaking
villages by ADBN.
8
On the urban side, BCP
bought all the highest quality handmade paper
that village participants could produce, and
converted it into greeting cards, stationary,
and the like, for sale to GCO. Twenty-five per-
cent of BCP profits reverted back to support
community development activities in the rural
sites, and social development activities among
the BCP factory employees.
When the project began in 1980, harvested
lokta resources came exclusively from the Hat-
iya Forest in Baglung District, and papermak-
ing occurred in the nearby villages of Pang
and Nanglibang in Parbat District. Eventually,
PAPER INDUSTRY OF NEPAL 1825
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 buying
the handmade paper products). Certain aspects
of the project’s initial ‘‘successes’’ are undis-
puted. The most obvious is the rejuvenation
of lokta-based handmade paper production,
followed by an increase in rural employment
and income, as well as project-supported com-
munity development initiatives such as access
to clean drinking water, sanitation facilities,

preschool teacher training, education for village
children, and development of fuel wood planta-
tions (Messerschmidt, 1988, 1995). It began as
a classic special project, which helped with the
continuing opening up of a new niche market
that, in the words of one observer, was an
opportunity for ‘‘success just waiting to hap-
pen’’ (Michael Thompson in Messerschmidt,
1995). The industry had a promising future,
embodying many of the ingredients for long
range ‘‘success,’’ including goals of poverty
reduction and improved quality of life through
community development. As we demonstrate,
however, the actual growth of the industry took
place in socially innovative ways that were, in
significant ways, quite different from the design
of the original project.
From a purely economic perspective, UNI-
CEF’s guaranteed market for lokta paper prod-
ucts might appear to be the most important
component of the project. The 1988 analysis,
however, argues that economic incentives alone
are insufficient for such a project to ‘‘succeed.’’
Instead, attention to and support of preexisting
social and cultural values in project design and
implementation, in addition to the guaranteed
market, are as important as the underlying
economic rationale for success. (In more con-
temporary terms: ‘‘culture matters’’ as much
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 (Messer-
schmidt, 1988, p. 733).
A separate impact study of the project in
1995 reaffirms these successes, pointing to the
1826 WORLD DEVELOPMENT
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 during 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) was
about US$4.25 million. While the CDHP pro-
ject and BCP concentrated exclusively on lokta
fiber for handmade paper, other firms have
concentrated on recycled fibers, such as cotton
waste and other natural fibers. Currently, it is
estimated that lokta based products make up
about 70% of handmade paper and recycled
fiber products 30%. While in the early 1980s,
BCP was the most important firm in the in-
dustry, today BCP’s contributions to the total
industrial output is small, between 5% and
10%. Today Get Paper Industries (GPI), the
largest company and the biggest exporter, uses
almost entirely recycled paper.
By one recent estimate, the industry provides
employment to 4,155 families, or about 21,000
persons, with women making up 80% of those

employed (Dangol, 2003). This may seem a
small impact on poverty in absolute numbers,
but in an industry where (typically) whole
neighborhoods or communities are involved,
it has significant local socioeconomic impacts.
While the project promoted ‘‘group’’-based
development at all stages in the handmade pa-
per value added chain, the industry has always
been characterized by diverse institutional
structures, and this diversity continues today.
In rural areas, there are private microenterprise
lokta 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 high
degree of socially responsible business practice.
We now look at three aspects of the recent
growth of the industry: (a) niche market devel-
opment, (b) growth of private and social entre-
preneurship, and (c) resource management and
sustainability.
(a) Niche market development
UNICEF helped introduce Nepalese hand-
made paper to the world through the CDHP
project, including the BCP factory and GCO,
which provided an excellent platform to adver-
tise and promote handmade paper products
internationally. At first, the global attraction
to Nepal’s handmade paper products was based

upon perceptions of an ‘‘exotic’’ handmade
craft and a culture of concern for people and
the environment—that is, humanitarianism, so-
cial responsibility, social ethics, a remarkably
high-quality product, and resource sustain-
ability. Also marketed is a touch of romantic
PAPER INDUSTRY OF NEPAL 1827
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.
11
The 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 (see Table 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 international 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 it
has also been the long-standing entrepreneur-
ship of members of local NGOs such as the
Association of Craft Producers, and other
members of the Fair Trade Group, Nepal, that
have been particularly important ( Limbu,
2002). Some of these local NGOs started pro-
ducing quality craft goods for local and inter-
national markets in the 1970s. This concern
with developing international markets is illus-
trated by the discussions on globalization and
Nepal’s accession to the WTO at a recent fair
trade conference in Katmandu in 2003 (Fair
Trade Group of Nepal—FTGN, 2003). The
handmade paper business organization called
the Nepal Handmade Paper Association
(HANDPASS) has made this a priority in its
work, and held a special industrywide market-
ing strategy workshop in 2003.
(b) Growth of private and social
entrepreneurship

During the 1990s, many private sector busi-
ness entrepreneurs, seeing the potential to
develop a growing international market for
handmade paper products, joined the paper-
making industry.
14
(The ‘‘private sector’’ here
includes both for-profit companies and NGOs.)
Included among these were two previous BCP
employees; 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 toward
employee adult education classes and a scho-
larship fund for the children of its poorest
workers. It also maintains a program for local
community development in areas where lokta
is procured. NPP is a Nepalese company that
in recent years has been awarded the Geneva-
based international ISO accreditation for high
business standards, and is a member of Global
Compact, an international alliance against the
use of child labor. NPP is, therefore, subject
to the monitoring of two international certify-
ing agencies.
Besides being one of the first private compa-
nies to be established in the growing industry,
GPI has also been a leader in social entrepre-
neurship. In 1991, GPI established an ancillary
organization called General Welfare Pratishan

(GWP), funded from 25% of the GPI’s profits;
a travel and tour agency operated to generate
income for social service activities; and (as with
other philanthropic organizations and pro-
grams) GWP receives additional funding from
1828 WORLD DEVELOPMENT
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 group
was formally registered as an NGO in 1996
and now has 13 members, including the Associ-
ation for Craft Producers (ACP), a professional
group providing design, marketing, and techni-
cal services for low income, primarily female
craft artisans. ACP maintains welfare, retire-
ment, and loan funds; counseling services; edu-
cational allowances; and medical provisions for
its employees. Although ACP was formally
established in 1984, its director of long standing
has 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’s
indigenous handicrafts. In the context of
handmade paper, mention should be made of
another FTGN member, the Women Develop-
ment Service Center of Janakpur, which was
established in 1979 to promote production
and marketing of the popular Mithila cultural
paintings 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 at

Grass Roots.’’ Mahaguthi helps over 1,000
poor and marginalized producers and artisan
groups to supply many international marketing
outlets. Another NGO is Sana Hastakala,
whose name translates as ‘‘small handicrafts.’’
Established under the auspices of the UNICEF
(independently of the CHDP Project), it assists
small, home-based handicraft producers, most
of whom are women, and provides a local
storefront outlet for many crafts including
BCP’s lokta paper products. Together, these
and other FTGN members pursue a collective
marketing strategy and publish a joint catalog
(www.peoplink.org/ftgnepal).
Some prominent international buyers require
their suppliers to abide by codes of trade con-
duct that include social and environmental
programs. Thus, fair trade and social con-
sciousness activities feature prominently in the
niche marketing strategies of many paper
product wholesalers and retailers worldwide.
18
Being part of the FTGN enables commercial
units to provide some of the socially responsi-
bly assurances. Only NGOs can be members
of the FTGN, however. Several of the major
actors in the handmade paper industry (GPI
and BCP) as well as ACP and FTGN are mem-
bers of an international fair trade organization,
the International Federation for Alternative

Trade (IFAT), established in 1989.
19
Fair trade
objectives espoused by these organizations
PAPER INDUSTRY OF NEPAL 1829
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 lists
significant 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, the
Trade Promotion Center, the Nepal Chamber

of Commerce, and the Federation of Nepalese
Chambers of Commerce and Industry. There
are also two handicraft associations: the
government-sponsored HAN, and the more
recently established private business service
organization, the HANDPASS.
The creation of HANDPASS in 1996 marked
a significant change in the overall conduct of
the industry. This business service organization
was founded to strengthen and promote hand-
made paper enterprises; by 2003, it had 32 reg-
istered members. Membership dues follow a
sliding 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
—Bhaktapur Craft
Printers (BCP)
—Fair Trade Group,
Nepal (FTGN)
—Federation of
Community
Forest Users,
Nepal (FECOFUN)
—Federation of

Nepalese Chambers
of Commerce and
Industry (FNCCI)
—General Welfare
Pratishan (GWP)
—Get Paper
Industries (GPI)
—Handicraft Association
of Nepal (HAN)
—Nepal Handmade Paper
Association (HANDPASS)
—Nepali Paper Products
P. Ltd. (NPP)
—Lotus Paper Crafts (LPC)
—Lotus Holdings (LHs)
—Asia Network for
Sustainable
Agriculture and
Bioresources (ANSAB)
—Association for Craft
Producers (ACP)
—Greeting Cards
Operation
(UNICEF/GCO)
—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
—Maoist insurgents
—Paper craft buyers
(local, global)
—Paper transport workers
—Private research firms
—Rural paper makers
—Urban factory workers
1830 WORLD DEVELOPMENT
objectives of HANDPASS include (a) develop-
ing mutual understanding 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 conducts 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.’’
20
Further 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
Other
international connections have also helped the
private industry entrepreneurs to improve their
marketing. For example, following the Lokta
production seminar, Nepal’s Trade Promotion
Center put the HANDPASS secretary in touch
with an independent European consultancy
firm, the Center for the Promotion of Imports
from Developing Countries (CBI) in The Neth-
erlands, to help the association prepare a sector
wide international marketing plan.

To some extent, there is now a ‘‘coming of
age’’ in the handmade paper industry where
there is an overriding recognition that niche
markets (international and local) have to be
developed and maintained by Nepalese social
entrepreneurs and overseas partners creating
high-quality new products and designs. This
awareness is reflected by the preoccupations
of HANDPASS, FTGN, ACP, etc., and re-
flected in the frequent articles on the handmade
paper industry in the local press and monthly
journals aimed at local expatriates, tourists,
and the Nepalese middle classes in Kathmandu
(Dhakal, 2004; Newar, 2003; Poudyal, 2004a,
2004b).
(c) Resource management and sustainability
There exists a large natural resource potential
for the lokta paper industry in Nepal. Some
manufacturers estimate that the 2003 usage of
lokta (30,000 metric tons) represents only a
small percentage of the estimated 110,000 met-
ric tons national availability. Nonetheless, in
some districts, there is evidence of diminishing
lokta 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 and
the use of wood for preparing lokta pulp, two
other aspects of resource management are of

concern to the industry. First, some members
of the industry estimate that illegal sales of
lokta across Nepal’s southern border to India
represent 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 same
region or district as lokta harvesting. Second,
the ongoing Maoist insurgency is affecting lok-
ta harvesting, with economic and poverty im-
pacts. The conflict, coupled with the Royal
Nepal Army’s strategy of pursuit and engage-
ment in remote forest tracts, has curtailed
access to lokta forests in many areas. The
PAPER INDUSTRY OF NEPAL 1831
ramifications of the conflict are many and di-
verse; for example, in Bhojpur District during
2003, nine handmade paper factories were
closed because the local administration im-
posed restrictions on caustic soda used in mak-
ing pulp, believing that the Maoist may use it
for producing explosives (Kathmandu Post,
November 29, 2003). In addition, some Maoists
have targeted the paper making industry as a
‘‘capitalist’’ enterprise, essentially driving lokta
cutters out of forests. Paper makers prefer to
operate in the rural districts as close to the
lokta source as possible, where the rural work-
force is readily available, and where transporta-
tion and storage costs are kept to a minimum.

Given the conflict, however, some papermaking
operations have sought safer, but more costly,
locations. The industry is also experiencing
declining demand for lokta products as the
tourist industry is declining due to the conflict.
Meanwhile, however, export markets continue
to expand.
Any analysis of forest resource management
needs to take into account the role of CFUGs
as emerging actors in the industry. When the
CDHP started in the early 1980s, there were
very few CFUGs. The Nepal Community
Forestry (CF) Program, which promotes user
groups, has grown phenomenally in recent
years. By 2005, there were over 13,000 regis-
tered CFUGs nationwide, an increase from
only a few hundred in the mid-1990s. Under
the CF Program, the Department of Forests
assists community groups to prepare five-year
operational plans to facilitate handing over des-
ignated local forest resources to them. In addi-
tion to the management of timber, the CF
Program has come to recognize the importance
of managing alternative forest resources (non-
timber forest products, NTFPs), including
lokta and fuel wood.
23
Where lokta falls under
the control of local forest user groups, there is
evidence that lokta resources management is

more likely to be sustainable, as CFUGs are
required to draw up and follow up resource
management plans.
In this context, HANDPASS recently ap-
proached the Federation of Community Forest
Users, Nepal (FECOFUN) to meet local group
representatives from lokta producing districts
to discuss lokta management practices by
CFUGs. The interest is high in those mid-hill
districts where lokta grows, and a number of
groups already include lokta management in
their operational plans.
24
Where forest user
groups are not working well with district forest
officers (for a range of political and other rea-
sons) or where lokta extractions is from na-
tional forests, then the issue of who has access
to lokta extraction licenses becomes highly
political and contentious. In Myagdi District,
where the BCP has been involved for many
years, the district level FECOFUN has recently
initiated proceedings against the Department of
Forests, implicating BCP in obstructing
CFUGs from marketing lokta from their for-
ests to other buyers.
25
Currently there is a widespread development
interest in the promotion of lokta and in alter-
native forest resources and other NTFPs. For

example, the Department of Small Scale Indus-
try gave trainings in collecting and making
paper to women of Baglung as part of an
alternative Energy Promotion Center and
Paper and Poverty Employment Program (Tri-
pathi, 2004). Another example of this interest
was a workshop focused on opportunities and
policy challenges for alternative forest products
in an increasingly globalized world, organized
in 2003 by the Asia Network for Sustainable
Agriculture and Bioresources (ANSAB, 2003).
This workshop complimented an earlier study
on the assessment of community based forest
enterprises in Nepal, where case studies of lokta
production were analyzed (Subedi et al., 2002).
ANSAB has coordinated a Private Public
Alliance (PPA) program to promote certifica-
tion and sustainable marketing of Nepalese
NTFPs, including lokta, while contributing to
responsible forest management in Nepal since
2002. With the pilot initiatives of PPA, the
Rainforest Alliance/SmartWood has awarded
the first Forest Stewardship Council (FSC) cer-
tification in Asia for community-based NTFP
management to the FECOFUN in January
2005 based on evidence of social, environmen-
tal, and economic sustainability. The pilot
certification includes 11 CFUGs in a certified
pool comprising about 10,500 ha of forests
land in Bajhang and Dolakha Districts. Most

of the certified CFUGs are managing lokta in
their respective community forests, and hand-
made paper manufacturing companies such as
Himalayan BioTrade and Malika Handmade
Paper, both of which promote responsible busi-
ness practices, are in the process of obtaining
the FSC Chain of Custody (CoC) certification
(ANSAB, 2005).
Recently, a major community forest project
published a study entitled ‘‘Rural Entrepreneur
Development: a Pro-poor Approach to Enter-
prise Development through Community For-
1832 WORLD DEVELOPMENT
estry.’’ Central to this and other studies by the
same agency have been concerns about how to
ensure that an equitable share of value added in
the production and marketing chain of all for-
est products went to poor people (Nurse &
Paudel, 2003; Pokharel, Nurse, & Hem Tembe,
2004). Another example of the growing interest
in this area is a large donor project designed to
provide business development services for alter-
native forest resources and products in Nepal.
While the major emphasis is on the support
for the marketing and production of herbs
and spices in Nepal with a focus on strengthen-
ing of private sector service providers, some of
its activities relate to lokta production and mar-
keting. From a social responsibility perspective,
an important dimension of this business devel-

opment service project is that one of the imple-
menting partners, LHs, brings with it a track
record of effectively developing codes of corpo-
rate social responsibly in private and NGO
operations.
26
Against a background of widespread skepti-
cism and criticism in the literature, of the abil-
ity of the Government of Nepal to facilitate
development, it appears that at the macro-
institutional and policy levels at least some of
Nepal’s existing trade policies, regulatory prac-
tices, and development projects have facili-
tated the rapid growth of the handmade paper
industry. Especially relevant and responsive
in this regard have been such government
and quasi-governmental organizations as the
Department of Small and Cottage Industries,
HAN, the Federation of Nepalese Chambers
of Commerce, and the Trade Promotion
Center. Without doubt, overall the national
community forestry policy is being effective
in improving the management of lokta for-
estry resources.
6. ANALYSIS AND DISCUSSION
(a) Social responsibility in the handmade paper
industry—a case of positive deviance
There is a growing body of literature on what
can be learned from situations of positive devi-
ance in different social arenas. In its simplest

terms ‘‘positive deviance’’ represents situations
where, by some indicators, better things are
happening than in the majority of cases (see
Buscell, 2005; Sternin, 2002, 2003; STC,
2003). Traditionally, attention has been given
to microlevel community examples, such as
investigation about why some children in a
poor community are better nourished than oth-
ers, though both live under similar socioeco-
nomic conditions. This type of investigation
has existed for many years, but it was not
always called positive deviance. For example,
the work of Tendler (1997) on good governance
in Brazil investigates how and why in a specific
region of Brazil examples exist where, by con-
temporary development indicators, good things
are happening, while neighboring regions with
similar base conditions are rife with corruption,
nepotism, and poor levels of development indi-
cators.
In Asia, Jain (1994, 1996) has investigated
managerial reasons as to why a number of large
NGO and government programs have been
successful (where others have failed). In
Bangladesh, in the early 1970s, the Ministry
of Rural Development organized a series of
investigations to search out, understand, and
write up the policy and practical implications
coming out of a wide range of positive develop-
ment situations in the field (sponsored and

unsponsored; see Yunus & Latifee, 1975). More
recently, Uphoff, Esman, and Krishna (1998)
have touched upon similar themes in their case
studies of ‘‘successes,’’ just as Messerschmidt
(1988) earlier investigated why the UNICEF
handmade paper project in Nepal was success-
ful.
In our study regarding ‘‘positive deviance’’
and ‘‘successes’’ we see some difference in ap-
proaches of the observers, and in what they
investigate and reveal. In the case of the posi-
tive deviance studies, the entry point is where
something ‘‘positive’’ or ‘‘better than average’’
is already observed and where there is no pre-
sumption that there was, or must have been,
‘‘a project,’’ ‘‘a program,’’ or ‘‘a policy’’ that
gave rise to the outcomes. In the case of many
‘‘success’’ stories, the entry point is often part
of an ‘‘outsider’s’’ development intervention
perspective of the world. For example: Why
was ‘‘the development project’’ a success? The
difference is that the question for positive devi-
ance is not about project inputs or outside
sponsorship, but about preexisting or coexis-
ting positive nonproject success stories. Focus-
ing strictly on project or program inputs,
from the outside, as the key to success can lead
to a preoccupation with the inputs, agencies,
special agendas, and ‘‘catalytic’’ actions of
intervention-minded development agents and

agencies. With positive deviance studies, how-
ever, there is no preconceived idea that an ‘‘out-
PAPER INDUSTRY OF NEPAL 1833
sider’s’’ development actions were important or
even present. Rather, positive deviance starts
with what positive behaviors are working
‘‘on the ground’’ regardless of project inputs.
Hence, it can lead to development actions that
build on the positive in the most cost-effective
and locally owned manner, with the least pro-
ject support.
When we started this investigation, we were
uncertain about what would be happening
now in the handmade paper industry. We knew
the early (1980s) history and that the industry
had grown, but we knew little about the social
aspects and outcomes of that growth, nor
whether the industry was sustainable from eco-
nomic and environmental perspectives. While
this is only an exploratory study, we argue that
there is sufficient evidence to indicate that this
is an industrywide case of positive deviance
vis-a
`
-vis all three development indicators of
environmental, economic, and socially responsi-
ble outcomes.
(i) Environmental considerations
The main resources for handmade paper are
lokta bark, cotton wastes, recycled paper or

rags, fuel wood and caustic soda or potash
for cooking the lokta bast, and dyes for adding
color. It has been established that there are very
large areas of lokta resource untapped as yet in
the Nepal Himalayas. At a maximum, it only
takes eight years to grow Daphne shrubs either
from seed or from coppicing. While there are
some reports of over-cutting coppice stock,
there are also indicators that the industry is
lobbying the government to get forest offices
to play a more proactive role in monitoring
existing regulations to maintain sustainable
lokta stocks. There is evidence, too, of viable
and well functioning and resource sustainabil-
ity-conscious community groups such as the
FSC-certified forest users groups mentioned
above. In addition, where well-managed CF
user groups do operate, the local regulation of
lokta harvesting is part of the overall resource
management plan.
Regarding the necessary fuelwood for cook-
ing the bast, there are concerns that this can
put undue pressure on local fuel wood sources.
The issue is not new (see Poudyal, Oli, & Gau-
tam, 1996); it was addressed in the CDHP pro-
ject in the early 1980s through the development
of fast-growing fuel wood lots (Messerschmidt,
1988). This is, however, an aspect of the CDHP
project that has slipped over the years. From
interviews with members of the industry, we

were told that, relatively speaking, this is now
not seen as the major issue it once was. Indus-
try representatives argue that (a) the wood
requirements of the handmade paper industry
are small compared with other demands for
wood; (b) the preferred wood fuel is from dead
or fallen trees, not green-felled timber; (c) some
commercial buyers of lokta paper are actively
promoting sustainable wood lots among their
suppliers (e.g., GPI and NPP); (d) many lokta
paper makers have begun using alternative
sources of fuel (e.g., gas, kerosene, electricity);
and (e) where effective forest user groups exist,
there are management plans that regulate fuel
wood needs for paper makers.
27
One other environmental concern relates to
the chemicals used in papermaking, including
caustic soda for processing the bast, and dyes
used for coloring some of the paper. In the
past, paper makers used potash in the bast
cooking process, but this required a consider-
able amount of fuel wood to be burned. Gener-
ally, paper makers now use caustic soda (where
possible), a chemical not considered to be a
serious environmental hazard.
Regarding dyes, Nepal has banned harmful
chemical dyes, and we found no evidence that
the handmade paper industry is violating the
law. In fact, the major commercial units in

the industry make a point of not using harmful
dyes, and HANDPASS both endorses the regu-
lations and promotes the use of natural dyes by
its members (Dhaubhadel, 2003).
There have been no reports of unexpected
negative environmental side effects because of
the use of recycled fibers, another major re-
source used by parts of the industry.
(ii) Economic considerations
As we have seen, handmade paper producers
are finding good international markets, and are
increasingly supplying the growing demand for
high-quality Nepalese craft products. Perhaps
the biggest contribution that the original pro-
ject made to the revival of the industry was
the social marketing of Nepalese handmade pa-
per Christmas cards internationally, conducted
by UNICEF. This aspect of the project has
had a profound long-term effect on the entire
industry. Since those early days of the CDHP
project, though, it has been the social entrepre-
neurs of the industry who have been most
active in attending international trade fairs,
fostering partnerships and links with estab-
lished international buyers, diversifying their
products to meet buyers’ needs, and seeking
1834 WORLD DEVELOPMENT
professional advice from international consul-
tants. One of the major goals of the HAND-
PASS has been to help its members develop

strong international markets.
From an economic perspective, it appears
that private entrepreneurs in the handmade
paper industry are very much abreast of the
challenges of developing viable international
markets. In no sense are they waiting for gov-
ernment, or anyone else, to either provide or
open up markets for them. Consequently, one
can argue that the industry has a good chance
of being economically sustainable in the future.
This appears to be the case even noting that
handmade products from Nepal are often more
expensive than comparable products from
other countries, and that Nepalese entrepre-
neurs have to compete on the basis of unique-
ness, quality, and in keeping with stringent
fair trade and socially responsible codes of
conduct.
28
(iii) Social responsibility considerations
Perhaps the most interesting features we
found in this study were the depth and diversity
of socially responsible behavior in the hand-
made paper industry. This diversity and some
of the long-term socially responsible traditions
that exist at the foundations of Nepalese society
lead us to conclude that socially responsible
behavior in the paper industry is sustainable
in Nepal well into the future.
29

We see this so-
cially responsible behavior coming from five
interrelated sources: (1) traditional community
development practices of social responsibility
and volunteerism that are deeply rooted in
Nepalese society; (2) fair trade codes of conduct
to which social entrepreneurs adhere; (3) CSR
codes of conduct arising in the private sector;
(4) agreements built into membership in
HANDPASS, the industry’s major business
association; and (5) the general policy, project,
and legal context.
(1) Traditional commitments to community
development. There is a long history in Nepal
of a commitment to socially responsible and
voluntary community development (Messer-
schmidt, Yadama, & Silwal, 2005; Yadama &
Messerschmidt, 2004). In the context of hand-
made paper industry, the largest company,
GPI, is illustrative of a viable company that ad-
heres to the IFAT codes of practice and, at the
same time channels 25% of its profits into a
community development NGO noted for its
high and long established reputation (since
1991). Similarly, BCP has IFAT accreditation
and continues to support community develop-
ment programs. NPP also has a local commu-
nity development program in areas where
lokta fiber is procured.
(2) Fair trade codes of conduct. The second

major source of socially responsible behavior
is the development of fair trade codes of
conduct. In Nepal, we have seen that these
traditions go back a long way. Currently, the
largest handmade paper company, GPI, is a
member of IFAT, as are BCP and FTGN. As
such, these organizations are monitored under
the certifying codes of conduct of IFAT. Many
of the major NGOs that market handmade
craft products, including paper products, are
members of FTGN, which has its own monitor-
ing procedures for compliance to its code of
conduct. These initiatives are related to other
social responsibility initiatives, but have and
continue to develop relatively independently.
The recent award to the FECOFUN of the first
FSC Certificate in Asia is another example of
international recognition of compliance to fair
trade principles.
(3) CSR. The third source of interest comes
from the CSR promotional work of LHs.
LHs’ special commitments to social responsibil-
ity focus largely on the rights of children, the
banning of child labor, and ensuring that chil-
dren of poor families in their employment have
access to education and medical attention. One
of the influential firms in the handmade paper
industry is LPC, a member of LHs. LHs has
also made significant inputs, both in terms
of financial assistance and moral support, to

the development of the industrywide HAND-
PASS.
(4) HANDPASS. The fourth notable feature
of social responsibility in the industry is the
nature of its major business service organiza-
tion, HANDPASS. This association was
founded in 1996 and comprises members who
are either (or both) handmade paper manufac-
turers and exporters (traders). This means, for
example, that when members attend interna-
tional trade fairs to develop markets, they are
in a position to assess both the financial and
the social responsibility implications of possible
new market developments. Many of the core
goals and objectives of HANDPASS member-
ship focus on socially responsible behavior.
These are not just ‘‘add-ons’’ to profit driven
PAPER INDUSTRY OF NEPAL 1835
entrepreneurial behavior, but are underlying
principles, illustrated by the fact that HAND-
PASS has lobbied the government to change
the tax laws in order to bring them in line with
those of most high income countries so that
funds transparently allocated to worker health,
welfare, child education, and community devel-
opment are tax deductible. It is not coincidental
that many of the organizations concerned with
social responsibility in the handmade industry
are the ones with long traditions in prompting
the rights of women and children, as the hand-

made paper industry is dominated by women
workers. HANDPASS represents a good ex-
ample of an effective, influential, and socially
responsible Nepalese ‘‘civil society’’ organiza-
tion.
To some extent, it can be argued that
HANDPASS represents an institutional inno-
vation that local actors created to address what
are now called in the forestry sector ‘‘second
generation’’ issues.
30
Significantly, HAND-
PASS was not the creation of a development
program or project, but was created by socially
responsible entrepreneurs in the industry. Its
continuing viability (which includes finding
funds to sustain its work) and its relevance to
challenges of the industry indicate that it has
developed its own ‘‘sustainable capability’’ by
being relevant and responsive in the continu-
ously changing local and international con-
texts. Many development projects would envy
such outcomes from their planned policy, pro-
gram, and project interventions.
(5) General policy and legal context. The fifth
feature of socially responsible behavior con-
cerns the government laws and regulations that
effect handmade paper activities. While in
many industries, laws and actions of the gov-
ernment are described as lacking, inadequate,

not enforced, etc., in the case of the handmade
paper industry, it appears that the legal system
is helping to create better levels of social behav-
ior. The major industries in the sector recognize
unions; the IFAT and CSR codes of conduct
are all monitored and all require that child la-
bor laws, etc., are enforced and that accounts
of companies are open for inspection, especially
as regards the tax and other business records.
One major paper making company is proud
to have received the international ISO award
for good company practice based on maintain-
ing high standards in observing labor laws and
honest business practices. Skeptics might ask to
see how these laws and codes are monitored
and compliance maintained. While we agree
these are legitimate concerns, we maintain
(based on interviews) that the existing labor leg-
islation, the various codes of conduct, and the
transparent methods for monitoring, all imply
that there is a widespread culture of social
responsibility in this industry to keep within
the legal labor and business frameworks of
the country. All the major firms welcome
‘‘unexpected’’ visits to their factories, which
reinforces our confidence that compliance to
the law and codes of conduct are being main-
tained. This makes it an industry with a differ-
ent culture than those covered under the ILO
publication cited at the beginning of this paper

(ILO, 2004).
(b) Lessons for innovation theory
and development practice
(i) Searching for the positive
We have found that the handmade paper
industry has many examples of new institu-
tional innovations that serve to improve social
indicators (jobs, working conditions, child wel-
fare, health care, etc.) in the industry. These are
effective and useful in the current political and
economic climate of Nepal. A hypothesis that
this research has lead to is that there are many
such illustrations of new institutional innova-
tions in Nepal. Subsequent to our initial re-
search on the subject, this line of research was
followed up in a major study of groups and
group-based development in Nepal. We had
no trouble finding case studies of socially
responsible and innovative processes at the
micro, meso, and macrolevels (Biggs et al., 200 4).
While many observers of Nepal’s development
and current socioeconomic and political condi-
tions concentrate on the negative, this study of
the handmade paper industry and our separate
(but related) research on positive development
group behaviors has shown that positive inno-
vations are continuously arising in Nepal and
there is a basis for building upon these exam-
ples.
31

Interestingly, no one can claim that these sus-
tainable socially responsible institutions found
in the handmade paper industry were primarily
the result of ‘‘external’’ ideas. While, yes, as
most cases of innovation, there has been and
continues to be contact with outside ideas, vir-
tually none of the institutional innovations we
have documented here (or in our group devel-
opment study) were solely the direct result of
a project, a program, or a policy.
1836 WORLD DEVELOPMENT
(ii) The degree of diversity and complexity of
institutional innovation
The handmade paper case study shows
that there is no single institutional model of
social responsible behavior. There are many
sources of innovation. We certainly do not
find that there is any one source or idea that
is being ‘‘scaled up.’’ Our confidence that so-
cially responsible behavior will continue in this
industry is based on the depth and diversity of
the organizations, management practices, and
codes of conduct that exist now, and which
are continuously changing to address the
changing social and economic contexts.
(iii) The role of the UNICEF/CHDP project
Clearly, the CDHP project played an impor-
tant role in helping to rejuvenate the handmade
paper industry, starting in the early 1980s. The
introduction of handmade paper to the world

by UNICEF, in its popular Christmas Card
series, was a remarkably successful act of social
marketing. Because the project was designed to
build upon and strengthen local institutions,
especially those of a socially responsible kind,
the project can be seen as successful in doing
just that. However, subsequent institutional
innovations, such as those needed to keep the
industry abreast of international markets and
create new socially responsible codes of con-
duct, have come not from the project staff,
but from the private and social entrepreneurs
in the larger industries and actors in the gov-
ernment.
(iv) Sources of innovation
Many people think of innovations originat-
ing from a research center, or from a project
and then being ‘‘scaled up’’ or spreading. Agri-
cultural research and extension systems often
promote this view of the world, with improved
varieties being developed in (public sector) re-
search stations, and the useful ones then being
adopted by farmers as a result of ‘‘scaling up’’
by promotional work of extension agencies.
In the case of the handmade paper industry,
we see, as regards institutional innovations,
things are far more complex than that. Yes,
there was great interaction of the industry and
with the project in the earlier years, but more
than that: the project based its management

methods at the village level on local group
practices. The design of the community
development side of the CDPH project was also
largely based on institutional structures
‘‘adopted’’ from local traditions of community
development. It was because of this sensible ap-
proach to project design that the early days of
the project were such a success. In the larger
industries, local social entrepreneurs have con-
tinued to use, and more importantly to change
and adapt these local socially responsible insti-
tutions, to changing local and international
conditions. Consequently, what we find in the
industry today, are not institutional innova-
tions emanating from the project; rather, they
are a range of innovations emerging from with-
in the wider industry. The awarding of the first
FSC certification in Asia for community-based
NTFPs to FECOFUN is just one of the recog-
nitions by an international agency of recent
local institutional innovation in Nepal.
Another observation is that these emerging
institutional innovations are not ‘‘fixed’’ or
‘‘static,’’ but are continually being changed by
social entrepreneurs to address today’s ever-
changing situations. This observation also
means that we have a completely different so-
cial process taking place compared to situations
where people speak of the ‘‘institutionaliza-
tion’’ of a new policy, or ‘‘the implementation’’

of a new set of codes of conduct, or the ‘‘scaling
up’’ of the results of a ‘‘special project,’’ or a
‘‘demonstration.’’ In this study, it has been
instructive to see that the human agency behind
socially responsible innovations came from
within Nepal. The original project was success-
ful because it was based on long established
traditions of community development and
more macro level traditions of social develop-
ment behavior (Yadama & Messerschmidt,
2004).
Concerning the source and spread of techni-
cal innovations, we saw that one of the major
technical innovations in the industry, the intro-
duction and use of Japanese technology for
processing recycled paper, was first used in
the private sector and then was adopted by
the project’s production unit, the BCP.
(v) The importance of individual personalities in
innovation processes
We have tried to avoid mentioning the spe-
cific names of individuals in this paper. We
have found, however, that the names of certain
effective persons kept on coming up. These are
individuals who are, indeed, ‘‘positive devi-
ants’’ within the larger society. Some of the
most important social entrepreneurs have
worked on being effective in this arena since
the 1970s. It is possible that while some actors
in the government and political arenas spend

PAPER INDUSTRY OF NEPAL 1837
a lifetime working their way up in an institu-
tional hierarchy, there are other individuals
who spend their lives being innovative in so-
cially responsible ways; though, of course, there
is inevitably some overlap among these groups.
7. CONCLUSION
We argue in this paper that there is a broad
range of different types of socially responsible
institutional behavior in Nepal’s handmade
paper industry. These innovations are embed-
ded in many of the long-held cultural values
of Nepalese society. The depth and diversity
of these current institutions constitutes the
robustness of such behavior in the industry.
This positive deviant behavior is in contrast
with situations where there is a high use of child
labor and lack of health facilities, etc., as in
other industries. Although this is an explor-
atory study, we feel we have presented sufficient
evidence to support our arguments. While we
all know of development projects and program
evaluations that have purposively gone out to
collect ‘‘the good news’’ in order to show that
a particular development intervention has had
a ‘‘successful’’ impact, we do not think we have
fallen into that trap. At the start of our study,
we were curious to find out what was happen-
ing in the handmade paper industry since the
first impressions of success on the UNICEF

funded CDHP project. What we encountered
were the positive indicators and processes that
we have described and analyzed here. When
asked why this is happening, we see two main
reasons: First, there is an international demand
for handmade products produced under
socially responsible conditions. In this, both
Nepalese and international social entrepreneurs
are being innovative in opening up and main-
taining markets. Second, there are Nepalese so-
cial entrepreneurs who have been committed
for years to developing business practices that
encourage this type of behavior, which leads
to continued growth of the industry.
NOTES
1. For an early review of alternative innovation theo-
ries, see Biggs and Clay (1988).Therearemany
empirically based critiques of the linear and pipeline
frameworks of agricultural and natural resources
approaches to technology gen eration and diffusion
(Biggs, 1990; Douthwaite, 2002; Gurung & Menter,
2004).
2. Details of changes in the SFDP, the creation of
Small Farmers Co-operatives, and the restructuring of
the ADB, Nepal, are given in Wehnert and Shakya
(2003) and Koch, Maharajan, Sharma, and Wehnert
(2004). As far as we know there have been no publicly
available overall long-term studies of the changes in and
outcomes of the UNICEF part of the original CDHP
project.

3. See note 30.
4. As with all ‘‘low cost’’ exploratory studies such as
this, there is a wide range of issues where critics can say
that the data presented are inadequate to support the
arguments. We accept some of these criticisms, but hope
we have provided sufficient information to sustain our
qualified findings. We purposely concentrated on the
socially responsible behavior of the units that process
the great majority of handmade paper in Nepal. A
complimentary study that needs to be done, but was
beyond our resources, is an analysis of the value added
shares in the industry that go to different social groups
such as lokta cutters, gatherers of recycled cotton and
paper waste. Such an analysis would need to be done
carefully as, for example, lokta harvesting is sometimes
conducted by villagers who are also members of local
forest users groups, handmade paper cooperatives, or
local private handmade paper enterprises.
5. Production processes are described in Trier (1972)
and Messerschmidt (1988, 1995).
6. The ‘‘group approach’’ to development in Nepal is
more thoroughly discussed in Biggs, Gurung, and
Messerschmidt (2004), and for the handmade paper
industry by Messerschmidt (1988, 1995).
7. All major acronyms used in this paper are listed in
Table 3.
8. For a recent analysis of the outcomes of social
mobilization and other components of groups based
strategies across all sectors of Nepal (see Biggs et al.,
2004).

1838 WORLD DEVELOPMENT
9. Accounts of ‘‘successful’’ project initiatives in the
rural development literature were, and remain, relatively
rare. We say ‘‘rare’’ not because ‘‘successes’’ are not
there but because quite often aid actors need ‘‘problems’’
and ‘‘failures’’ to ‘‘fix’’ in order to justify new develop-
ment initiatives. (Successes are discussed later in the
paper.) We recognize that ‘‘success’’ is in the eyes of the
beholder, and that it is a term used extensively and
selectively by various development actors wishing to
effect ongoing policy processes and development prac-
tices. An example related closely to the focus of our
study is the array of alternative views of Nepal’s
community forestry (CF) program that promotes decen-
tralized CF user groups. There are some who present the
CF program as an internationally renowned success that
has promoted true social and economic development in
Nepal’s villages. Others see it as a program that has
resulted in well-recognized improved forest manage-
ment, but at the expense of social equity, in which many
development goals are not achieved and where the social
and economic circumstances of some of the poorest and
most marginalized groups in Nepal have actually been
made worse. For a discussion of alternative perspectives,
see Biggs and Messerschmidt (2003) and Biggs et al.
(2004).
10. The overall loan and community development for
small farmers, a major underpinning of the original
project, re ached its highest point in 1995 –96, but
declined thereafter as ADBN was restructured under

an institutional development program. The responsibil-
ities of ADBN’s subproject offices (SPO), which previ-
ously organized and administered the SFDP in rural
sites, were recently transferred to the Small Farmer
Cooperative Limited (SFCL), owned and administered
by local farmers. ADBN still gives loans to lokta
producers as a normal part of the new SPO/SFCL
activities, but there is no longer a special lokta program
as there was during the early 1980s (ADBN, 2002). GCO
buys 90% of BCP’s handmade paper output, under an
exclusive contract. BCP has also searched for alternative
markets, especially since the 1996–97 season when the
GCO unexpectedly (temporarily) canceled its orders.
The privatization of BCP has also been discussed. At the
time this study was conducted in 2003–04, however,
links with UNICEF continued to dominate BCP.
11. In recent years, an alternative fiber called argeli has
also been developed for paper making, with Japanese
support. The result is basically a one-product paper,
used almost exclusively for printing Japanese paper
currency, the Yen. Argeli paper is made from a fast
growing Daphne-related shrub called Edgeworthia chry-
santha. A small argeli harvesting industry now flourishes
in Nepal but, under a special arrangement between the
two governments, the raw material is shipped from
Nepal to Japan for processing. Buyers of nonrecycled
waste products, however, prefer pure lokta-based paper
over argeli-based paper, for lokta’s greater tensile
strength and durability.
12. Japan has had a long established tradition of its

own for manufacturing handmade paper crafts using
lokta fiber-based paper, about which Nepalese produc-
ers were initially only vaguely aware. In 1985, the Japan
International Cooperation Agency (JICA) approached
the Nepal government to suggest that it introduce
Japanese technology to the Nepalese producers, and
interested Nepalese entrepreneurs were taken to Japan
for training.
13. It is interesting to note that one of the most
important technical innovations in the industry was the
adoption of new Japanese technology for recycling lokta
wastes and other fibers. In this instance, it was GPI, a
private company, that first took it up and only subse-
quently did BCP, as part of the CDHP project, adopt it.
14. There is now a broad-based industry with many
producers, traders, and buyers. In Kathmandu, some
traders have substantial stocks of handmade paper,
which helps to address problems of fluctuating supplies
of fiber.
15. Locally in Nepal, corporate ‘‘social responsibility’’
is defined to include providing education to the children
of workers, wages as per the law, and health insurance
for employees, often with concern for empowering
women. Some firms do much more in this regard. This
fits within international codes of conduct that assure the
implementation of welfare activities to company
employees and their children. The Fairtrade Foundation
(2004), for example, emphasizes social responsibility as
including offering disadvantaged workers a chance to
‘‘increase their control over their own future, have a fair

and just return for their work, continuity of income, and
decent working and living conditions through sustain-
able development’’ (Fairtrade Foundation, 2004, quoted
in Raynolds, Murray, & Taylor, 2004; see also Young,
2003). For examples of analysis of the issues involved in
drawing up and ensuring c ompliance to c odes of
conduct see Barrientos, Dolan, and Tallontire (2003)
and Nadvi (2003).
16. Several LH companies are also involved in the
woolen carpet industry, each of which follows the
voluntary global labeling initiative called ‘‘RUG-
MARK,’’ dedicated to ending child labor and providing
educational opportunities to those children who previ-
ously worked in the industry. Other Lotus-associated
companies provide conventional business services, but
always under the codes of conduct of CSR.
PAPER INDUSTRY OF NEPAL 1839
17. These figures are based on official export statistics
from HAN. These percentages would be a little lower if
the exports of BCP were included in the official statistics.
The BCP exports are not included in HAN’s figures as
BCP exports still come under a speci al U NICEF
agreement with the government of Nepal. In 2003–04,
GPI is the fastest expanding exporter.
18. For examples, see www.catgen.com/home/mguthi,
www.handmadepaperproduct.com, www.khadi.com,
www.nepalipaperproduct.com.np, www.peoplink.org/
Hastakala, www.thebodyshop.com, www.acp.org.np,
and others.
19. The Nepalese members of IFAT are FTGN, ACP,

Women’s skill Development Services, Pokhara, GPI,
and BCP.
20. The Small Industry Promotion Program (SIP-P) is
a joint project of the government of Nepal and Swiss-
contact (a Swiss NGO). The SIP-P facilitates small
industry cooperation with local chambers of commerce,
trade associations, producer groups, and service delivery
organizations for the development of selected sectors
including handicrafts. Although the seminar concen-
trated on lokta handmade paper, the meeting covered
issues related to all handmade papers.
21. Concern with quality products for international
markets has been heightened by recent problems in other
areas of Nepalese handicraft production. For example,
the popular pashmina woolen shawl industry of Nepal
has suffered from problems of overproduction and lax
quality control.
22. The lokta resource estimates are from Nepal Paper
Products (NPP), P. Ltd. Current industry concerns with
resource management are discussed in Acharya (2003).
HANDPASS has al so lobbied the Department of
Forests to consider establishing stronger measures to
further protect lokta resources at the source. Techni-
cally, the Department of Forests issues licenses to lokta
harvesters for cutting in specific areas to protect the
resource and raise revenues. The regulations are difficult
to enforce, however, especially in remote locations and
given current security concerns related to a nationwide
Maoist insurgency. Under current circumstances, it is
difficult to monitor or police them effectively.

23. ‘‘Alternative forest resources’’ or AFRs (also called
NFTPs, or ‘‘nontimber forest products’’) are defined as
forest-derived substances that serve as the raw materials
for value-added commodities production and may include
timber-based resources (Messerschmidt & Hammett,
1998). The distinction is between the raw resources and
their value-added products. For example, lokta fiber is
the forest resource from which handmade paper is
processed. Similarly, while big timber is used for
building materials and furniture, alternative timber-
based forest resources such as scraps and leftover after
milling become the raw material for making wooden
toys, tool handles, and sawdust for fuel. Other AFRs
include, for example (there are far too many to list),
babiyo grass from which a kind of rope is woven, and a
complex of forest resources called jaributi that are
refined and processed into a variety of medicinal
products.
24. For examples of user group management of lokta
resources see DOF and UNICEF (1984), Lama, Rob-
inson, and Rai (1996), Malla, Shakya, Karki, Morten-
sen, and Subedi (1999), and Shiva and Mathur (1996).
For a comprehensive early account of lokta and paper
making see Trier (1972). For details on the effective
management of lokta for the Malika Handmade Paper
Private Ltd. of Bajhang District, Nepal, see Subedi et al.
(2002, pp. 56–60). Comparatively, for problems arising
in lokta management in Parbat, one of the early CHDP
Project districts, see Subedi et al. (2002, pp. 10–13). For
an overview of community forestry in Nepal, see Biggs

and Messerschmidt (2003).
25. The license system for Daphne extraction has
favored large companies and militated against com-
munity based enterprise development engaging in the
handmade paper market independently. Often licenses
are allocated in a highly nontransparent manner. The
lokta extraction license structure, which relates to the
right to export lokta collected in national forests (and
not community forests) has in practice been used to
monopolize all exports of lokta out of districts, with the
District Forest Officer’s support. This obstructs a free
market and price competition, and also makes it difficult
for small units within the district to get an assured
supply of lokta. (Reviewer’s comments on an earlier
draft of this paper.)
26. The project is known as the BDS MaPs Project
(Business Development Services—Marketing, Produc-
tion and Services). It is led by the International
Development Enterprises (IDE) with Winrock Interna-
tional, ANSAB, Lotus Opportunities, and the World
Wildlife Fund Nepal Program as development agency
partners. It is funded by USAID and DFID.
27. In order to be totally confident that the industry is
sustainable for environmental considerations, a detailed
study of the industry would be necessary. What we are
arguing here is that there is adequate evidence that
environmental sustainability issues are being addressed
by major companies, CFUGs, and HANDPASS, the
industry’s business organization (see Subedi et al., 2002).
1840 WORLD DEVELOPMENT

28. By helping to find and develop international niche
markets, Nepalese social entrepreneurs are being ‘‘re-
warded’’ by consumers who also want to keep socially
responsible behaviors, such as not using child labor, in
the production processes.
29. For a full analysis of the social distribution of
‘‘value added’’ throughout the production and con-
sumption chain, a large and expensive study, well
beyond the scope of our exploratory study, would be
needed.
30. ‘‘Second generation’’ issues in forestry are ‘‘those
associated with the challenge of converting newly
secured forest resources int o assets for social and
economic development’’ (White & Martin, 2001, p.
24), with special attention to poverty reduction and
livelihoods enhancement, social equity and rights advo-
cacy, resource, and product marketing, and good
governance (i.e., beyond sustainable management and
resource conservation). See also Chhetri, Sigdel, and
Malla (2001) and Winrock International (2002).
31. An example of negative reporting in the handmade
paper industry is the often cited ‘‘over cropping’’ of
lokta resources. These reports in the newspapers and
sometimes in development reports, give evidence from
specific cases. While we do not dispute their information,
what is often lacking is balanced reference, including
industrywide actions that are already in practice (refer to
HANDPASS, above) and earlier references to case
studies where good practices are already in place.
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