Table 9. Number of enterprises located in Province 2 by focus sector, 2018

The number of enterprises in Province 2 by focus sector as of 2018 is outlined in Table 9. Percentage share of the province to total number of enterprises was less than 10% except for manufacturing. The relatively low density of formal enterprises in growth sectors sets limitations to the diversification and expansion of the economic base.

Table 9. Number of enterprises located in Province 2 by focus sector, 2018 Sector Number of enterprises located in Province 2 % share to total number of enterprises (national)

Agriculture

Manufacturing

Construction

1,231

12,654

110 5%

12%

7%

Tourism

ICT

10,813

246 8%

9%

Source: (CBS 2019)

Province 2 has a sub-tropical to tropical climate and the most fertile plain area are suitable for agriculture, especially for growing major cereal, oilseed, and pulse crops and commercial tropical and sub-tropical fruits and vegetables. It is a major producer of rice, sugarcane, and wheat as well as the largest producer of farmed fish. Province 2 is engaged mainly in the primary production and trading rather than in value added processing. As can be seen in Table 10, only 5% of the agribusinesses in the country were located in Province 2, which was the lowest among the seven provinces. Industrial activity mainly involves the processing of agricultural produce including jute, sugarcane, tobacco, and grain.

Proximity with India. The eight districts ((Bara, Parsa, Rautahat, Sarlahi, Mahottari, Dhanusa, Siraha and Saptari) in the province are linked with the Indian Territory. An important city in Province 2 is Birgunj Metropolitan City, which is dubbed as the “commercial capital of Nepal” as far as trade with India is concerned. Almost all of the country’s trade with India is via Birgunj and the Indian town of Raxaul. Products are transported to and from India via the dry port in Birgunj.

In the manufacturing sector, the province had 12,654 enterprises or 12% of the total number of manufacturing companies in the country in 2018. Historically, the province has the highest GDP output per province in manufacturing.

The Birgunj-Pathlaiya industrial corridor produces the following products: (i) food and beverages; (ii) tobacco/cigarettes; (iii) soap; (iv) industrial and consumer goods - fabricated metal products, nonmetallic mineral products, basic metals, cement, plastic and rubber products, textiles, apparel, furniture, electronics, leather and allied products. More than 50% of the production in this corridor is exported to India.

The province has one industrial estate, the Gajendra Narayan Singh Industrial Estate, which is located in Saptari District. The estate can accommodate ten enterprises but currently has five locators. All the five enterprises have stopped operations due to failure of the estate management to address the following: (i) a separate feeder for power supply inside the industrial area; (ii) immediate construction of compound wall damaged by flood in 2017; (iii) arrangement of deep boring for clean drinking water; and (iv) arrangement of industrial security force (Setopati 2018).

In the construction sector, Province 2 had 110 companies in 2018. Although the Province does not have its own limestone deposits, it has cement factories which source their raw material from neighbouring districts in Province 1 and Bagmati.

Birgunj is the centre of tourism of Province 2. Visitors consist of domestic tourists and Indians. Hotels are mainly three stars. Other religious tourism sites in Province 2 are the Janaki Temple and Ram

Temple in Dhanusa, Janakpur Dham. These are among the holy places for Hindus. The province also has the Parsa National Park, which is its only ecological tourism site.

The province had 10,813 enterprises in 2018. The 2020 provincial planning document described the flow and operation of tourism sector as unorganized and lacked destination management (PPPC 2020). There is no institutional mechanism within the province to coordinate product development and encourage private investment in tourism facilities. Likewise, coordination between tour operators and other supply chain actors is weak resulting to poor marketing.

Province 2 had 246 enterprises in the ICT sector in 2018. In 2020, only 0.5% of the population had access to the internet (MoHP; WHO 2020). Similarly, 2.5% had access to landline telephone while 55.5% had access to mobile phone service.

Impact of climate change. A baseline study conducted in 2020 by the Province Policy and Planning Commission (PPPC) with support from the Economic Policy Incubator, enumerated the following observed changes in climate condition in Province 2: (PPPC 2020) (i) shift or variability of seasonal concentration of rain with a reduction of winter rainfall such as significant increase in the pre‐monsoon rains and mixed trends in the monsoon seasons across districts; and b) general increase of maximum temperatures in pre-monsoon and monsoon seasons. The province has increasingly experienced torrential rains, erratic unseasonal rainfall patterns with impact on the harvesting seasons, crop disease, unprecedented flooding and heat waves. The same report also indicated that province is exposed to a range of natural geo‐climatic hazards including floods, droughts, earthquakes and landslides. Disaster risks are exacerbated by the interaction of these hazards with socio‐economic, infrastructure, environmental vulnerabilities, as well as human and climate‐induced stressors, such as over‐exploitation of natural resources (PPPC 2020).

Per capita income. Despite being one of the top three industrial and agricultural hubs in Nepal, the per capita income in 2019/20 was at US$ 992. Bara registered the highest per capita income at US$ 1,480 while Mahottari had the lowest at US$ 681 (PPPC 2020). The wide disparity in per capita income among the eight districts in the province indicates that that the economic benefits of the high output and gross value added are concentrated in just a few areas.

Human Development Index. In 2019, the province had the lowest human development index (HDI) of 0.510 compared to the national average of 0.587 (NPC; UNDP 2020). Close to half of the residents in Province 2 lived in multi-dimensional poverty in 2019. It also has the lowest literacy rate.