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The Impact of Digitization on Nepal’s Handmade Paper Industry

Hari Kumar Magar, a handmade paper entrepreneur from Banepa Municipality, had to shut down his business due to declining demand. His factory has remained closed for over a year and a half, reflecting the broader challenges facing Nepal’s handmade paper industry.

Traditionally used by government offices for record-keeping, handmade paper is struggling to survive amid the rise of digital documentation. Many small paper factories in Kavrepalanchok, once thriving with significant investments, have now shut down.

Originally from Sindhuli, Magar established Kanchan Nepali Paper Factory 14 years ago, aiming to create a successful business. However, with demand dropping, covering production costs—including taxes, rent, and salaries—became unfeasible.

“Even after the pandemic, when other businesses started recovering, the handmade paper industry couldn’t bounce back. Eventually, I had no choice but to close down,” Magar said. He had invested Rs2.5 million in his factory but suffered losses amounting to Rs1.5 million.

Purushottam Painju, owner of Friendship Paper Industry in Khopasi, Panauti, has been in the business for two decades. Despite early success, his enterprise now faces similar struggles.

“Dealers in Kathmandu say foreign demand has dropped, and orders have declined,” Painju said. His factory’s production has reduced from 600 kori (one kori equals 20 sheets) to 500, with 200 kori remaining unsold due to low demand.

Lokta paper is known for its durability and resistance to insects and mildew. According to the UN’s Food and Agriculture Organization (FAO), the government primarily used it for official record-keeping.

Handmade paper production in Nepal dates back to at least the 12th century, particularly in rural hill districts. Baglung was historically known for producing high-quality paper.

However, by the 1930s, production declined due to imports from Tibet. By the 1960s, competition from machine-made Indian paper further weakened the industry, leaving only a few families in Baglung and Parbat with knowledge of traditional paper-making techniques.

The industry saw a revival in the 1970s, fueled by growing tourism. By the decade’s end, new markets emerged, and international organizations like UNICEF and the Asian Development Bank (ADB) initiated projects to support lokta paper production, including the establishment of Bhaktapur Craft Printers in the Kathmandu Valley.

Significant industrial developments took place in 1985, when the introduction of Japanese technologies improved efficiency while retaining traditional craftsmanship. Japan has a longstanding tradition of making handmade paper from daphne tree bark fibers, and when this method was introduced in Nepal, sustainability became a key focus, including the recycling of lokta paper scraps.

The Japan International Cooperation Agency (JICA) collaborated with the Nepalese government to train local entrepreneurs in Japanese techniques. Around the same time, General Paper Industries became Nepal’s first major private handmade paper company, pioneering these advancements.

According to Mahaguthi Craft with Conscience, a Fair Trade Organization that markets Nepali crafts, handmade paper is produced from the bark of Daphne cannabina and Daphne papyracea (lokta), found at altitudes of 2,000–2,700 meters. The raw material is sourced from several hill districts, including Dolakha.

Harvested every two to three years, the bark is cleaned, boiled, beaten into pulp, and dried in wooden frames under the sun to create sheets.

Tibetan monks have historically used this paper for manuscripts and sacred texts. However, with the rise of digitization, government orders have declined significantly, dealing a major blow to the industry.

Additionally, sourcing raw materials from Dolakha remains expensive due to high processing and labor costs. As a result, a large portion of the handmade paper produced never reaches the market, pushing businesses closer to closure.

Painju, like other producers, is uncertain about the future. He plans to scale down production in response to market demand but is unsure how long he can sustain operations.

While the exact number of Nepali handmade paper enterprises in Kavrepalanchok is unknown, the Office of Commerce and Industry records indicate that only three companies are formally registered.

Ganesh Kagaj Udyog, established in 2000, has not renewed its registration, while Ugratara Hadkeshwar Nepali Kagaj Udyog (2004) and Nepal Kagaj Udyog (2006) are no longer in contact with authorities.

“Many enterprises operated without registration, but even the officially registered ones are now on the verge of closure,” said Sitaram Pokharel, chief of the office.

Despite the versatility of Nepali handmade paper, its higher production cost compared to regular paper and the widespread shift to digital documentation have shrunk its market.

Data from the Inland Revenue Office in Kavrepalanchok shows that five Nepali paper enterprises are registered, though not all remain active.

According to the Department of Customs, Nepal exported handmade paper worth Rs335.67 million in the first six months of the current fiscal year. Major export destinations include Australia, China, France, Germany, the UAE, the UK, the US, and Japan. The paper is primarily used for greeting cards, stationery sets, notebooks, gift-wrapping paper, bags, envelopes, and photo frames.

While Nepali handmade paper remains an important part of the country’s cultural heritage, its future is uncertain as digital alternatives continue to replace traditional documentation methods.

The second phase of the Motihari-Amlekhgunj Petroleum Pipeline project is progressing well, with around 40 percent of the work completed, according to Binit Mani Upadhyay, head of the Madhesh Regional Office of NOC, Amlekhganj Bara.

As part of this phase, the Indian Oil Corporation (IOC) is building two petrol tanks with a capacity of 4,000 kiloliters each, along with two transmix tanks of 250 kiloliters each. Additionally, 24 fully automated loading stations for petrol transportation, pump houses, refillers, and laboratories are being developed at the Amlekhgunj depot in Bara, Upadhyaya stated.

He also highlighted advancements in upgrading the fire-fighting system, implementing the OWS system for oil-water separation, and constructing the PMCC room. The NOC Madhesh Regional Office has assigned Likhita Infrastructure Pvt Ltd to complete the infrastructure by the end of 2023. Funding for one petrol tank will come from the NOC, while the IOC will finance the other.