Local and Provincial Economic Development

Programme description

Title: LPED – Local and Provincial Economic Development
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Nepal
Lead executing agency: Ministry of Land Management, Cooperatives and Poverty Alleviation (MoLCPA)
Overall term: 2019 to 2022

Afghanistan. Essential oil is obtained from distillation. © GIZ


Nepal's economic development in recent years has been marred by labour migration, low economic growth and a strong infrastructure deficit, partly triggered by the consequences of the two earthquakes in 2015 and ensuing slow reconstruction. According to the World Bank, Nepal still ranks among the least developed countries in Asia with an annual per capita income of around USD 1,003 (2018). More than a quarter of the Nepali population are multi-dimensionally poor. The economic structure is characterised by a high share of agricultural production (27 per cent of gross domestic product (GDP) in 2018), low agricultural productivity, a poorly developed manufacturing industry (5.6 per cent of GDP in 2018 and declining) and low levels of industrial investment. These economic structural deficits have hampered Nepal's sustainable development and competitiveness.

Nepal initiated a far-reaching decentralisation process with its new constitution in 2015. The series of elections which were completed in December 2017 have instituted elected leadership at the federal, provincial and local governmental levels. The provincial and local governments, which are now equipped with governing power and authority in the field of economic development as well as substantial funds within the framework of decentralisation, are central to remedying these deficits.


Framework conditions for local economic development in selected municipalities and value chains at local and provincial levels in Nepal are improved.


Women from a savings cooperative © GIZ


The project implements GIZ`s territorial economic development approach called Local and Regional Economic Development (LRED) in combination with a value chain promotion approach primarily at the local level, with various feedback, dialogue and upscaling activities at provincial and federal levels. Focusing on eleven municipalities of Province 5, Karnali Province and Sudurpashchim Province, the project works with the municipal governments, the private and cooperative sectors to promote local economic development. It focuses on four fields of action.

  • Enhance the capacities of public, private and cooperative actors to work together to elaborate economic development strategies. The participatory analysis of the local economy and related value chains in the respective municipalities and the development of appropriate joint strategies are an integral part of improving the framework for local economic development.
  • Improve the conditions for the implementation of intervention measures to strengthen the local and provincial economy. The aim is to strengthen the relevant administrative structures, support enterprise development in selected value chains, introduce business and economic networks and market approaches, and provide services through primary cooperatives and cooperative unions / federations as well as private sector organisations such as chambers of commerce and industries.
  • Exchange experiences on economic development between actors at the federal, provincial and municipal levels through mechanisms such as Public-Private-Cooperative Dialogues (PPCD). The exchanges help ensure coherence of measures, enable learning on successful implementation and generation of additional ideas for improving measures. 
  • Improve the conditions for and provide capacity development of public, private and cooperative actors to promote the local economy. The improved analysis and implementation capacities of local administrations, private associations and cooperatives lead to a medium to long term local anchoring of the local economic development approach. This will be supported by an extensive capacity development campaign. In this way, a sustainable improvement of the framework conditions is ensured.


  • The overall improvement of the business climate at the municipality has led to higher business registrations and a better environment for innovation and entrepreneurship
  • Partner cooperatives have improved their profitability, service delivery and also their outreach to the indigenous and disadvantaged groups
  • There is stronger coordination and increased communication between the local and provincial level governments and the stakeholders from the private and cooperative sector
  • The successful experiences at the local level are modelled and channelled into federal discussions for replication

Further information