In 2021, Nepal’s electric vehicle sector had its big moment when a homegrown startup introduced an EV bike that had been designed, developed, and produced in the country. The P1 bike from Yatri Motorcycles — a company founded by cousins Ashim Pandey and Batsal Pandey — was celebrated by local media. To date, it has sold 85 units. 

A screenshot of Yatri Motorcycles (@YATRIdesign) twitter post announcing one year since their first P-1 delivery.

But soon after the launch, Nepal’s traffic police started impounding these bikes because they didn’t carry government-issued license plates. Instead, their custom plates featured the acronym “YDS” — for Yatri Design Studio. It was an entirely new problem: Nepal’s lawmakers had never anticipated that vehicles could be manufactured locally, so the country’s arcane laws only allowed registration for imported vehicles.

“I was frustrated that I couldn’t take the bike anywhere, even after investing so much money on it,” Jonesh Shrestha, 25, who spent 582,700 rupees ($4,400) for a Yatri bike that got impounded by the police, told Rest of World. The amount is double the cost of a petrol-run, imported bike in Nepal.

When Yatri’s bikes were initially launched, the Department of Transport Management had issued interim certificates to bike owners — documents that allowed the company to register the bikes so that users could actually operate them on Nepal’s roads. It was a stop-gap solution till the Office of Transport Management, a subordinate body under the transport department, sorted out the registration issue. “When we had approached [the Office] for registering our motorbikes [in 2021], they told us they wanted to come up with a comprehensive directive so that it becomes easier to register Nepal-made vehicles from now on,” co-founder Ashim Pandey told Rest of World. But the interim certificates expired in November 2022, and there was still no directive in place.

Earlier this month, after the matter was raised in the Parliament and Prime Minister Pushpa Kamal Dahal directly intervened to expedite the process, Yatri’s registration issue was finally resolved. The government added a clause to its transport directives that would allow locally made vehicles to be registered in the country. On May 15, Yatri announced on Twitter that it had registered its first bike.

But this was a one-off situation where the government had resolved a local business issue in record time. Innovators, executives from IT companies, social activists, and entrepreneurship facilitators told Rest of World that bureaucratic red tape remains the main stumbling block for innovation in Nepal.

The country does not have a good track record for investing in the area. According to the Global Innovation Index, in terms of innovation capabilities, Nepal ranked 111th out of the 132 countries surveyed. When it came to government effectiveness in supporting innovation, Nepal’s position dropped to 121.

“The government, throughout history, has never recognized research and innovation in Nepal,” Mahabir Pun, social entrepreneur and chairperson of the National Innovation Center nonprofit, told Rest of World. In late April, Pun staged a brief sit-in protest to demand money for research and innovation in the country.

According to the World Bank’s Doing Business project, in 2019, it took an average of roughly 23 days to start a business in Nepal, as compared to 18 days in neighboring India. For a product or service not covered by existing laws and policies, it could take even longer. 

Sachin Karanjit, director of operations at software company Deerhold, which has an offshore office in Nepal, told Rest of World it is difficult for local entrepreneurs to obtain the necessary permits to launch new products. Bureaucrats are reluctant to challenge existing guidelines for any product that falls in a gray area, since they are answerable to higher authorities like Nepal’s anti-corruption watchdog, Karanjit said. The red tape ends up discouraging investments in innovative ideas, Santona Malakar, entrepreneurship lead at local investment firm Safal Partners, told Rest of World.

“Of the many problems we faced, the most significant was the lack of accountability and the desire to take the initiative among the bureaucrats,” Yatri’s Ashim said. The system is such that it punishes action and rewards inaction, he added.

“The government, throughout history, has never recognized research and innovation in Nepal.”

There is a complete absence of governance for innovation and entrepreneurship in Nepal, according to Dipta Shah, founding partner of 54i Ventures, a Kathmandu-based transaction advisory and management consulting firm. He told Rest of World someone in the government should have informed Yatri that they may not be able to actually register the EV bike in the end. “It’s unfortunate that there’s nobody in the government … to say, ‘Hey guys. You know, this is amazing. You’re creating an EV two-wheeler in Nepal. You’ve gotten all the permits to do the manufacturing, but have you thought about what it actually means when your equipment hits the road?’” Shah said.

Critics have claimed on social media that Yatri’s tussle with Nepal’s bureaucracy was resolved in record time because the company’s young founders have political clout. Batsal is the son of Bikram Pandey, a former minister and one of Nepal’s top building contractors. Ashim Pandey denied his uncle’s involvement in the company’s day-to-day dealings like registration, and told Rest of World that Yatri has been successful due to the combined efforts of its team.

But there are other pioneering companies that haven’t been as fortunate. Two entrepreneurs — who founded a matchmaking app and a P2P rental platform, respectively — told Rest of World they feared for the future of their businesses in Nepal due to the lack of clarity in policies. The entrepreneurs spoke on condition of anonymity, fearing government backlash. Both of their apps are registered with the revenue department as website development companies, because Nepal doesn’t have clear policies for their businesses. They said there are chances, albeit slim, that their apps will be shut down. 

The Nepali government, meanwhile, is working on an information and communication technology bill, which is expected to help recognize and aid tech-enabled businesses that are currently in a legal gray area. “We are coming up with a new ICT bill that will address issues related to ride-hailing apps and other innovations in the IT sector,” Krishna Bahadur Raut, secretary of the Ministry of Communications and Information Technology, told Rest of World. Raut didn’t elaborate on the remit of this bill as it is still in the works.

But IT industry insiders said a single bill can’t address the vast array of problems that innovators face. “Until the attitude of the bureaucrats changes, no amount of legislation will help,” said Deerhold’s Karanjit. As a result of Pun’s sit-in, the government promised to allocate 1% of its annual development budget “to support innovation and research work.” Though Pun and the government arrived at an agreement, his original ask had been that Nepal invest at least 1% of its GDP to enable entrepreneurs to have access to financing.

The government should clearly articulate how it plans to drive innovation in the future, said Shah from 54i Ventures. “If it’s [in] digital services and technologies, we need a policy framework that creates a conducive environment for investment — both for this country and for export,” he said. With the introduction of a policy that prioritizes digital services and technologies, the behavior of the bureaucrats will automatically change, Shah said.