Public Enterprise Decline and the Industrial Replacement Gap in Nepal: Evidence from Product-Level Trade Data and Explainable Machine Learning

Nepal’s decline of public industrial enterprises was not always followed by comparable domestic productive capacity. This study introduces the industrial replacement gap (IRG) as an initial conceptual and diagnostic framework for assessing such replacement. We triangulate World Bank indicators (1980–2023), UN Comtrade product data (1998–2022), Ministry of Finance enterprise records, and Department of Industry registrations (FY 1990/91–2022/23). Results show persistent manufacturing stagnation, import-dominated trade in several product groups linked to public enterprises, and mixed sectoral proxy signals. Average employment per newly registered manufacturing firm fell from 142 workers during early liberalization to 88 in recent years. In the secondary exploratory analysis, SHAP places foreign direct investment inflows and trade openness highest in predictive importance within the fitted Random Forest, but the small sample and modest performance do not support causal interpretation. For sustainable industrialization, the IRG complements aggregate SDG 9.2 indicators by linking enterprise decline with sector-level capacity, trade, and employment evidence, while direct production and environmental data remain necessary for validation. For public managers, the revive, restructure, repurpose, and replace framework supports asset audits and feasibility screening. For the government, the findings support sector-specific capacity strategies that combine employment and regional resilience with resource efficiency, environmental safeguards, and monitoring, rather than uniform revival or market-led replacement.