Status Of FDI In Nepal

Kushal Pokharel


Becoming the first Nepali head of government to address the World Economic Forum in Davos, Prime Minister KP Sharma Oli took the opportunity to draw the attention of the international community to explore the potentials of Foreign Direct Investment (FDI) in Nepal. With great optimism, the PM highlighted the political gains achieved by Nepal in the past two decades including the end of the Maoist civil war and the logical conclusion of the peace process through the promulgation of a new constitution.

Key sectors
Reiterating the natural resource endowments and a strong majority government with a national vision for prosperity, the PM made an attempt to assure the world community of the immense benefits of FDI in this country. As a matter of fact, key sectors for FDI in Nepal have been identified as: tourism, hydro-electricity, agriculture, mining and construction.
Singing the glory of Nepal’s policy success, the PM reassured that the country is heading in right direction in every sector. Furthermore, addressing a session titled ‘Strategic Outlook on South Asia’, PM Oli shed light on the pro-active role of Nepal in international development forums and expressed his commitment to transform Nepal into a vibrant bridge between the two neighbouring giants- India and China.
While it is a matter of pride for the PM of a small country to be invited in a forum dominated by the rich and powerful nations of the globe, the current status of FDI in Nepal needs critical inquiry. Having said that, the Davos forum is critically viewed as an ‘elite club’ that intends to perpetuate the capitalist hegemony. Though the PM assured the world leaders of an investment friendly climate after the historic gains in the political realm, the recent statistics in the field of FDI in Nepal paints a gloomy picture. In fact, the last 6 months of FDI has shown a declining FDI commitment in Nepal signalling a discouraging investment climate. According to the latest data of the Department of Industry, only a total of 10 billion FDI commitments have been recorded in the first six months of this fiscal year which was worth about 14 billion last year. Furthermore, the issue has become complicated with the latest news of FDI entering Nepal from tax haven countries which need further investigation from the government.
Despite the fact that FDI is responsible for generating employment opportunities for the recipient country and boosting economic growth, the reality is pretty different in the context of Nepal. Ranging from the problem of policy inconsistencies to the government’s own understanding of the role of FDI in our economy, luring investors have remained a stiff challenge. Policy dilemmas have remained a major hurdle for the investors. For instance, the present government of Nepal doesn’t seem to be clear on how it intends to promote private sector investment both national and international. Even the constitution has stated that private sector will be a key partner in the national progress but no concrete strategies to supplement the role of non-state actors including the corporate sector have been formulated till date.
With the governance and regulatory factors gaining greater prominence among the foreign direct investors community, the government of Nepal needs to enact a new law that ensures the simplification of the administrative procedures including the provision of an integrated service system. A predictable policy environment is undoubtedly a strong motivation for the international investors. In this regard, it is learnt that the government in mulling over introducing new bill in the parliament for the revision of Foreign Investment Act, Intellectual Property Act among others pertaining to the field of economic and industrial development.
Hosting an international investment summit in March this year is also high on government’s agenda in a bid to appeal the global community to enter the Himalayan nation for reaping benefits. However, this will only materialise if the government organises the summit with some intense preparation and contemplate over the follow ups on the investment pledges, if any, made during the event.
It is imperative that our government understands the vulnerabilities of the investment communities and take some ground-breaking measures to address the same. This is not to say that the government should expose a parasitic mentality for the sake of investors. But it is important to bring the foreign development community on board with our broader national vision. How we want to channelise the FDI is an important point to discuss and decide. Moreover, ensuring the benefits in the form of tax subsidies or other measures for the investors and also making them responsible for the promotion of local employment and utilisation of resources will be the key.

Nevertheless, what actions the government takes further in creating an investment climate will decide the future of FDI. And the policymakers ought to have a clear vision of using FDI for meeting the aspirations of our own national development and prosperity. 

More Articles



Copyright © 2014, All rights reserved. | Developed by: Young Minds