Kathmandu, September 2

Adverse investment climate of the country in the financial year 2015-16 weighed on the sentiment of foreign investors, with the foreign direct investment (FDI) commitment plunging by a whopping 77.5 per cent.

“FDI commitment plummeted in the last fiscal mainly due to unfavourable economic environment in the country,” said Maheshwor Neupane, director general of the Department of Industry (DoI), adding that the devastating earthquakes, political uncertainty and blockade along the southern border points that resulted in crippling shortages of all essential items, including petroleum products discouraged foreign investors.

During the review year, the DoI granted approval to 341 joint venture projects, a decline in number of such projects by 7.3 points, with FDI commitment that amounted to Rs 15.14 billion.

In fiscal year 2014-15, Nepal had received FDI commitment worth Rs 67.42 billion with the DoI approving altogether 368 joint venture projects.

According to DoI data, only service sector-related projects saw FDI commitment go up in the review year. The DoI approved 143 service sector projects that amounted to Rs 7.94 billion in fiscal 2015-16 against 126 projects that amounted to Rs 5.62 billion in fiscal 2014-15.

Meanwhile, the number of projects relating to agriculture and forestry, energy, manufacturing, tourism and minerals declined.

DoI approved 22 projects worth Rs 297.3 million under the heading of agriculture and forestry in fiscal 2015-16, down from 39 projects that amounted to Rs 735.9 million from earlier fiscal.

The number of energy sector projects approved in the review year dropped to three from five in the earlier fiscal. Foreign investment commitment in the sector nosedived by 96.63 per cent to Rs 1.83 billion in 2015-16, when compared to such investment amounting to Rs 54.29 billion in fiscal 2014-15.

In total, 122 tourism sector-related projects received DoI approval in 2015-16 with  FDI commitment worth Rs 1.89 billion. The number of such projects in the previous fiscal was 132 and had amounted to FDI of Rs 4.33 billion.

Whereas only one project was approved under the construction sector in both 2014-15 and 2015-16, the investment commitment tumbled by 90 per cent to Rs 10 million.

Minerals sector had received  FDI commitment worth Rs 190 million through DoI’s approval of six projects in 2014-15 but it failed to draw any investor interest in the review year.

Country-wise, China stood first with 125 foreign investment projects, followed by South Korea with 55, the United States with 40, India with 23, Japan with 18, the United Kingdom with 11 and other countries with 69 projects. The approved projects are expected to generate direct employment opportunities for 11,426 people.

In fiscal 2014-15, China had made FDI commitment for 153 projects, followed by the United States with 33, South Korea with 32, India with 25, Japan with 13, the United Kingdom with 11 and other countries with 101 projects.

DoI approves FDI of up to Rs 10 billion for a project in the country. Foreign investment above Rs 10 billion needs to be green-lighted from the Investment Board Nepal.