Kathmandu, May 26

The Investment Board Nepal (IBN) has said that the lack of clear government provisions on viability gap funding has been a major setback to realising mega foreign investments in Nepal.

Due to the ambiguous legal provisions which have not clearly defined the role of the government on project development, IBN officials said that they have not been able to give a complete package of projects to foreign investors who have shown interest to make investments in different domestic sectors.

Viability gap refers to the gap between revenue required for a project to become commercially viable and the revenue that is expected to be generated after the completion of the project.

“We do not have a clear-cut legal provision defining the contribution (financial, technical) of the government in big projects, which is crucial for drawing foreign investment,” said Maha Prasad Adhikari, chief executive officer of IBN, adding that the government should clearly define its contribution to facilitate project development as soon as possible.

Due to lack of pre-defined contribution of the government in mega investment projects, Adhikari also informed that IBN has not been able to give a complete project package to the investors who had signed letters of intent (LoIs) to invest in Nepal during the Nepal Investment Summit in the first week of March.

Foreign investors had signed LoIs with the government to invest more than $13.52 billion in different sectors of the country during the Nepal Investment Summit.

“Now what we need at the earliest to capitalise on this investment pledge is to develop a concrete foundation for foreign investment by developing projects as sought by investors and define the modality of the project with clarity on the role and contribution of the government,” added Adhikari.

On top of that, IBN is preparing to issue tenders for four different mega projects in the country within the next fiscal year, he informed.

Meanwhile, IBN officials also said that they have been facing project deficit (in some sectors) which is delaying the process of turning different FDI pledges into reality.

“We are constantly following up on all foreign investment pledges that were signed during the investment summit. However, the sad fact is that we do not have enough projects as sought by foreign investors,” an IBN official said, adding that IBN has asked various government ministries to come up with projects best suited in their respective sectors.

Similarly, a separate committee at IBN is also developing terms of reference (ToR) and financing modality of different existing projects that IBN has developed.