KATHMANDU, SEPTEMBER 28
The latest survey report on foreign direct investment (FDI) in Nepal published by the Nepal Rastra Bank indicates a significant gap in approved FDI and actual net FDI inflows in Nepal. Between 1995-96 and 2021-22, the total actual net FDI inflow stood at around 36.2 per cent of total FDI approval as per the survey report.
"The FDI approval may simply indicate an intended investment (the approved investment may not actually take place) or there may be significant time lags between approval and actual investments. In some instances, the realisation of the approved investment may take place over several years as usually seen in projects with longer gestation periods. As a result, there exists a gap between FDI approval and actual FDI inflows."
As per the report, gross FDI inflows to Nepal decreased 3.5 per cent to Rs 19.2 billion in the fiscal year 2021-22 in line with the global trends, while the stock of FDI in Nepal increased by 16 per cent in the review year and stood at Rs 264.3 billion as of mid-July 2022. Also, net FDI inflows to Nepal decreased 4.9 per cent to Rs 18.6 billion in the review period while the divestment of foreign investment during 2021-22 stood at Rs 658.7 million, which was around 3.4 per cent of gross FDI inflows.
As per the World Investment Report 2023 published by UNCTAD, global FDI inflow decreased 12.4 per cent to $1,294.7 billion in 2022 from $1,478.1 in 2021 as a result of Russia-Ukraine war, high food and energy prices, fears of a recession, and debt pressures resulted in the decline of FDI inflows around the world.
In 2021-22, Rs 15.7 billion was approved for dividend repatriation by firms with foreign investment. The highest dividend repatriation approval was for manufacturing sector, which stood at over Rs 7.3 billion, followed by the information and communication sector at Rs 5.4 billion, electricity, gas, steam, and air-conditioning at Rs 1.6 billion, financial and insurance services at Rs 1.08 billion, others at Rs 106.6 million, construction at Rs 52.2 million, transport and storage at Rs 25.7 million, agriculture, forestry and fishing at three million rupees and accommodation and food services at Rs 1.9 million.
The paid-up capital, reserves, and loans increased by 15.5 per cent, 16.4 per cent, and 16.6 per cent respectively. The foreign liability of Nepal in terms of direct investment stood at Rs 264.3 billion as of mid-July 2022.
Paid-up capital was the major component in FDI stock, accounting for 53.7 per cent of total FDI stock. The share of reserves and loans in total FDI stock stood at 31.7 per cent and 14.6 per cent, respectively.
The electricity, gas, steam, and air-conditioning sector had the highest FDI stock of Rs 86.8 billion (32.8 per cent of the total) followed by the manufacturing sector with Rs 77.9 billion and the financial and insurance services sector with Rs 67.8 billion. Meanwhile, the FDI stock of transport and storage decreased as a result of the significant decline in the reserve position of the companies within the sector.
Nepal received foreign investment from 57 different economies as of mid-July 2022.
Country-wise, India remained in the top position with Rs 88.6 billion FDI, followed by China at Rs 33.4 billion, Ireland at Rs 20.9 billion, Singapore at Rs 16.1 billion, and Saint Kitts and Nevis at Rs 15.1 billion. In terms of paidup capital also India ranked in the top position with Rs 53.4 billion, followed by China at Rs 24.3 billion, South Korea at Rs 10.5 billion, and Ireland with nine billion rupees.
In terms of FDI stock, Bagmati Province constituted the highest share of FDI stock at 55.4 per cent whereas Karnali and Sudur Paschim provinces accounted for less than one per cent of total FDI stock. Meanwhile, Koshi Province accounted for 17 per cent, Gandaki Province at 16.8 per cent, Madhesh Province at 8.8 per cent, and Lumbini Province at one per cent.
A version of this article appears in the print on September 29, 2023, of The Himalayan Times
