KATHMANDU, SEPTEMBER 13
There is a huge gap between the approved foreign direct investment (FDI) and actual net FDI inflows in Nepal, according to a latest central bank report.
A survey report on FDI in Nepal unveiled by the Nepal Rastra Bank today has revealed that between 1995-96 and 2019-20, the total actual net FDI inflow stood at around just 36.5 per cent of total FDI approval.
Meanwhile, the stock of FDI in Nepal increased by 14.8 per cent during 2020-21 and stood at Rs 227.9 billion as of mid-July 2021.
The paid-up capital, reserves, and loans increased by 13.7 per cent, 7.3 per cent and 41.5 per cent respectively, according to the central bank report. The paid-up capital was the major component in FDI stock as it accounted for 53.9 per cent of total FDI stock whereas the reserves and loans in total FDI stock accounted for 31.6 per cent and 14.5 per cent, respectively.
Nepal received foreign investment from 55 different countries as of mid-July 2021. In terms of total FDI stock, India ranked at the top with Rs 75.8 billion, followed by China (Rs 33 billion), Ireland (Rs 16.5 billion), Singapore (Rs 15.5 billion) and Saint Kitts and Nevis (Rs 14.5 billion) .
Industrial sector accounted for about 60.5 per cent of total FDI stock, of which electricity, gas, steam and air-conditioning sector constituted 30.8 per cent and manufacturing 29.5 per cent.
About 39.4 per cent of total FDI stock was in service sector, of which, financial and insurance services sector constituted 26.9 per cent, accommodation and food services sector 5.7 per cent, and information and communication sector 4.8 per cent.
The electricity, gas, steam and air-conditioning sector, particularly hydropower, in Nepal has been preferred sector for FDI in recent years. The latest survey shows 30.8 per cent of FDI stock and 40 per cent of total paid-up capital was in this sector.
Moreover, hydropower sector also attracted other sources of external financing such as foreign loans in addition to FDI; the electricity, gas, steam and airconditioning sector accounted for 50.1 per cent outstanding foreign loan at the end of 2020-21.
The capacity utilisation of FDI based manufacturing firms was 64.9 per cent, while profitability of FDI firms remained at 14.7 per cent in the review year.
In terms of FDI stock, Bagmati province constituted the highest share of FDI stock while Karnali and Sudur Paschim accounted for less than one per cent.
A version of this article appears in the print on September 14, 2022 of The Himalayan Times.
