Nepal | September 21, 2020

Business confidence of investors at its nadir

Foreign direct investment down 50 per cent in the first quadrimester of the current fiscal

Sujan Dhungana
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Kathmandu, December 25

With the formation of a stable government after more than a decade of transition, the country’s business community was expecting a better investment climate, which would lure both domestic and foreign investment.

However, this hope has been dashed due to the failure of the government to win the trust of private investors, opine experts. Moreover, the recent macroeconomic statistics of Nepal Rastra Bank back experts’ opinion as foreign investment in the country has come down by more than half in the first four months of the current fiscal, compared to the same period in the last fiscal.

According to NRB, Nepal received foreign direct investment of only Rs 4.95 billion in the review period, though the country had drawn foreign investment worth Rs 10.17 billion during the same period last year.

“Political stability alone is not enough to boost the confidence of investors. The government’s leadership should have the capacity to convert the political and policy stability into trust,” economist Biswo Poudel told THT, adding that falling investment is primarily due to failure of the leadership to win investors’ trust.

The Ministry of Finance  and the Ministry of Industry are the two major authorities that should take responsibility of assuring conducive investment environment to the business community.

Moreover, these two ministries have a significant role to play in changing the country’s economic landscape. However, their failure to initiate proactive roles to win the trust of the business community has proved to be a major setback to business growth, as per experts.

According to Poudel, the government should first win the trust of the Nepali business community before it even thinks of drawing foreign investment. “Along with failure to win the trust of investors, the government has not been able to market the country’s investment opportunities in the global market,” he said.

The deteriorating confidence of the business community is also the result of a communist approach in Nepal, which undermines the role of the market and private sector and prioritises the role of the state, another economist Posh Raj Pandey opined.

“Different economic policies have been indicating such priority of the government, thereby forcing investors to defer their investment plans,” he said.

He added that the state’s priority of ‘extracting’ revenue by overlooking the concerns of the business community would lead to further deterioration of the investment climate.

Meanwhile, the private sector has expressed frustration over the failure of the government to bring about any positive changes in the ‘doing business’ environment. Instead, the government has created fear among the business community by regularly threatening business people that it will imprison them for any misconduct, an industrialist said on condition of anonymity.

“Instead of facilitating businesses, the government and its policies have been intimidating the business community. The country cannot expect growth in business and investment in such a ‘fearful’ context,” the industrialist added.


A version of this article appears in print on December 26, 2018 of The Himalayan Times.

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