Nepal | November 13, 2019

‘Due to limited financing options Nepal is obliged to depend on FDI’

• RENDEZVOUS

Sujan Dhungana

The government is set to host a mega investment summit towards the end of March. Preparations are beingintensified  to make the event a success for promoting Nepal as an ideal investment destination. t  However,  government could fully realize Letter of Intents (LoIs) signed at the earlier summit held in 2017. . Sujan Dhungana of The Himalayan Times caught up with  Maha Prasad Adhikari, chief executive officer of Investment Board Nepal talked to discuss on expectation of upcoming summit, achievement of earlier summit , overall investment opportunities and government’s initiatives to create investment friendly environment. . Excerpts:

The government is set to host an international investment summit in the last week of March . What are the key objectives of hosting such event after two years?

Yes, the government is going to host an investment summit on March 29 and 30 in Kathmandu. The primary objective of the summit is to promote Nepal as the first choice for FDI destination. Unlike in the past, we have political stability that is producing consistency and predictability to the investor. All transition has come to an end and the country’s focus has shifted toward economic prosperity. It is the fact that we can’t achieve our targeted development goals without promoting for investment. Due to limited financing options within the country, we need to explore several source of financing. FDI seems to be one of the reliable and consistent sources of global finance. Therefore,the country has adopted the policy to invite FDI for its economic development. The beauty of FDI is that in most cases it comes along technology. Thus, the upcoming investment summit is aimed at updating investors about the improved investment climate and encourage their investment in different potential sectors in the country. We are also planning to utilize the Summit to communicate to the global investors about the policy initiatives that the current government has undertaken vis-à-vis FDI.

An investment summit of a similar nature was held in 2017 but it seems to be unsuccessful in terms of bringing in FDI. How hopeful is the government that this summit will encourage foreign investors  to  invest in Nepal?

An investment summit of a similar nature was hosted in 2017, which was fruitful and well received by the participants. During that summit participant expressed their letters of intent (LoIs) for investments worth around $13.72 billion. It was the government’s first initiative to communicate to the outer world that Nepal is open for business.  Though summit objective initially not much focused on LoIs, we sincerely followed up with the investors who expressed LOI’s. Out of these, Nepal been able to ensure the initiation of almost $4 billion worth of project, which will translate in to FDI in due course of time.Investment promotion is a gradual process and we can’t get quick results out of such events overnight. Thus, we should understand that investment summits are necessary to continue sensitizing investors about Nepal and opportunities in the country. We will feel the impact later. It will be too optimistic to assume that all LOIs of 2017 summit will turn into a reality.

Along with an intention to invest in a country, foreign investors look at various aspects like policy friendliness, available projects and commitment of the government to implement a project before making an investment decision. If potential investors change their mind, find any uncertainty in their investment security and returns, they can cancel investment plans. Similarly our preparedness about the project would also effect the translation. Thus, all investment commitments and LOI’s cannot be materialized in a real sense.On the other hand, the government also cannot grant approvals to some projects which are not at its priority and against the interests of the nation.

Investment Board Nepal (IBN) has kept investment intents as a key indicator to gauge investors’ confidence to invest in the country. Similarly, there are a few examples that some countries or regions have been able to attract huge amount of FDI only after a couple of investment summits. Experiences of Gujarat in India and South Korea could be some examples. Investors choose best investment destinations among available options. Establishing Nepal as a best destination for investment is not possible overnight. It is necessary to host such investment summits regularly especially for nations like Nepal which is lacking domestic financing resources and technology in several infrastructure related projects.  We have to promote external financing mainly FDI to achieve desired development goals. However, it is crucial that we assure favorable environment for FDI by making necessary policy and legal reforms  along with developing vital infrastructures. In the upcoming investment summit, the government will try its best to assure potential foreign investors that Nepal is an appropriate land for investment. Along with this, we will also highlight policy and legal reforms initiatives targeting foreign investments in the last couple of years, the government’s strategy for FDI, experiences of foreign investors in Nepal etc. I believe that the investment summit is being organized at an appropriate time. The country has political stability and everyone  wants economic development. We have also gained experience from the previous summit. We can expect that such summit will help draw significant amount of FDI in future.

Despite huge  commitments, the actual FDI coming into   Nepal is negligible. Why?

As I mentioned earlier, bringing in investments is not a one-attempt process. It is good if it comes in the first attempt itself. Therefore, we don’t need to worry about it. We need to work hard to capitalize on all investment pledges. Yes, Nepal has not been able to bring in as much FDI as other neighboring countries have been doing. However, we should not forget the reality that all countries pass through the similar experience like us, and they spend years in promoting for investment initially. The FDI inflow begins only after many attempts and years.

After the previous summit, we regularly followed up with the LOIs and could gain success in materializing to some extent. During the discussions with multiple potential foreign investors, they expressed some concerns regarding   investment procedures and legal provisions in Nepal. The government today is addressing those concerns with fresh legal and policy reform initiatives.

It is said that the investment summit this year will target to bring such investors who have been trying to invest in risky zones/countries. Can you please elaborate on this?

We do not have such target to particular category of investor. We have invited potential investors from across the world to participate in the upcoming investment summit. Generally, risk and profitability have direct relationship so that high-risk resulting better yields. Foreign investors may not interested to invest in Nepal until few years back due to several risk factors including political risk. As of today, risks in Nepal have been minimized and existing investors are also making good returns. In such a context, we can attract any category of investors. Investors investing in risky zones can get better return by expanding their business in to Nepal without having such risky feature in the country.  If we could bring in few such investors, others will follow gradually. Moreover, Nepal is a virgin land for investment for varieties of investors. Therefore, those investors who have been investing in risky areas can take more benefits from investing in Nepal.

Do you  mean that Nepal is still a risky zone for investment?

No. It is not that context now. Today, Nepal is an appropriate destination for investment and our business environment is becoming competitive. Our competitive index has been significantly improved since last two years. The government is also preparing for country’s sovereign rating, which will further set a bench mark for attracting investment. It is due to the improved business climate that banks and financial institutions in the country have been expanding their loan portfolio into different sectors. I believe that there is no such risk in Nepal that cannot be mitigated.

What are the projects that would be  showcased at  the summit?

IBN has been studying projects which can be marketed in the upcoming investment summit. Such projects are being prioritized and developed in consultation with all seven provinces. Moreover, provincial governments are also taking ownership for implementing these selected projects in their respective provinces. Similarly, we have also sought investment proposals for potential projects from private sectors. Those projects to be exhibited at the Summit include regional airports, cold storage facilities, hydropower projects, film city, urban transportation and railways, among others.

 

 

 

 


A version of this article appears in print on February 05, 2019 of The Himalayan Times.


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