Nepal | November 27, 2020

FDI pledges promising but huge gap still in actual inflow

Himalayan News Service
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Despite the adverse effects of coronavirus pandemic across the world, the foreign direct investment (FDI) commitments to Nepal have not decreased.

According to the latest statistics of the Department of Industry (DoI), Nepal received FDI commitments worth Rs 19.03 billion for 89 projects in around four months (from mid-July to November 10) of the current fiscal year. Nepal had received FDI pledges worth Rs 18.94 billion for 112 projects during the same period of last fiscal year.

Similar to past several years, China topped the list in terms of FDI commitment to Nepal.

Of the 89 projects, China alone pledged to pour Rs 15.78 billion in 83 projects. British Virgin Islands, India, the United Kingdom and Mexico were other countries to make FDI commitments to Nepal during the period.

Sector-wise, the country’s tourism sector received highest FDI commitments followed by the services sector. The FDI commitments in the tourism sector doubled from Rs 6.97 billion for 47 projects in last fiscal to Rs 13.8 billion for 58 projects this fiscal during the review period. Meanwhile, the FDI commitments in the services sector decreased from Rs 5.9 billion for 35 projects in the first four months of last fiscal to Rs 4.4 billion for 25 projects in the review period of this fiscal.

Similarly, FDI commitments have also come down in manufacturing and information and technology-based sectors, while the FDI pledges in the agro and forestry-based sector has increased this fiscal in comparison to last fiscal.

According to Binod Khadka, information officer of the DoI, receiving FDI commitment worth Rs 19 billion in about four months is a positive sign when compared to the total FDI commitments in the previous fiscal year, which was around Rs 38 billion. He further informed that FDI commitments had increased by 49.1 per cent in the fiscal year 2019-20 in comparison to the fiscal year 2018-19 when such pledges stood at around Rs 25 billion.

However, according to the Nepal Rastra Bank (NRB), there is a huge gap between approved FDI and actual FDI inflows in Nepal. In the previous fiscal year, although Nepal received FDI commitments worth Rs 38 billion, the actual FDI inflows stood at only 51.7 per cent or Rs 19.48 billion.

Similarly, the total approved FDI was Rs 24.99 billion in the fiscal year 2018-19 while the realised amount was just 52.3 per cent or Rs 13.07 billion.

As per NRB Spokesperson Gunkar Bhatta, the gap between FDI commitments and actual inflows could be minimised if Nepal strengthens its services and facilitation for foreign investors and speeds up necessary legal reforms. He further said that FDI inflows in Nepal can also be increased by strengthening the One-Stop Service Centre, making the capital market debenture-oriented, attracting foreign investors in small development projects at the federal level with the option of public-private partnership, among others.

A version of this article appears in print on November 12, 2020 of The Himalayan Times.

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