FDI in Nepal is around 0.4 per cent of GDP, far below average 2.3 per cent among LDCs

Kathmandu, September 6

Minister of Industry, Commerce and Supplies Matrika Prasad Yadav has expressed commitment to provide favourable ground for foreign investors and adequate protection of foreign investment.

Stating that the country needs to amend required laws for easy entry and exit of foreign investment, he also emphasised on prudent intellectual property right regime and introduction of suitable tax laws to attract investment.

Minister Yadav further stated that the ministry has instructed the Department of Industry (DoI) to prepare a list of ‘well known’ brands and not register the trademark of such brands unless the concerned company comes to Nepal citing the case of Kansai Nerolac Paint Japan, which lost a legal battle while trying to obtain its trademark in Nepal and has filed a review petition in the Supreme Court.

Due to weak intellectual property rights law, whoever first registers a brand name has an upper hand in the country, irrespective of how popular the brand is globally.

On the other hand, Minister Yadav informed that the Ministry of Home Affairs has been framing industrial security policy to provide security to industrial enterprises.

Similarly, Shankar Sharma, former vice chair of National Planning Commission underscored the need of attracting foreign direct investment, as the country requires huge investment to achieve its target to move towards higher growth trajectory.

Speaking in a programme titled ‘Roundtable Interaction on Bilateral Investment Agreement’ organised by the Society of Economic Journalists-Nepal in collaboration with UK-AID funded Economic Policy Incubator, Sharma said that foreign direct investment (FDI) in Nepal is around 0.4 per cent of the gross domestic product (GDP), far below the average of least developed countries, which is at 2.3 per cent of GDP.

Shishir Kumar Dhungana, revenue secretary at the Ministry of Finance, said FDI is critical and bilateral investment agreement (BIA) can be an effective tool to attract FDI, which assures fair and equitable treatment, protection from expropriation and profit repatriation, among others.

Nepal government has also been mulling over giving opportunity to Nepali investors to set up factories abroad in specified sectors through amendment of the Foreign Exchange (Regulations) Act. “Local manufacturers have to pay 80 per cent tariff when exporting their products abroad. But if we allow Nepalis to set up factories of our specialised products, it would help expand their business and also repatriate their profit to Nepal,” said Dhungana.

Till date, Nepalis are barred from investing abroad.

Radhesh Pant, former CEO of Investment Board Nepal (IBN), underpinned the need for adequate protection of investment and guarantee of return to attract FDI. The project development agreement (PDA) that was signed with Indian companies — GMR Energy India for Upper Karnali and Satluj Jal Vidyut Nigam Ltd for Arun III — during his tenure has provisions of compensation if the investor faces loss due to political strikes, protests and vandalism. “We included these provisions in the PDA after holding intensive discussions with political parties to ensure protection of investment and protection from expropriation,” said Pant. “Such measures need to be taken as foreign investors need to be able to witness tangible reforms to be confident to invest in Nepal.”

Another speaker, Madhu Kumar Marasini, joint secretary at Ministry of Industry, Commerce and Supplies, urged for effective economic diplomacy and cordial relation with investors of potential source countries. “A single window should be provided for foreign investors to facilitate them,” he said, adding that Nepal should capitalise on the situation of stable political scenario to move forward.

Hari Bhakta Sharma, president of Confederation of Nepalese Industries, and Shekhar Golccha, senior vice-president of Federation of Nepalese Chambers of Commerce and Industry, sought a fair and level playing field for domestic investors as well. Golchha further said that the business community had been oriented towards trading due to lack of industrial environment in the past, but that if the government created a conducive environment for diversification of trade, Nepal could reap benefits from its natural resources, bio-diversity and large working-age population to take forward the economy.

Nihal Pitigala, a trade economist, underscored that Nepal needs to compete with the rest of the world in welcoming foreign investors by providing them special treatments.

Similarly, Umesh Prasad Singh, officiating president of Federation of Nepal Cottage and Small Industries, said that FDI in large scale industries is essential for value chain integration of small production units and ancillary industries.