Along with formation of various new business-related policies, the government claims that the environment for investment has improved significantly in Nepal. However, the private sector is still expressing its reservations on the government’s failure to implement policies and address other bottlenecks. Against this backdrop, Sujan Dhungana of The Himalayan Times talked to businessman and an international Nepali investor Upendra Mahato about challenges and opportunities of investing in Nepal and the business environment in the country. Mahato is also the chairperson of Nepal Mediciti and founding president of NRNA. Excerpts:
As an international Nepali investor, what is your view on the current investment scenario in Nepal?
Nepal had been unable to unleash its investment potential in the past due to political instability and other problems. In fact, the short terms of the past governments had discouraged investors to invest in the country. However, the scenario has slightly changed today. Both domestic and foreign investors are positive about investing in Nepal now that the country has a stable government and political stability. However, I do not feel that investors make their decisions solely based on the political scenario. In my view, the experience that those who have already invested in Nepal share with the rest of the world matters a lot. The bitter fact is that though most of the foreign firms in Nepal have been recording brisk profit, this has never been highlighted in the international investment forums or among investors. Rather, only the hurdles and bad experiences get emphasised. Today, international investors are looking into prospects of doing business in Nepal following the end of political transition and introduction of good policies. But, bureaucratic hurdles are still a major bottleneck to doing business here. I came to know through international investors that some of the investment procedures take months in Nepal, while such procedures are completed within hours or a maximum of a few days in other countries. This is where the government should focus.
You have invested in multiple sectors in Nepal, including in hydropower, banking, health and telecom. Based on your experience, why do you think Nepal is failing to materialise the investment pledges, which amount to billions every year?
Commitments can be driven by emotions. So, not all investment commitments can be materialised. It is easy to give commitments during investment summits or other occasions, when investors are in ‘festive’ mood. I think today Nepal should focus not in drawing pledges through investment forums, but in showcasing the country’s investment potential among investors. The government should inform investors regarding unleashed opportunities in Nepal and comparative advantages by investing in Nepal. It should develop catchy project banks and promote them among investors through different mechanisms.
Nepal Mediciti is one of the latest additions to your investment portfolio in Nepal. What prospects do you see in medical tourism in Nepal?
As per Nepal’s geographical location, hydropower is the sector with topmost investment potential. Unless Nepal is able to produce power in bulk and promote the hydropower sector properly, the country actually cannot achieve desirable growth. Producing power only to cater to the domestic demand is not enough. We need to make best use of all rivers. If Nepal is able to sell electricity in bulk, the country won’t need to focus on foreign investment for growth and development. But Nepal is not in a state of waiting for the day when it starts exporting electricity in bulk. So, what we need to do is focus also on service sectors like health, education and tourism and the agriculture sector. Let us temporarily forget bringing in foreign investment and try preserving the outflow of billions of rupees that Nepalis have been investing for health and education services abroad. If we are able to preserve this money, this will not just narrow down our trade deficit but also prove to be a boon for the country’s economy. Having said that, reducing trade deficit by increasing exports is practically possible only through the export of energy at present.
The other sector is the service sector. Why can’t we make Nepal an international hub for education and health?
Both our health services and education are competitive in the international market. Thus, we need to prioritise these sectors. It is to be noted that hundreds of Nepali doctors and professors have been able to prove themselves in foreign education and health institutions. So, why can’t Nepal use the expertise and experiences of such people to promote health and education sectors in the country itself? Similarly, Nepal has high prospect for medical tourism, as Nepali health institutions today are able to deliver equally competitive services in terms of liver and heart transplants and treatment of other chronic diseases. Meanwhile, there is a general assumption that health sector is where investors make easy money. This is false. Investors get good returns in health sector, but not by means of fraud. Today, big corporate houses rarely choose health sector for investment as the government, especially the central bank, has placed health sector under the basket of unproductive sector. However, I am optimistic that a majority of corporate houses will enter the health sector in the next five years if we are able to change the perception of people and the government towards this sector.
What is your opinion on the government’s policies, especially those related to business and investment?
I don’t see any problem with the existing policies of the government. We have competitive policies. However, the problem lies in its implementation. Investors have been facing procedural hurdles and this might discourage other potential investors. Through policies and guidelines itself, the government should set the timeline for approval of investors’ applications.
As the founding president of Non-Resident Nepali Association, what’s your view on the role of NRNA in the country’s economic growth and development?
The NRN movement officially began in 2003. Nepali people have struggled a lot to establish themselves in foreign lands. But after getting settled abroad, non-resident Nepalis started thinking of contributing to their homeland. In fact, home country for any citizen is very important regardless of their work destination. We came up with the concept of the NRN movement to promote the idea of coming together and doing whatever is possible to contribute to Nepal’s development and promote the country in the global market. The movement was also intended to encourage NRNs to travel to Nepal with their family, promote Nepali culture abroad and also encourage foreigners to visit Nepal. Along with this, we also encouraged NRNs to invest in Nepal. If not investment, we encouraged NRNs to bring their expertise and foreign technology to Nepal. Thus, I believe that NRNs have been playing a crucial role in Nepal’s development. With favourable policies and support from the government, NRNs will continue to increase their investment in Nepal.
It has been alleged that you had invested in offshore companies and brought investment in Nepal as a foreigner. What is your comment on this?
By law itself, I can open companies abroad and invest in other countries out of the profit I have made. However, it is false that I brought foreign investment in Nepal from tax havens as a foreigner.
What are your future plans on expanding investment portfolio in Nepal?
A majority of my investment today is in foreign countries. However, now I plan to prioritise investing in Nepal. For the next couple of years, I will be investing in the health and agriculture sectors in Nepal. Even if I see opportunities abroad, I will focus on investing in Nepal itself in the coming years.
A version of this article appears in print on May 21, 2019 of The Himalayan Times.