Nepal has failed to attract the actual foreign direct investment committed by the investors due to bureaucratic hassles

Despite the fact that the entire world is badly affected by the coronavirus pandemic, the foreign direct investment (FDI) pledges to Nepal seem to be encouraging. As per the Department of Industry (DoI), Nepal received FDI commitments worth Rs 19 billion for 89 projects, with the lion’s share coming from China, in the last four months (mid-July to November 10) of the current fiscal. Nepal had received FDI pledges worth Rs 18.94 billion for 112 projects during the same period last fiscal. As in the past several years, China has topped the list in terms of FDI commitment. China alone has pledged to inject Rs 15.78 billion in 83 projects, mainly in the tourism and service sectors. Domestic investors have also expressed commitment to inject money, mainly in hydropower projects, which currently stands at Rs 38.68 billion in the current fiscal. Apart from China, British Virgin Islands, India, the UK and Mexico are other countries making FDI pledges to Nepal this fiscal.

According to DoI, most of the FDI commitments have come for the tourism and service sectors. The FDI commitment has doubled from Rs 6.97 billion for 47 projects last fiscal to Rs 13.8 billion for 58 projects during the review period of this fiscal. However, the FDI commitments in the service sector have slightly gone down from Rs 5.9 billion for 35 projects in the same period last fiscal to Rs 4.4 billion for 25 projects in the review period.

FDI pledges in manufacturing and information technology has decreased.

The positive side of the current fiscal is that the agro-forestry sector has received more FDI commitments compared to the last fiscal.

FDI commitments worth Rs 19 billion in the last four months are a positive sign, given the prolonged lockdown and the country’s battered economy due to the COVID-19 pandemic. During the last fiscal, the FDI commitment stood at around Rs 38 billion. But making FDI commitments is not enough to drive the economy forward. We need actual foreign direct investment in the productive sectors that can help boost economic growth and also generate job opportunities within the country. But the actual investment stood at only Rs 19 billion due to bureaucratic and legal hassles. These two problems can be resolved by strengthening the One-Stop Service Centre, making the capital market debenture-oriented and attracting FDI in small-scale development projects at the federal level. Meanwhile, the Investment Board Nepal (IBN), chaired by the Prime Minister, has approved three hydel projects, which have pledged to invest more than Rs 10 billion each. As per the changed rules of the IBN, even domestic investors are required to register with the IBN if their projects cross the Rs 6 billion mark. The IBN was created to attract FDI, not domestic investment, which can be handled by the government’s other agencies. Independent power producers have termed it as “yet another bureaucratic hassle” in attracting domestic investment in the energy sector. The One-Stop Service Centre and the laws related to FDI must be made more effective to translate the investment pledges into reality.

Exercise caution

After weeks, Kathmandu reported less than a thousand coronavirus cases on Wednesday, but that should be no reason for the authorities to be complacent.

The coronavirus pandemic started with just one infection in China on December 31 last year, so a single case of COVID-19 is already one too many.

With the caseload having crossed the 200,000 mark this week, the government and the people must do all they can to contain the contagion. Unfortunately, the way people are thronging the narrow streets of Kathmandu shows little sign of awareness about the gravity of the situation.

It is the festival time of Tihar, and shops, especially those selling sweets and fruits, are likely to see crowds of people over the next few days. So people are advised to take the virus seriously and follow the health protocols suggested by the government, namely wearing masks at all times, washing one’s hands frequently, maintaining a safe distance and avoiding crowds. Take note that countries that have adhered to these rules have seen a big drop in the number of new infections. With the sudden dip in the temperature heralding the winter season, it is wise to take extra precautions to keep the virus at bay.