The awful truth
Foreign Minister Ramesh Nath Pandey, back from an 11-day official trip to China on Tuesday, has said that a team of Chinese experts is arriving soon to explore investment prospects in Nepal. In China, he said, he had a “useful interaction with Chinese investors” and he expected more Chinese invesment in days to come. Indeed, a number of projects have been in operation under joint ventures with India and China. Over the past few years, Nepal has taken certain measures to attract FDI. Besides, under the WTO regime, Nepal is supposed to open up its market to foreign competition in a number of sectors, including services.
But to wish and to have the wish fulfilled are two different things. FDI is no charity, and so investors would want such a rate of return as to lure them into Nepal instead of elsewhere. Therefore, they would analyse the various risks and opportunities in Nepal and weigh both up before committing any funds. Given the highly uncertain and unstable political and the poor security situation, political risk analysis (PRA) comes even before examining the commercial side, such as the market size, legal and bureaucratic hassles, transparency and investor-friendly laws, and repatriation of profit.
Today, Chinese investors have numerous openings at home and abroad, as China itself is one of the largest recipients of FDI, which totalled $33.1 billion last year alone. Therefore, logically, Nepal needs to offer something compelling for Chinese to come and invest here. At a time when many business projects have already closed down or are at risk of doing so because of the ongoing violent conflict, it is hard to say whether Chinese, or for that matter any other, industrialists will be tempted. This month alone, Unilever Nepal, a joint venture with 80 per cent Indian stakes, shut down indefinitely after it received a threat from the Maoists, who also bombed out part of Jyoti Spinning Mills, resulting in a loss amounting to crores of rupees. Economists have also indicated a tendency to capital flight. Confronted with this awful truth, it will not be enough for Nepal just to declare that “peace is our only agenda,” but to do something concrete to restore it. Until then, any talk of attracting FDI would be no more than an academic exercise.