Kathmandu. Stakeholders have said that foreign direct investment (FDI) has not been expected in Nepal due to administrative complexities. At a programme organized by Nepal Automobile Importers and Manufacturers Association (NAIMA) here on Tuesday, the stakeholders stressed the need to boost the morale of domestic investors to attract foreign investment in Nepal.
According to Satyendra Timilsina, head of the Economic Research Department of Nepal Rastra Bank, foreign direct investment (FDI) of Nepal Rastra Bank (FDI) stood at Rs 12 billion last year.
“Last year, Nepal received FDI worth Rs 12 billion. Out of this, about Rs 4 billion has been returned as dividend. ’
According to him, Nepal Rastra Bank publishes FDI report every year. According to the latest report, the total stock of FDI so far is Rs 340 billion. Of these, the highest investment is from India, which is about 56-57 percent. It is followed by China, Ireland, Australia and Singapore.
Regionally, the highest FDI inflows have come in three sectors. These include the manufacturing sector, hydropower and banks and financial institutions. These three sectors alone account for about 80 per cent of the country’s share. According to the data, 56 percent of the investment is in the industry sector and 44 percent in the service sector.
FDI is not just a foreign financial source. It’s technology, management, good governance and many other things that we bring in with FDI. So, FDI is not just about getting resources, we are also coming up with technology and best practices. So, we should not look at FDI inflows only in terms of numbers,” he said.
He said that FDI should be thought of in a slightly different way and from a larger perspective. Afghanistan and Bhutan are the only countries that attract less FDI than Nepal. Even a small country like the Maldives has FDI inflows of $ 761 million. India has $28 billion, Pakistan $2 billion, Bangladesh $1.38 billion and Sri Lanka $711 million. The ratio of all these countries to GDP is about 0.5 to 0. It is around 6 percent. “But our situation is very weak,” he said.
“It is easy to understand where we are in FDI and what our situation is. Last year, according to World Bank data, global FDI inflows were $847.8 billion. That’s about 0.75 percent of global GDP. In the same period, Nepal’s FDI inflow was 73.8 million US dollars. This is only 0.18 percent of our GDP. While the global average is 0.75 per cent, we are limited to 0.18 per cent,” Timilsina said.
Founder of Dolma Impact Fund and Chairman of Dolma Foundation, Tim Gocher, said that it was difficult to bring investment in Nepal and to take foreign investment.
He said that they have been facing extreme hardships to take back the profit or investment rather than bringing in foreign investment (FDI) in Nepal. He said that the international investors have been disappointed due to the cumbersome administrative process and policy instability. “It’s very difficult to bring money into this country,” he said. It’s almost impossible to take money out of the country,” he said.
According to him, there was a time when the government did not follow the international tax treaty. He said that although the government later abide by the tax treaty, they had to pay the tax against the international law after a case of public concern was filed against it. According to him, it took four months to get the tax number required to pay the tax.
He also said that the decision of the board meeting of the company was also sought when the company tried to sell the company and withdraw the money. He said that such a decision was necessary to get permission to sell on the stock exchange.
“Hundreds of documents are required, which in the UK, the country where I came from, just clicking on the cell and the money would go back to where it came from,” he said.
Stating that the work done in countries like the UK with just a click of a button is entangled in hundreds of paperwork in Nepal, he stressed that the government, NRB and Department of Industry should stand in the place of foreign investors and roll out the red carpet.
According to him, although Nepal has committed investment of more than 100 million dollars so far, it is less than the amount of foreign investment required by Nepal.
Bankers also feel that foreign investors cannot be brought in unless the morale of domestic investors is boosted. Speaking on the occasion, Chief Executive Officer (CEO) of Nabil Bank Manoj Gyawali said that liquidity has accumulated in the bank due to lack of demand for investment.
“At present, there is a deposit surplus of around Rs 13.5 trillion to Rs 14 trillion. This money is three times more than the government’s one-year capital expenditure,” said Gyawali. ’
According to Gyawali, the loan flow to the banking sector has decreased by Rs 30 billion since mid-July. Rastra Bank 2. He said that although the banks have been given relief by drawing deposits at 75 percent, the real problem is in the demand and confidence of the economy.
Gyawali stressed that the government should take initiative to remove the frustration among the entrepreneurs. In particular, he says, business mistakes and criminal charges should be viewed differently.
“Now discussions are going on to separate financial crimes and criminal charges. If someone has committed a financial crime, he should be punished financially. If the law is clarified instead of imprisoning and harassing, it will bring back the morale of entrepreneurs,” Gyawali said.
According to him, there are some things that need improvement on the part of the government. Financial crimes and administrative or criminal charges should be separated. If a businessman has not committed a mistake intentionally, he should not be treated like a criminal. This will demoralize investors.
“It’s very important to win the trust of the private sector. Resources are needed for the country’s delivery and prosperity, and this resource is possible only with the investment of the private sector. Therefore, a system should be developed to keep the morale of honest businessmen high and take action against the miscreants,” said Gyawali.
Agreeing with Gyawali’s statement, Ritu Singh Baidya, president of NAIMA, said that if the government does not trust the private sector, there will be a situation where the private sector will not trust the government.
She stressed the need to distinguish between financial crimes and criminal charges. He said that lack of legal clarity and security has increased fear and mistrust among investors.
“The biggest problem right now is the lack of trust. The government does not trust the private sector and the private sector does not trust the government,” Vaidya said, adding, “We do not trust the policies and the policies are not designed to encourage the private sector.” Instead of looking at investors with suspicion, a culture of welcoming should be developed. ’
She said that Nepal should give priority to the areas with potential and comparative advantage rather than combining many sectors at the same time. Stating that it would be difficult to achieve economies of scale in large productive industries in Nepal due to small and limited labor force, she stressed the need to focus on information technology, tourism, high-value agricultural crops and hydropower-based innovative industries.
According to Vaidya, IT and tourism sectors are the most suitable sectors for Nepal. “We should pay attention to those areas where there is no toll and distance,” she said. We have a good workforce being prepared for the IT sector. With this, the youth can not only look for employment but also become entrepreneurs themselves. ’
She also said that the private sector can create a large number of jobs by building infrastructure as the tourism sector brings in foreign money and administrative hassles are comparatively less.
“Now we have to think about crops like figs and peanuts, not just paddy and millet. Today, farmers in Punjab have reached California and become rich by growing walnuts and peanuts,” she said. ’
Vaidya is of the view that in the hydropower sector, one should not be satisfied only by selling dry electricity to neighboring countries. She said that new technology should be brought to increase the internal consumption of electricity.
“Instead of just selling crude power to neighbouring countries, we should adopt technologies like green hydrogen and ammonia, which help decarbonise the cement and steel industries. Instead of trying to earn money only by selling electricity outside, we should use it within the country to reduce dependency,” she said.
She also said that the government should immediately make policy reforms to attract foreign investment by boosting the morale of domestic investors as FDI (FDI) not only brings capital but also new dimensions of international knowledge, technology and development.
According to him, it is difficult for the domestic investors to come in from outside without confidence. Therefore, the government should make its policies and regulations investment-friendly. “If we don’t improve these things soon, people’s patience will run out and it could have a negative impact on the economy,” he said.
