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Kathmandu Wednesday June 13, 2001 Jestha 31, 2058.
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Foreign
investment surges
By Prem Khanal
KATHMANDU, June 12 - Despite the shrinking global flow of
Foreign Direct Investment (FDI), along with the worsening law and order situation in the
country, the Nepalese economy, interestingly, witnessed an impressive growth in the
foreign investment inflow during the first ten months of the current fiscal year.
During the period, the Department of Industry approved 76
new foreign investment proposals as opposed to just over 50 such proposals during the
corresponding period last year. The total project cost, total fixed investment and total
foreign investment of the proposed projects are Rs 4.87 billion, Rs 4 billion and Rs 1.76
billion respectively. All projects are anticipated to generate extra employment
opportunities for an additional 3,117 people.
Of 68 total foreign investment projects approved by the
department last year, the total projects cost and total fixed investment were Rs 2.56
billion and Rs 1.85 billion respectively. Similarly, the total foreign investment of the
projects was 1.39 billion and altogether these projects had created jobs for 4,659 people.
Ever since Nepal opted liberal economic policy and opened
its doors for the foreign investment, with adequate policy level reforms in the 90s with
an aim to minimize the scarcity of capital and relevant technology, altogether 39
countries have invested in 668 projects.
Up to now, the total project cost, fixed investment and
foreign investment of the projects of total 668 projects are Rs 72 billion, Rs 62 billion
and Rs 17.75 billion respectively. These investments have contributed to generate extra
82,320 employment opportunities.
Among the countries investing in Nepal in the post-reform
period, India continued to remain as the dominant foreign investor followed by Japan and
the USA. Altogether 230 Indian investments have come to Nepal with Rs 25.539 billion as
total project cost, Rs 20.8 billion as fixed investment and Rs 6.31 billion as foreign
investment. These projects have so far absorbed 33,492 people.
Similarly, Japan, the second largest foreign investor, has
invested in 72 projects so far followed by USA with 69 projects.
Of the total foreign investment projects, which, so far,
having received necessary government permission, 246 projects are operating. Similarly, 49
projects are under construction and 140 projects are yet to begin work. Likewise, 17
industries with foreign investment have been closed and 46 licenses given to commence
projects have been cancelled due to various reasons. Altogether 7,183 jobs were lost due
to the closure and cancellation of 63 industries during the entire post-liberal era.
However, days ahead are tough given deteriorating internal
security situation and various investment-friendly measures adopted by the new Indian
budget.
"Sound internal security is the underlying condition
required to attract foreign investment in the absence of which attracting foreign
investment remain nothing more than nightmare," says Dr Minendra Rijal, an economist.
He also says that the government should be very serious in curbing the worsening domestic
law and order situation.
The Indian budget for the current year, which has been
admired as "investment-friendly", among others, has greatly simplified
investment procedures. The budget also has introduced a liberal labor regime allowing the
entrepreneurs to hire and fire contract laborers. The latest Indian step could not only
obstruct aspirant Indian investment into Nepal. In addition, chances of repatriation of
projects that have already been established in Nepal are high, given the stringent labor
protective laws.
Furthermore, India opened investment in the non-financial
institutions up to cent percent. It has also opened up to 49 per cent stake of foreign
institutional investors in portfolio investment. These investment attracting measures will
play a crucial role in marking up the foreign investment in India, which is already the
largest FDI destination in South Asia.
The FDI flow in India, during the first three months of
2001 has registered a robust growth of over 32 per cent to touch US$ 994.4 million as
compared to US$ 752 million during corresponding period last year. Under such
circumstances, it has become inevitable for Nepal to induce extra efforts to attract more
FDI. The protracted defunct one window policy and persisting bureaucratic hassles are some
of the obstacles that need immediate attention. Otherwise, investment intended for Nepal
in coming days, could find India more fertile.
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