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Kathmandu Tuesday November 06, 2001 Kartik 21, 2058.
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FDI dip in first 3 months
Post Report
KATHMANDU, Nov 5 – Along with the shrinking
global flow of Foreign Direct Investments (FDI) dragged by the squeezing world economy,
the Nepalese economy witnessed a dip in the foreign investment inflow during the first
quarter of the current fiscal year.
During the period, the Department of Industry
approved 25 new foreign investment proposals as opposed to 30 such proposals approved
during the like period last year. The total project cost, total fixed investment and total
foreign investment of the proposed projects are Rs 1.77 billion, Rs 501 million, and Rs
717 million respectively. All projects are projected to generate extra employment
opportunities for an additional 1,102 labour force.
Of 30 total foreign investment projects approved
by the department last year, the total project costs and total fixed investments were Rs
2.69 billion and Rs 2.33 billion respectively. Similarly, the total foreign investment of
the projects was Rs 584 million and altogether these projects had created jobs for extra
1,525 people.
Ever since Nepal opted liberal economic policy
and opened its doors for the foreign investment with necessary policy level reforms in the
90s with an aim to address the capital scarcity along with relevant technology, altogether
39 countries have invested in 699 projects.
Up to now, the total project cost, fixed
investment and foreign investment of the projects of entire 699 project are Rs 76.96
billion, Rs 64.85 billion and Rs 20.14 billion respectively. These investments have
contributed to generate extra 85,520 employment opportunities.
Among the countries investing in Nepal in the
post-reform period, India continued to maintain first position followed by Japan and the
USA. Altogether 244 Indian projects have come to Nepal with Rs 27.95 billion as total
project cost, Rs 21.66 billion as fixed investment and Rs 7.20 billion as foreign
investment. These projects have, so far, absorbed 34,208 people.
Similarly, Japan, the second largest foreign
investor, has invested in 74 projects followed by USA with 72 projects.
Though, there has been some slide in the inflow
of FDI, it is still not late to take some stringent measures to curb such decline. One of
the crucial sectors in which Nepal is falling behind is the timely policy reform,
hindering the goal of making Nepal as one of the attractive destinations of foreign
investors. Since India still maintains number one position in the country-wise list to
invest in Nepal, the ongoing massive reforms in the policy of foreign investment in India
can seriously hit Nepal’s efforts to attract foreign investment, particularly from
India.
The Indian budget for the current year, which
was admired as "investment friendly", among others, has greatly simplified
investment procedures. The budget also has introduced a liberal labour regime allowing the
entrepreneurs to hire and fire contract labourers.
The latest Indian step can obstruct aspirant
Indian investors coming to Nepal since the Indian government has massively simplified its
investment procedures and it also adopted a liberal labour policy. In order to make
current pace of FDI attraction, it has become inevitable for Nepal to take similar steps,
particularly in the area of labour policy.
Another determining factor of decline in FDI is
the existing confusion on the renewal of the Nepal-India Trade Treaty 1996, which provides
duty and quota free access for the goods produced in Nepal to the Indian market. Since the
domestic market is extremely small with low consumption expenditure of the consumers, most
of the foreign investors come to Nepal to penetrate huge Indian market of more than 1
billion consumers. "The existing confusion regarding the renewal of the treaty has
slowed domestic as well as foreign investments," says Dr Shankar Sharma, member of
the National Planing Commission.
Another area that Nepal should pay a serious
attention is to activate the almost protracted defunct one-window policy of Nepal. The
basic sprit of the policy to provide all necessary facilities needed for foreign investors
have not been practically materialized. Under such circumstances, it is a need of hour for
Nepal to induce extra efforts to curb the shrinking FDI.
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