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Kathmandu Tuesday January 15, 2002 Magh 02, 2058.
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Foreign Investment dips in
first half
Post Report
KATHMANDU, Jan 14:Along with the shrinking flow
of Foreign Direct Investment (FDI) worldwide due to sluggish global economy, Nepal
continued to witness a dip in the foreign investment inflow during the first half of the
current fiscal year.
During the period, the Department of Industry
approved 39 new foreign investment proposals as opposed to 54 similar 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 2.59 billion, Rs 1.14 billion, and Rs
882.15 million respectively. All projects are expected to generate extra employment
opportunities for an additional 1,662 labour force.
Of the 54 total foreign investment projects
approved by the department last year, the total project costs and total fixed investments
were Rs 3.68 billion and Rs 3.13 billion respectively. Similarly, the total foreign
investment of the projects was Rs 998.2 million and altogether these projects had created
jobs for extra 3,128 people.
Ever since Nepal adopted liberal economic
policies, throwing the doors open to foreign investors by making necessary policy level
reforms, altogether 39 countries have invested in around 700 projects. These investments
have contributed to generate over 85,000 employment opportunities.
Among the countries investing in Nepal during
the period, India continued to remain at the top followed by China and Japan, South Korea
and USA. Altogether 10 Indian projects have come to Nepal with Rs 1.56 billion as total
project cost, Rs 319.65 million as fixed investment and Rs 572.08 billion as foreign
investment. These projects have absorbed 711 people.
Similarly, China became the second largest
foreign investor with 6 projects. The total project cost, fixed investment and foreign
investment of these projects are Rs 95.63 million, Rs 67.22 million and 63.08 million
respectively. Similarly, Japan, South Korea, and USA jointly captured the third position
with 4 joint investment projects each.
Manufacturing related joint investment projects
continued to top the list of approved foreign investment. During the period, 18 projects
were approved in the manufacturing sector approved followed by 10 in service sector and 9
in the tourism sector. No foreign investment was approved in the agriculture and mineral
based sectors during the period.
The continuing slump in the inflow of the
foreign investment is one of the serious threats to the post liberal government policy to
accelerate industrial development through foreign capital and technologies.
One of the crucial factors, among others, which
has distracted foreign investors is the lack of timely policy reforms. The most serious
challenge is coming from neighboring India, which is overhauling its foreign investment
policy to make it more attractive to the western investors.
Since India maintains number one position in the
country-wise list to invest in Nepal, such massive foreign investment policy reforms in
India can seriously hit Nepal’s efforts to attract foreign investment, even from
India.
The Indian budget for the current year, which
was admired as "most investment friendly in years", among others, has greatly
simplified investment procedures. The budget also has introduced a liberal labour regime
allowing the entrepreneurs to hire and fire contract laborers whereas investors have been
complaining Nepal’s labor policy as heavenly biased towards labour. So, it has become
inevitable for Nepal to adopt liberal labour policy
Another factor effecting the FDI is the ongoing
confusion on the renewal of the 1996 Nepal-India Trade Treaty, which provides duty and
quota free access for goods produced in Nepal into the huge Indian market.
Since the domestic market is small with one of
the lowest per capita consumption expenditure in the world, foreign investors come to
Nepal to export their products to the lucrative Indian market with more than 1 billion
consumers.
Another area that Nepal should pay a serious
attention is to activate the almost protracted defunct one-window policy of Nepal. The
basic policy to provide all necessary facilities needed for foreign investors have not
been practically materialized, which has greatly hindered in stipulating foreign
investments in Nepal.
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