The Investment Board, Nepal (IBN) turns 12 from next month. The Board functions as a central fast-track government agency to facilitate economic development in Nepal by creating an investment-friendly environment, and mobilising and managing domestic and foreign investments. IBN is also a nodal agency for managing PPP projects. It gives investment approval for projects with cost estimates of Rs. 6 billion and above and hydropower projects with a capacity of 200 MW and above. Projects worth Rs. 350 billion are currently under implementation under the IBN. The Board is set for International Investment Summit in Kathmandu in early 2024 to attract and mobilise private investment, including FDI. It is observed that investment is not mobilised as committed by prospective investors. In this context, Chief Executive Officer of IBN Sushil Bhatta shared achievements, projects in pipeline, prospects and challenges in regard to investment in Nepal with Laxman Kafle of The Rising Nepal. Excerpts:
How is the Investment Board Nepal (IBN) functioning?
The IBN was established through the Investment Board Act, 2011 and replaced the Private Public Partnership and Investment Act (PPPIA) in 2019. In accordance with the mandate and responsibility under the Act, the Board has been performing activities such as fast tracking of process, project proposal, facilitation and hand holding in various stages of development. As per the Act, IBN is national PPP agency and Investment Promotion Agency for attracting large investments in strategic projects. It has developed and operationalised as per the Strategic Plan along with five-year business plan which identifies four strategic pillars—project development and management, investment promotion, institutional development and coordination, collaboration and partnership. It manages its operation for providing fast track services to its investors through the life cycle of the project.
The facilitation works to investors from entry to exit phase is the responsibility of the IBN and Office of the Investment Board Nepal. And the necessary policy-level decisions for attracting investment are approved and recommended to the Council of Ministers.
After my appointment as the Chief Executive Officer of IBN on August 3, 2020 my first priority was to complete the projects under construction within scheduled time. Accordingly, two large-scale cement manufacturing projects — Hongshi Shivam and Huaxin Cement Narayani completed and have already started commercial operation. Capital, technology and skill sets brought by these large cement manufacturers has a positive impact on the Nepali cement market. The country has received multifaceted benefits after the two cement industries came into operation. Employment has been created and the competitiveness of domestic industries has also increased. We are facilitating these completed projects also during their operation. Similarly, we at OIBN facilitated the 900 MW Arun-3 Hydropower Project even during COVID-19 pandemic period. As a result, progress of this project is significant and nearing completion.
The Office of the IBN is turning 12. What are major achievements during this period?
We are turning 12 in September 2023. In this period, IBN has succeeded in generating hope and developed trust. Besides, we’ve developed the first-ever strategic plan along with five-year business plan with a vision of developing Nepal as an attractive investment destination and a mission of accelerating investment in transformative infrastructure projects. The five key goals for the planned period are to: approve at least USD 10 billion, manage PPP projects of at least USD 6 billion, contribute to generating employment opportunities to at least 100,000 people, contribute to improving the investment climate in Nepal, and develop IBN as a PPP Centre of Excellence.
Further, we have developed system and process and streamlined the same in OIBN for fast-track facilitation in the projects from its development to implementation. Similarly, project bank framework has also been developed to identify, select and prioritise bankable projects and arrange appropriate development modalities such as project screening and analytics tool (PSAT) and Value for Money.
The IBN has approved an investment of about USD 9.27 billion for 42 projects, till today. Out of those projects, 28 projects are in energy and 14 are in the non-energy sectors. Projects worth Rs. 350 billion are currently under construction. Investment around Rs. 462.675 billion has been approved in the last three fiscal years.
Moreover, the IBN has been effectively handholding around 4,000 MW worth of clean energy projects that are already aligned with a result-based framework for timely implementation. Among the projects to be implemented are Lower Arun with a capacity of 669 MW, 750 MW West Seti, 450 MW SR-6, and 327 Upper Marsyangdi-2 Hydropower projects. Detailed Project Report preparation for 750 MW West Seti, 450 MW SR-6 is underway and finalisation of 327 Upper Marsyangdi-2 Hydropower Project. Further, following PDA signing with Lower Arun with its developer company Lower Arun Power Development Company preparation are afoot for its implementation.
Recently held 55th Board Meeting of IBN has further granted a study permit to Dolma Himalayan Energy for preparing Detail Feasibility Study Report of 245 MW solar energy project complemented by a 20 MW battery capacity in the Rajpur Rural Municipality of Dang district. In a bid to amplify Nepal’s renewable energy capacity, IBN has acknowledged the DFSR submitted by Risen Energy Co. for the development of 250 MW solar energy installations in Kohalpur, Banke, and Banganga in Kapilvastu.
The board has also endorsed the draft MoU to be signed with NIKOLA Sdn. Bhd. in Malaysia for conducting a feasibility study related to the establishment of a Green Calcium Ammonium Nitrate (CAN) Fertiliser Factory.
You have already spent three years leading the organisation as CEO. What are the gaps you have identified?
Definitely, as the role of IBN is to provide handholding facilitation for the developers, the bottlenecks from project development to project implementation are also being resolved gradually. We have tried our best to accelerate project implementation, which are at the different stages of execution including the projects of strategic importance that need to be developed in coming years.
However, I feel that there is a need for a common understanding between stakeholders and government institutions on prioritising areas and projects that need private investments including in PPP. IBN alone cannot promote and generate private investment. I am optimistic that we all have common understanding in this regard.
The government is advocating for business ready state for attracting investment. For this, we need to focus on areas for making ease of doing business in Nepal. There is a need to bring ‘game changer’ projects in consultation with the federal, provincial and local levels. At a time when soft loans from multilateral banks have started to shrink, it is necessary to motivate the private sector to bring in investment in manufacturing as well as infrastructure sector, including PPP investment. In this regard, we also need to effectively manage and resolve complaints from existing and prospective investors through consultation with concerned authorities for proactively improving the investment climate. For example, there are complaints of developers such as having to renew their visa time and again as investors have to operate in the country until the last stage of the projects.
The recent Board of IBN has given approval to prepare and forward draft Bill for amendment of the Public Private Partnership and Investment Act, 2019. The rationale behind it is to create a solid foundation for the institutional sustainability of the OIBN and a sort of financial autonomy. As the OIBN has been envisioned as the strategic institution to deal with the complex nature of projects to be executed in PPP, knowledge development, retention, and enhancement are crucial for the sustainable, effective and effective operation. The outcomes envisioned from this institution is difficult to be achieved in existing scenario due to the frequent turnover of government staff and temporarily hired consultants.
What are the weaknesses in not being able to realise foreign commitments into investment and how can they be improved?
We have to understand the commitments and realisation in true sense. This narrative of gap in commitment and realisation must be changed. The serious commitments are realised in the due course of time of project implementation or the gestation period of the project. The 900 MW Arun-3 Hydropower Project laid foundation stone in 2018. The scheduled commercial operation is 2025. The approved investment amount will be received within the gestation period of the respective project.
We must see how serious and genuine the investor lodging interest to invest in the country is. Genuineness and credibility of the investors matter, which is why we have changed a few processes of giving investment approval. Rather than approving estimated investment before issuing the survey license, we issue study rights first, the investor submits the DPR or detailed feasibility study report (DFSR) based on that and investment approval is given only after the evaluation of the DPR/DFSR. This has helped us to screen credible, genuine, serious and potential investors.
So far, it has been confirmed that investment worth Rs. 350 billion will be mobilised. We are preparing the foundation to bring in more investment. The project investment of around Rs. 78.64 billion for 327 MW Upper Marsyangdi-2 and Rs. 9.68 billion for Dabur Nepal has been signed. Like Dabur, Satluj Jal Vidyut Nigam Limited has already signed an agreement to build another project of 669 MW Lower Arun. The Board regularised the execution of the 900 MW Upper Karnali Hydroelectric Project, including rescheduling the work schedule based on the instructional order of the Supreme Court.
Likewise, a few other projects have already entered in the PDA/PIA negotiation phase including 327 MW Upper Marsyangdi-2 Hydroelectric Project, China Nepal Friendship Industrial Park, Damak and Vehicle Assembly Plant by Motrex Co. The approved amount is mobilised gradually by the developer as per the requirement during the project implementation phase.
The preparations for Upper Trishuli-1, which a South Korean company is to develop, have been completed. Chinese and Indian investment projects are progressing. So, it seems that the majority of investments have come from the Board.
Which areas of Nepal attract higher investment?
Currently, more investment is coming in hydropower. As the IBN is promoting the export-oriented hydropower projects, the investors are also keenly interested to invest in this sector. Currently, 4,000-megawatt capacity hydropower projects have been incorporated into a result-based implementation framework.
Likewise, for social and economic development, investment in the infrastructure and facilities in other areas such as transport, infrastructure, tourism and health should be increased. There is immense potential in information technology. In addition to the commercialisation and transformation of agriculture, we have to find areas of competitive and comparative advantage in small and medium enterprises as well. However, we must keep a balance over the issues raised here. Therefore, it is necessary to attract investment in a quality project that gives quantitative and qualitative returns.
The IBN is holding an International Investment Summit in a few months. Why it is necessary?
Yes, the conference is also necessary to convey the message that Nepal is an investment-worthy country. In the past, we organised a national level investment conference, ‘Nepal Investment Summit’ in 2017 and 2019. Some projects that were showcased in 2019 are now being implemented. The Summit is a platform for showcasing the project, telling about the policies, rules and arrangements for investing in Nepal. We are doing necessary preparation for the summit to make it a success.
You are coming to the end of your tenure as the CEO of the IBN. What would be your focus in the remaining one year?
As the CEO, my priority will be to advance the projects in the pipeline at various stages towards implementation and facilitate them for completion. We are continuously working to develop the Investment Board as a strong, credible and sustainable institution. Public-private partnership and investment Act and Rules need to be amended in timely manner.
Similarly, another priority of the IBN is to increase commitment into the realisation threshold. For this, effective coordination, collaboration and facilitation among all sectors of the government are a must to bring the projects into execution. In order to attract foreign investors to Nepal, we are strengthening our relationship with the state-funded trade and investment promotion organisations such as Korea’s KOTRA, Japan’s JETRO and UK’s UKEF.
Source: The Rising Nepal