‘Due to limited financing options Nepal is obliged to depend on FDI’


The government is set to host a mega investment summit towards the end of March. Though preparations are being made to make the event successful in encouraging foreign direct investment in Nepal, what needs to be noted is that the government has not been able to fully realise investment commitments made in the past. Sujan Dhungana of The Himalayan Times spoke to Maha Prasad Adhikari, chief executive officer of Investment Board Nepal, to get details of the summit and investment environment in Nepal. Excerpts:

The government is set to host an international investment summit next month. What are the objectives of hosting this event again?

Yes, the government will be hosting an investment summit on March 29 and 30 in Kathmandu. The primary objective of the summit is to draw in mega foreign direct investment (FDI) in Nepal. Unlike in the past, Nepal today has a two-third majority government which is stronger and the country has also achieved political stability. All sorts of transitions have come to an end today and the country’s focus has shifted to economic expansion. However, adequate investment is necessary for economic development as well as the overall development of the country. As the country has limited financing options, Nepal is obliged to depend on FDI for economic development. Thus, the investment summit solely intends to update potential investors about the current investment scenario and encourage foreigners to inject their investment in different viable sectors.

An investment summit of a similar nature was held in 2017 but it did not prove to be successful in terms of bringing in FDI. How hopeful is the government that this summit will encourage foreigners to actually invest in Nepal?

An investment summit of a similar nature was hosted in 2017 and letters of intent (LoI) for investments worth almost $14 billion were signed with foreigners. Though we were not able to attract much FDI, almost $4 billion of the total investment commitment expressed by foreigners in the previous summit is in the process of being materialised. Thus, we should understand that investment summits are necessary to bring in FDI though it may be a gradual process. It will be too optimistic to assume that all investment commitments made in the summit will turn into reality. After showing intention to invest in a country, foreigners look at various aspects like policy friendliness, available investment projects and readiness of the government to implement a project before coming to invest. If the potential investors find any flaws, they will cancel their investment plan. As a result, all investment commitments do not turn into real investment. Similarly, the government also does not give approval to investment projects which are unnecessary and against the benefit of the nation. The government approves only those investment projects that are necessary. Similarly, investors must follow a certain administrative and legal procedure to invest in Nepal and if they do find some procedures not suitable to them they will not make any investment. As a result of all these things, there will certainly be some gap in the investment commitment and actual investment. However, Investment Board Nepal (IBN) has kept investment intent as one of the investment indicators in the country. Similarly, there are a few examples that a country or region has been able to draw huge FDI after the second investment summit. Experiences of Gujarat in India and South Korea are a proof to that. Investors choose the best investment destinations and promoting Nepal as comparatively the best destination for investment overnight is not possible. It is necessary to host investment summits time and again, especially for nations like Nepal which find it difficult to collect necessary financing for investment from domestic resources. We have to depend on FDI to meet our investment and development goals. However, it is crucial that we assure favourable environment for FDI by making necessary changes in the existing policies and enhancing other infrastructure. In the upcoming investment summit, the government will try its best to assure potential foreign investors that Nepal is an appropriate land for investment. Along with this, we will also showcase policy changes that the country has made targeting foreign investments in the last couple of years, the government’s strategy for FDI, experiences of foreign investors in Nepal and country’s economic strength. I believe that the investment summit is being organised at an appropriate time. The country today has political stability and everybody is eyeing development. We have also learned lessons from the previous summit. We expect that this summit will help draw notable FDI in Nepal.

Despite large FDI commitments, the actual FDI that comes to Nepal is negligible. Why is this the case?

As I mentioned earlier, bringing in investments is not a one-attempt process. It is good if it comes in the first attempt itself, but if it does not come then we should not be worried. We need to work hard to capitalise on all investment pledges. Yes, Nepal did not receive FDI worth the commitment made by investors in the previous summit but no country receives all investment intents. After the previous summit, we discussed with investors who had expressed their intent to invest in Nepal to capitalise on their plan. We identified the actual potential investors among those who had expressed investment commitment. During the discussions with multiple potential foreign investors, they expressed some serious concerns for investing in Nepal. The government today is addressing the concerns of foreign investors in existing policies. It is natural that Nepal did not receive notable investment from the commitments expressed by investors in the previous summit as the Constitution and the new federal structure was just being implemented and there was some sort of uncertainty prevailing.

It is said that the investment summit this year will target to bring such investors who have been trying to invest in risky zones/countries. Can you please elaborate on this.

We have requested potential investors from across the world to participate in the investment summit in Kathmandu. Generally, risk and output have direct relationship in investments and high-risk results in better output. Foreigners were not attracted towards investing in Nepal a few years ago as there were too many investment risks. As of today, investment risks in Nepal have come down drastically while investment returns have increased. In such a context, we can attract investors who are planning to invest in risky zones to Nepal. If we are able to bring in a few such investors, others will follow gradually. Moreover, Nepal today is a fertile land for investment for every type of investor. However, those investors who have been investing in risky areas can take more benefit from investing in Nepal.

Does this mean that Nepal is still a risky zone for investment?

It is not the context now. Today, Nepal is an appropriate destination for investment and our business environment is becoming competitive. The government is also preparing to launch a sovereign rating, which will go a long way in attracting investment. It is due to the improved business climate that banks and financial institutions in the country have been expanding their loan portfolio in different sectors. I believe that there is no business challenge in Nepal that cannot be managed in due course of time.

What are the projects that the country will be showcasing in the summit?

IBN is developing necessary projects to be promoted in the upcoming investment summit. We have collected potential investment projects from across all provinces. Moreover, provincial governments are also taking the responsibility of implementing these selected projects in their respective provinces. Similarly, we have also sought investment for potential projects from private sector. We have been developing investment projects especially related to regional airports, cold storage facilities, hydropower projects, film city, urban transportation and railways, among others.

Source: The Himalayan Times.