With senior Indian ministers and Chinese investors showing the highest level of investment commitment, Nepal’s foreign investment climate is changing for sure

March 12, 2017, 5:45 p.m. Published in Magazine Issue: Vol.10,No. 14. March 10,2017, (Falgun 27, 2073)

Even as Nepal has been passing through a drawn-out phase of political instability, the recent response of neighbors, India and China, to make investment in Nepal has generated positive vibes. Sending two senior Indian ministers in the Nepal Investment Summit and Nepal Infrastructure Summit, two major events of late, India has indicated its willingness to support Nepal’s drive for development.

Indian Minister of Finance Arun Jaitley attended the Nepal Investment Summit and Indian Railway Minister Suresh Prabhu attended the Nepal Infrastructure Summit, which concluded in Kathmandu recently. These high-level representations have indicated that Nepal-India relations are warming up.

Although China did not send any high-level government delegation, the huge commitments made by the Chinese investors were encouraging. The Chinese investors proposed over a 100-billion rupees worth of investment in Nepal in energy, infrastructure and other sectors.

"Nepal is a lucrative destination for investment, given its immense economic possibilities,” said Indian Finance Minister Arun Jaitley, addressing the two-day Nepal Investment Summit organized by the Ministry of Industry and Investment Board of Nepal. “India wished to see an economically strong Nepal as Nepal could be developed through proper utilization of natural resources. There were investment opportunities in Nepal’s energy, agriculture, tourism and irrigation sectors.

“The investors of Nepal and India can move ahead through coordination for investment in education, medicine and engineering sectors,” said Jaitley.

Nepal Investment Summit, which concluded in the capital recently, garnered nearly $13.51 billion (equivalent to around Rs. 1,446  billion) in foreign investment commitments.

The Ministry of Industry, during the two-day event, signed Letters of Intent with foreign investors for investment to this effect, which is more than half of the country’s GDP structure of $22.49 billion.

Investors from Nepal’s northern neighbor China alone signed LoIs with the government to inject $8.3 billion in different sectors. Investors from Bangladesh have pledged to invest $2.4 billion; investors from Japan and the United Kingdom have signed LoIs to bring $1 billion investment each, while Sri Lankan and Indian investors have pledged to invest $500 million and $317 million respectively.

However, domestic investors have pledged to invest only $11.5 million in different sectors.

“Such an encouraging commitment from foreign investors will surely give Nepal a major boost as the country moves on the path to prosperity. MoI is committed to materializing this commitment from foreign investors and facilitate additional foreign investment into the country,” said Minister for Industry Nabindra Raj Joshi.

Maha Prasad Adhikari, chief executive officer of IBN, said a number of committees had been formed to review the commitments and outcomes of the summit. “These committees will constantly follow up on the pledges to materialize the outcomes of the summit and turn the investment pledges into reality,” Adhikari said.

Investors intend to pour $ 13.52 billion into Nepal, with China investing the highest amount. Amongst the interested investors, China has signed LoI worth $8.3 billion, which is more than half the total LoI signed. Apart from some six foreign investors, domestic investors have also signed LoI worth $11.5 million, making for a total of 16 investing organizations.

The investors have shown interest in sectors like hydropower, hotels, metro rail, airlines, tunnels, tourism, energy, agriculture, infrastructure, mines and the financial sector, amongst others, he said.

"They have signed the LoI, which means they want to invest in various profit-generating sectors in Nepal.

"The summit is the beginning of glorious days ahead and the economic development of the country," he said, adding that the country is on its way to transforming itself from a Least Developed Country (LDC) to a developing country. "The investment promised will certainly help push the country's economic growth."

He also said that within the next decade no Nepali youth would need to go to foreign countries for employment as investments will generate enough employment in the country itself.

Foreign investment started to flow into the country after the first Investment Summit held back in 1992, as the government then opened up various sectors for foreign investment. According to the Department of Industry (DoI), some 3,678 projects with foreign investment have been registered as of last fiscal year.

The department's data also show that these projects are worth investments totaling Rs 358,707.80 million in costs and have generated an estimated 217,681 jobs in the country. In the 25 years since a liberal economic policy was adopted, there has been a 40-fold increase in foreign investment projects from 93 in 1990 to 3,678 in the last fiscal year, according to the department.

Of the total number of companies in the country, more than 100 as of today have transactions worth over Rs 1 billion, according to the Large Taxpayers' Office (LTO).

Just a week before, foreign investors from different parts of the world also expressed similar commitment to Nepal. Organized by Confederation of Nepalese Industries (CNI), Nepal Infrastructure Summit 2017 was also able to lure the foreign investors.

“Nepal Infrastructure Summit 2017 was a great success to lure the investors, experts and policy makers,” said Haribhakta Sharma, president of CNI. “Nepal should focus on rail network as it is cheaper and greener. "Kathmandu–Delhi and Kathmandu–Kolkata lines could be two real possibilities."

 There were eight different sessions including two parallel ones. More than 450 individuals from 15 different countries participated in the summit. There were around 70 speakers in the panel who shared their invaluable experiences and provided insights into the infrastructure needs of the nation, said Sharma.

 “Nepal has performed well in social development and now it is high time to focus more on the infrastructure-led economic development. Nepal has a tremendous potential for growth and private sector has colossal opportunity for investment in various sectors. Given Nepal’s infrastructure gap, the investors not only benefit from current growth but can capture the future growth,” said Sharma.

Nepal needs to leverage the benefit of having economically powerful neighbors like India and China. Nepal as a country must keep its eyes focused on the megatrends and align its policies and programs accordingly.

Connectivity channels, especially railway, road and airport, are fundamental for development. Nepal should also take advantage of China’s One Belt One Road (OBOR) policy to integrate Nepal with the regional economies.

Delegates from private sector, government agencies, donor community and foreign countries, including India, China, Israel, France, Bangladesh, Brazil, Bhutan, Singapore and the US, participated in the summit where Indian Railways Minister Suresh Prabhakar Prabhu delivered a keynote speech.

India’s support shown through the participation of senior most ministers and Chinese investors’ commitment has indicated that Nepal’s neighbors are both changing their mood to support its growth.


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