A good chunk of Foreign Direct Investment (FDI), perhaps meant for Nepal is finding its way to the neighbouring Indian states. The Indian states, specially those sharing borders with Nepal, such as Bihar, Uttar Pradesh, Uttaranchal etc are fast becoming preferred investment destinations for foreign investors, thanks to the rapid infrastructure development, investment friendly industrial policies and guarantee of investment security in India in recent times.

Additionally, the political instability, strikes and extortions has hit the Nepali entrepreneurs adversely. Industrialists in Nepal have held responsible the government for lack of security. They have shown their dissatisfaction towards the government for narrowing the tax liberty rather than providing subsidies.

Suraj Vaidya, President, FNCCI, said, “It is such a dreadful condition that the government has not been able to formulate economic agenda for overall industrial growth. “Investment securities are the major concern for both national and international investors these days. The present scenario would adversely affect the Nepali economy, thus losing out a large chunk of FDI to its southern neighbor, added Vaidya. Upper Karnali and Western Seti incidences have marked a bitter experience amongst the foreign investors. As stated by top officials of the federation, one Nepali Biscuit Industry vanished to India due to lack of favorable business environment.

Dinesh Shrestha, Sectoral Committee Chairperson of FNCCI said, “The leaders of political parties have not been able to create favorable environment for investment. He urged the need to control the party workers to put a stop to the acts of extortion and strikes. The industrial policy drafted two years ago has not come into execution. This has resulted in creating discouragement amongst the Nepali industrialists.

Currently, the financial indicators of Nepal are negative which stands at 134th position in terms of FDI within the list of 141 countries based on the World Investment Report-2011. Similarly, “Doing Business Index” of World Bank has considered Nepal as an unfavorable destination for Investment and doing business. This has relayed negative message in the international arena. On the other hand, foreign investors are lured towards neighbouring states of India due to flexibility in Indian FDI policies.

Radhesh Pant, CEO, Investment Board, said, “Foreign investors seek “One Window Shop” and we have not been able to do adequate marketing of the available resources and other positive aspects.” There is a lack of coordination between the government and private sector in Nepal unlike India, added Panta. According to him, the government should provide investment security to existing investments along with seeking additional flow of FDIs.

According to Vaidya, creating favorable investment environment and improvement in policies are primary steps towards attracting FDIs. Apart from it, political stability is the major factor governing this process.