The government has sped up preparations for the forthcoming Nepal Investment Summit 2019 scheduled for March 29-30 in Kathmandu. Of course, summits like this can prove to be helpful for attracting FDI.
However, given the rate of success of events organised in the past, there are doubts that the upcoming summit will help to increase FDI inflow. For instance, the Nepal Investment Summit 2017 secured FDI pledges amounting to USD 13.52 billion, a record high commitment by foreign investors. However, so far, the process is ongoing to realise Rs 400 billion only. At this pace, it will take many years to realise even half of the pledges made in the previous investment summit. Given the past experiences, it is possible that even this Rs 400 billion will not come in. It is a known fact that Nepal receives only 20-25 percent of the FDI pledges made during a year by foreign investors.
Currently, there are several hurdles for foreign investors in Nepal. For any investor, appropriate legal arrangements for investment, profit making, and repatriation of profits and investment are the topmost concerns. There are several weaknesses in our legal system that discourages investments. The issues related to acquisition of land, environmental impact assessment (EIA) of projects and weak security of intellectual and industrial property (IPR) are well known. Many such areas are being governed by decades old laws, rules and regulations that have contradictory provisions and have become obsolete at present. The government and the parliament have been too slow to work for making a comprehensive legal ground for facilitating FDIs in the country. There are still a substantial number of amendments of economic laws pending in the federal parliament. Only a very few laws have been amended in the recent years which is not enough to persuade foreign investors to invest in Nepal.
Similarly, court decisions also play a role in attracting FDI. The FDI pledges will be realised only if the decisions by the courts are made in time. The bureaucratic red tape is another factor hindering the foreign investments. Basically, foreign investors look for a single-point to avail all the services from the government when they seek to invest in any country. The government over the last several decades, ever since the Panchayat days, has repeatedly promised said to establish a ‘one-stop’ service point for facilitating foreign investments, but no such step has been taken so far. The high level of corruption also discourages foreign investors to come here. Nepal ranked 124th among 175 countries in the Corruption Perception Index (CPI) 2019 recently published by the Transparency International. Nepal’s position in the CPI is enough to scare off many foreign investors who look for a corruption free environment for doing business.
Ineffective economic diplomacy is another obstructing factor for receiving FDIs. The government has directed Nepal’s embassies to spread the word of the upcoming summit among the prospective investors. But this approach is unlikely to bear any result due to the low level of negotiation capabilities of Nepali diplomats. They are yet to be trained about the government’s priority sectors and major aspects of investing and opportunities for foreign investors in Nepal.
Above all, credibility of the government is most crucial element to gain trust of foreign investors. At a time when even the domestic investors do not have confidence in the government’s policies and actions, how wise would it be to expect foreign investments? Events like the Nepal Investment Summit will only be meaningful when an environment conducive to business and investment is created.
Madan Lamsal
