Sunday, 24 October, 2021

Facilitating FDI Inflow

Nepal is rich in natural resources but it has been unable to tap them in the absence of adequate capital, technology and managerial skills. As a result, its industrialisation process has slowed down. In early 1990s, Nepal adopted liberal economic policy with a view to attract foreign direct investment (FDI) that plays a vital role in building big infrastructure projects through the mobilisation of capital, human and natural resources and technology transfer. The FDI also involves financial and market access to the production, goods and services. It has been considered as a crucial instrument to boost economic growth and jobs. Accordingly, Nepal has amended the related laws to create atmosphere conducive to the flow of FDI into the country. Investment summits were also held in the past to woo the investors. Impressed by the commitment of successive governments and political parties, foreign investors had also pledged to pour their money into Nepal’s development. Still the flow of FDI is not encouraging owing to the several factors. Procedural hassles, including the red tape and cumbersome legislation are largely attributed to the unsatisfactory flow of FDI.

Political stability is key to provide confidence to the prospective investors because this ensures predictability and consistency in policy, law and order, and movement of people, goods and services. In February 2018, the country got a strong government that generated positive environment for the FDI flow. But Nepal again plunged into instability with the dissolution of the House of Representatives (HoR). The health of nation’s economy deteriorated with the COVID-19 pandemic that turned almost every sector upside down. The pandemic disrupted the flow of FDI globally and Nepal is no exception. UNCTAD's 2021 World Investment Report states that FDI inflows to Nepal declined by 32 per cent from USD 185 million in 2019 to USD 126 million in 2020 due to the economic and health crisis triggered by COVID-19. The country is recovering from the pandemic and its economic fallouts gradually.

Nonetheless, the FDI flow has been stymied by a set of bottlenecks, which the participants pointed out at an interaction in the capital the other day. They insisted that commission-seeking tendency, self-centred approach and lack of coordination among the line agencies have caused obstacles to the smooth flow of FDI. Minister for Finance Janardan Sharma ‘Pravakar’ said that instead of attracting investors with facilitation in every step and offering fast-track services, we turn our faces to other direction, get involved in brokerage of the projects for our own benefits and seek commission in every project. According to the news report carried by this daily, Minister Sharma admitted that his ministry was shy in transferring the rights to the line ministries while the latter did not give enough powers to the project chiefs.

It is imperative to assure the investors better service, facilitation and environment. At the same time, the government should focus on increasing the capital budget to enhance the basic infrastructures essential to attract the FDI. The political and bureaucratic leadership as well as the business community must rise above the individual interests to facilitate the FDI flow. The political parties should develop common development strategy and foreign policy and work together to strengthen institutional capabilities. At the same time, policy, Act and regulations must be in harmony with the Foreign Investment and Technology Transfer Act to overcome the bureaucratic hassles in inviting the FDI.