• Wednesday, 28 September 2022

Stability For Investment

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Investment is regarded as the engine of economic growth. High economic growth can only be achieved by mobilising high level of investments in the economy. As the capacity of the government to invest is very low in case of Nepal, private investments are crucial to accelerate its economic growth. The flow of private investments from both the domestic and foreign investors, however, is highly influenced by the profitability of doing business. And the profitability in the business is largely affected by the investment climate in the economy. A wide range of factors including sound macroeconomic policy, political and economic stability, well-functioning legal and regulatory framework sound infrastructures, among others, play an important role to create a conducive investment climate in the country. The investment climate has been significantly improved after the country entered into the new system of governance. 

More stability and predictability in socio-political and economic fronts, and improved governing system have created better investment friendly condition in the country. As capital formation is very low in Nepal due to low per capita saving, the country could not achieve the desired level of economic growth by mobilising domestic capital only. Therefore, we need to lure more foreign direct investment to meet the capital deficiency. Though the government has made various efforts to attract foreign investments in the country, expected results have not been achieved in this front so far.  Nepal government is especially targeting non-resident Nepalis (NRNs) to attract foreign investments in the country. In addition to different types of special facilities offered to NRNs to invest in Nepal, the country has recently introduced the provision of NRN citizenship to facilitate NRNs’ investments. 


With the improved condition, NRN leaders have also expressed their hope for increased foreign investment in the country. As per a news report published in this daily on Tuesday, Dr. Upendra  Mahato,  founding  president  of   Non-Resident  Nepali  Association (NRNA), has said that the FDI flow in the country would increase by 40 per cent if there is a guarantee  of  stability  in  bureaucracy  for  the  next  five  years. Stating that a large part of the FDI commitment goes unrealised, he maintained that political and bureaucratic instability are the two main causes behind it. He viewed that instability in bureaucracy will have greater effects on the development and the investment climate compared to political instability. He has said that the provision of NRN citizenship will reduce capital flight and increase capital inflow especially from NRNs. Currently there is not a single ministry and administrative agency that could enjoy the leadership of a minister or civil servant for more than two years. It has hampered the expertise and institutional memory in the government agencies. 

Lawmaker Gagan Thapa has said that there should be a clear policy provision for the repatriation of income and wealth generated by NRNs and foreigners to attract more foreign investments in Nepal. Since, there is no alternative to attracting private investments from within the country and abroad in order to achieve the goal of high economic growth, the government should ensure more stability and predictability in governance and bureaucracy. At a time when political parties are attempting to forge poll alliances for the upcoming general election, they should focus to ensure a stable government for the next five years. Moreover, the government should ensure stable bureaucracy and appoint specialised human resources in concerned fields and avoid their too frequent transfers. 

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