FDI inflows fall by two-thirds: NRB

Kathmandu, Aug. 31: The total Foreign Direct Investment (FDI) stock in Nepal has increased by 11.8 per cent in the Fiscal Year 2022/23 and reached Rs. 295.5 billion but the net FDI inflows to the country has gone down by 67.9 per cent to Rs. 6.0 billion from Rs. 18.6 billion in 2022/23. 

Such inflows amounted to Rs. 19.5 billion each in 2021/22 and 2020/21, which were the highest FDI amount received by the country so far.  

Of the total foreign investment received by Nepal in 2022/23, the share of paid-up capital was 52.8 per cent, reserves were 33.7 per cent, and the share of loans was 13.5 per cent, concluded 'Survey Report on Foreign Direct Investment 2079/80' published by the Nepal Rastra Bank (NRB) on Friday.

Similarly, by mid-July 2023, Nepal received FDI from at least 58 countries. Out of them, India is the largest investor with an FDI of Rs.103.45 billion which makes about 35 per cent of the total foreign investment in Nepal. Likewise, Chinese FDI in Nepal stands at Rs. 35.46 billion (12 per cent) while Ireland is in the third position with Rs.22.62 billion (7.7 per cent) investment.

Other top FDI sources for Nepal are Australia Rs. 19.6 billion (6.4 per cent) and Singapore Rs. 18.81 billion (6.4 per cent). 

Similarly, the West Indies, South Korea, the United Arab Emirates, the United States of America and Hong Kong are other big contributors. 

Likewise, 59.7 per cent of the total FDI stock in Nepal is in the industrial sector and 40.2 per cent is in the service sector. Under the industrial sector, 30 per cent of foreign investment is in the hydropower sector and 29.4 per cent is mobilised in the manufacturing sector, read the NRB report. 

"Similarly, 26 per cent of the total FDI is in banks and financial institutions and insurance companies under the service sector," it said. 

On a provincial basis, Bagmati Province has received the highest FDI in Nepal with about 59.7 per cent FDI mobilised to this province. 

The FDI in Gandaki Province is 15.1 per cent, Koshi Province 14.7 per cent, and Madhes Province 8.8 per cent. The FDI in Lumbini, Karnali and Sudurpaschim provinces is less than 1 per cent.

According to the NRB, it has been found that the capacity utilisation of FDI-operated manufacturing companies is 60.69 per cent, while the return on equity is found to be around 11.61 per cent.

Meanwhile, in line with the global trend, gross FDI inflows decreased by 59.6 per cent to Rs.7.8 billion in 2022/23. The divestment of foreign investment (repatriation of investment) during 2022/23 remained at Rs.1807.3 million which is around 23.3 per cent of gross FDI inflows, informed the report.

To collect necessary data related to FDI and provide assistance in the formulation of necessary policies based on the sectorial situation and trend analysis of such investment, the Department of Economic Research has been publishing annual FDI status reports.

For the survey of the last FY, 238 companies were selected from the institutions established and operated with the FDI.