Political stability key to attracting Indian investment

Kathmandu, Mar. 10: Indian investors in Nepal have said that political environment is the key consideration for making investment decisions in the country. 

A study conducted by the Nepal-India Chamber of Commerce and Industry (NICCI) with the participation of 17 companies with Indian investment found that the political environment is considered a fundamental factor when deciding to invest in Nepal with 15 affirming its importance. 

The study 'Business climate survey for Indian companies in Nepal 2024' was launched at the first Prabhakar SJB Rana Memorial Lecture on 'Celebrating Leadership, Vision, and Legacy' organised by NICCI in the Capital on Sunday.

According to the Commerce Wing at the Embassy of India in Nepal, by 2022, there were 150 ventures with Indian investment running actively in Nepal. The study included 17 companies out them from manufacturing, banking and finance, energy and infrastructure sectors. 

While Nepal has received FDI from at least 58 countries so far, India is the largest investor with more than one third of the total FDI stock. It had a share worth Rs. 103.5 billion of the total FDI stock of Rs. 295.5 billion by the end of Fiscal Year 2022/23, according to a report of the Nepal Rastra Bank. 

India was followed by China with Rs. 35.5 billion (12 per cent), Ireland with Rs. 22.6 billion and Australia with Rs. 19.1 billion. 

The study reported that major hurdles for the Foreign Direct Investment (FDI) from India to Nepal include policy inconsistency, legal constraints and administrative policies, and procedural hassles. Meanwhile, infrastructure deficits, and limited skilled manpower further compounded the investment climate highlighting a predominant need for domestic reforms over external considerations, read the report. 

The study also revealed that the Indian investors have come to Nepal under their market expansion policy with 12 participating companies confirming it while four have come here because Nepal has a strategic location. Likewise, labour availability, procedural ease, resource seeking and taxation were also the factors for investment attraction. 

Likewise, Indian investors in Nepal also expressed concerns about the high import tax, nascent state of local manufacturing, declining consumption potential and lack of market competition to expand their business or enter with new investment plans. 

"Additionally, issues regarding the small cap line market and the declining residing population, even with a population dividend have been tagged as probable risks that add to the contemplations," read the report. 

Stating that the government needed to prioritise policy consistency to boost investors' morale, it pointed to the need to amend the existing laws and policies as per the new market and business environment. 

"The issues surrounding the patent and intellectual property rights (IPR) need serious attention according to patent infringement complaints in the Department of Industries," read the report prepared by a team led by Kuvera Chalise. 

Economy integrates with culture

Speaking on the occasion, Dr. Krishnamurthy V. Subramanian, Executive Director at International Monetary Fund (IMF) and former Chief Economic Advisor to the government of India, said that religion and social norms in the eastern part of the world can't be separated from that of the economic ones. 

"It is critical that we go back and understand the ideas propagated by our ancestors and religion in developing and promoting entrepreneurship and wealth creation," he said. 

According to Dr. Subramanian, wealth creation is critical for economic prosperity. Even the social state needs steady sources of wealth creation to run the state and leverage services to its citizens. He urged one and all to find solutions to the economic challenges and development needs from the religious scriptures and eastern philosophies. 

Rana, a trailblazer

The NICCI has initiated the lecture to celebrate the legacy and contribution of Late Prabhakar SJB Rana to the economy and the nation. 

Late Rana was the founder President of NICCI (1993) as well as many business and social associations including Hotel Association of Nepal (HAN), Independent Power Producers’ Association, Nepal (IPPAN), PATA Nepal Chapter, and Nepal Heritage Society.

He was the first entrepreneur in Nepal who championed the idea of inviting international brands and companies with the FDI. "He succeeded in the concept of separating the domain of ownership and management," said Siddartha SJB Rana, Chairman of Tara Management Pvt. Ltd. – the parent institution of various companies under the Sipradi Group – and son of late Rana. 

“In terms of economic reforms in 1990s, we were ahead of India but we somewhat stalled the process during the course of development. Unless we change the mindset and pattern that we are confined to today, desired results won't be achieved, said Siddartha. "This is the economy that is driven by remittance and soon in the future we will be facing problems to hire qualified human resource. We need to put efforts and resources to reverse the situation," he maintained. 

Late Rana was born in 1934 at the Singha Durbar and died on 31 May 2019 in New York. 

He had established the famous Soaltee Hotel (now Soaltee Kathmandu) in 1966. Prasanna Shrivastava, Deputy Chief of Mission at the Embassy of India in Kathmandu, said that the agreement for long-term power trade between the two countries signed last year will further strengthen the economic cooperation between the two countries.

He also stressed on greater connectivity and transfer of technology for more impactful business and economic cooperation between the two countries.