FDI commitment rises 56 percent

FDI commitment rises 56 percent
eKantipur.com, 14-May-07

As peace and democracy prevail in the country, foreign direct investment commitment to Nepal has recorded a 56 percent rise during the first nine months of the current fiscal year.

Report of Department of Industry (DoI) says Nepal received a FDI commitment of Rs 2.45 billion during the period, whereas it was Rs 1.56 billion in the same period last year.

However, challenges lie ahead in materializing the FDI commitments into reality, economists said.

The rise in volume of commitment is a good sign,� said Dr Dilli Raj Khanal, economist and lawmaker of CPN-UML. �It is, however, vital that we convert the commitment into actual investments,� he told the Post.

DoI record shows that one-third of the FDI commitments received in a year never enter the country due to political instability, labor stir and bureaucratic red tape.

And the incoming two third FDI projects also take at least two years to come into operation. In such a situation, DOI officials said stronger reform was needed to take benefits of the FDI potential.

The DoI has approved 121 FDI projects during the nine months of 2006/07, which is higher than the number (86 projects) recorded during the same period last year.

Officials stated investors could shy away from coming in the country if the government did not act strongly in enforcing much-committed reforms in Labor Act, industrial and trade policy, Industrial Enterprise Act and Foreign Investment and Technology Transfer Act.

Dr Khanal also noted that labor stir, which impacted industrial operations severely in the past months, could send a negative signal abroad. �Situation like that must be averted,� said he.

He also laid emphasis on the need to foster investment climate in order to create more employment opportunities in line with the aspiration of Janaandolan II.

�On the positive side, we have presently secured more FDI commitment in the manufacturing sector, which is the largest generator of employment compared to other sectors. It is up to the political leadership to ensure that those investments do not shy away from the country,� said a DoI official.

Statistics of DoI shows Nepal received maximum FDI commitment, totaling to Rs 1.28 billion in the manufacturing sector. Likewise, FDI commitment of over Rs 940 million has come for 56 projects under the service sector.

Tourism industry has also managed to secure FDI commitment of over Rs 150 million during the period.