After the deadly earthquake of April 25, progress in every sector will be evaluated on the basis of pre- and post-quake periods. No doubt, at least for a decade, our major resources will be diverted to reconstruction of physical infrastructure like buildings, roads, utility supplies, and renovation of historical sites and people's resettlements. No attention will be given to investment in agriculture. Reluctance of youth to join agriculture, our dependence on remittance, and shortage of labor force and agricultural inputs will make matters worse.Our FDI Policy 2014 has prioritized agricultural sector. But this is not enough to attract foreign investors. After three decades of officially recognizing FDI in the sixth five year plan (1980/81-1985/86) and the promulgation of Foreign Investment and Technology Act 1982, there has been no progress in legitimatizing FDI in agriculture.
The FDI Board aims to attract FDI in the form of finance, technology, management and employment generation and mobilize locally available and underutilized resources. But it has been ineffective. Nepal is party to several international treaties related to FDI on agriculture and trade. Several acts, regulations and directives have been formulated. So now is the time to have a genuine discussion on failure of our FDI policy: Is it because it hasn't been thought through? Or are there other factors like political instability and government failure that scare away foreign investors?
Economic liberalization and free market policy of post-1990 politics could not make noticeable progress in agriculture because of our failure to mobilize FDI. According to government only nine agro-based foreign invested projects (valued at US $265 million) were in operation until 2010. Their sustainability is in question. New Agriculture Development Strategy (ADS), which is considered a milestone policy for the next 20 years, is under discussion in the parliament. Given the bitter 20 years of experience of Agriculture Prospective Plan (APP), this too does not inspire hope.
The ADS has proposed a ban on FDI in primary production areas and open investment only on agro-based processing industries. This may become contentious because there was no consensus among stakeholders, farmer groups and plausible investors about opening FDI in primary production. Large tracts of agricultural lands in middle and high hills have turned barren because of migration, labor scarcity and lack of investment. Arable lands lie fallow even in the Tarai. If the government and Nepali farmers cannot invest and foreign investment in primary production is banned, there is no way we can increase production and productivity. Banning foreigners is no solution.
FDI in primary production sector will be used not only for production process but also to exploit the underused resources to increase productivity and market access. It can generate employment and contribute to local and national economy. Likewise, FDI works as a tool to integrate developing countries into the global market. It ultimately increases the capital available for investment. Investor will not only invest on production but also in infrastructure development. Small farmers will benefit.
Until red tape is the norm, it will be hard to invest in agro processing industries as investors wouldn't know what to expect from local farmers in terms of quality and quantity. The policy should focus on ethical choice for foreign investors and a system that links extension, production, transportation, processing and marketing. Such schemes have been successful in African countries like Tanzania.
We have no separate FDI policy for agriculture. Ministry of Agriculture Development (MoAD) has a 'policy and foreign aid coordination division'. It formulates national policies for agriculture development and drafts proposals to coordinate with donor agencies. This division should be restructured as 'policy, foreign investment and trade promotion division' and the current World Trade Organization section of the ministry should be included within this division.
MoAD should take the lead in formulating and implementing policies and priorities of FDI in agriculture that is in the best interest of the country. Otherwise, ADS could meet with the same fate of APP.
The author is a senior plant protection officer at the Department of Agriculture. He is currently pursuing his PhD in Plant Pathology at National Chung Hsing University, Taiwan
nabinsharma1973@yahoo.com
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