KATHMANDU, Jan 4: Only a third of the total outstanding stock of foreign direct investment (FDI) is on paid-up capital while the remaining portion is held in reserve or debt, according to a study conducted by the Nepal Rastra Bank (NRB).
The study shows that the country had the outstanding FDI stock of Rs 151.75 billion as of mid-July 2016 while the portion of the paid-up capital was only Rs 55.3 billion. The rest of the amount is either the loans or is in reserve. The study shows that Rs 90.95 billion of the total FDI is in reserve while Rs 5.12 billion of the FDI is in loans.
Speaking at a roundtable on 'Industrial Development and Trade Policy' jointly organized by Society of Economic Journalists- Nepal (SEJON) and Economic Policy Incubator (EPI) in Kathmandu on Wednesday, NRB Executive Director Nara Bahadur Thapa said that the study found that 252 firms in the country have FDI. Of the total firms receiving FDI, only 37 are related to manufacturing sector. Out of the 37 manufacturing firms, who have received FDI, only 11 firms export their productions. Eight firms export fast moving consumer goods like noodles, juice and biscuits, while three firms export industrial goods, according to the NRB study.
Thapa also said that decision to repatriate the reserve could have macroeconomic consequences. “If will be a major macroeconomic concern if these firms decide to reinvest or repatriate the fund,” he added.
Amid calls for the review of the existing pegged exchange rate system with India, Thapa, who is also the chief of the Research Department of the central bank, said that the peg should be the last strategic option of the country to increase trade competitiveness and industrial development.
Earlier in his presentation, Pushkar Bajracharya, Professor of Management at Central Department of Management, Tribhuvan University, said that Nepali currency is overvalued, affecting the competitiveness of Nepali industries. “Nepali currency is reportedly overvalued by 13/14 percent. So, the ability to encourage exports and discourage imports will be arduous,” said Bajracharya. “Hence, foreign exchange regime should be reviewed periodically and the present strategies of pegging with Indian currency should be reviewed or necessary adjustments should be initiated while taking into account feasible and viable implications,” he added.
Meanwhile speaking at the event, leaders of the private sector underlined the need for a policy reversal in the country for industrial development. “We are in the deindustrialization process. Only the policy reversal can stop the deindustrialization,” Hari Bhakta Sharma, president of Confederation of Nepalese Industries (CNI), said. “We have to revisit the age-old business laws and come up with comprehensive two to three laws.”
Likewise, Industry Secretary Yam Kumari Khatiwada said that the government will ensure uninterrupted power supply for industries in Special Economic Zones within a month.