FDI inflow doubles amid optimism in economy

Published On: June 25, 2017 01:45 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 24: The country has received a total of Rs 11.61 billion in foreign direct investment (FDI) in the first ten months of the current fiscal year. 

According to Nepal Rastra Bank (NRB), the FDI inflow has more than doubled in the ten months of the current fiscal year 2016/17 if compared to the investment the country received in the corresponding period of the fiscal year 2015/16. Nepal had received a total of Rs 4.64 billion in FDI in the same period in the last fiscal year. The foreign investment is even higher than the total amount of investment that the country had received in the last fiscal year 2015/16. A total of Rs 5.92 billions flowed into the country as foreign direct investment in the last fiscal year. In fiscal year 2014/15, Nepal had received Rs 4.38 billion in foreign direct investment, according to the NRB's data. 

The jump in the FDI inflow follows the improvement in the business climate and optimistic economic growth outlook of the country. According to the Central Bureau of Statistics, the economy is estimated to grow by 6.9 percent in the current fiscal year 2016/17. 

The central bank also hopes that the increase in the FDI at a time when the trade deficit is rising at an alarming rate will help keep the balance of payment in surplus position.
 "Acceleration in reconstruction works will potentially increase trade deficit further at least in near future. Expected increase in foreign aid and foreign direct investment will, however, keep the country's balance of payment in surplus," read the recent monthly macroeconomic update report of the NRB.

 The rise in the FDI also indicates that the huge amount of pledges can be translated into real investment if foreigners find the climate favorable for investment and doing business in the country, say observers. While there used to be huge amount of FDI pledges from investors, only a small portion of such commitment is realized as actual investment.

While there was a commitment of FDI of a total of Rs 15.14 billion in fiscal year 2015/16 and Rs 67.4 billion in 014/15, only a fraction of such pledges were actually got converted into the actual investment (Rs 4.38 billion FDI in 2014/15 and Rs 5.92 billion in 2015/16).
While the rosy economic picture of the country is attributed to the jump in the FDI in the current fiscal year, the government' recent reforms is also paying off, according to observers. 

"There is political stability as well as political commitment to attract foreign investment. The governance and administrative process is getting better in facilitating foreign investment in the country," former Minister for Industry, Nabindra Raj Joshi, told Republica. "We have initiated second generation reforms and amended and framed various investment-related laws, rules and regulations for the easy entry, operation and exit of business. Above these all, we have sent a message to the foreign investors that Nepal offers a good potential for business and return," added Joshi, who had played a key role in convening the Nepal Investment Summit in March. During the summit, international investors from various countries had made investment commitment of nearly $13.51 billion. 

According to Joshi, the momentum of direct investment is likely to continue in the days to come. "Our reform efforts are coming to fruition. The commitment shown in the investment summit will be translated into the real investment as Nepal is a very lucrative destination for foreign investors in various sectors," added Joshi. 

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