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🇳🇵 Nepal /Economy & Trade

Policy instability, weak implementation continue to deter foreign investment in Nepal

From Kathmandu Post · () English

Summarized by DistantNews. Read the original for the full story.

At a glance

News Named sources Context piece
  • Nepal has struggled to attract foreign direct investment (FDI), with its FDI-to-GDP ratio hovering around 0.2 percent, significantly lower than comparable developing nations.
  • Foreign companies operating in Nepal face persistent operational and policy challenges, hindering their ability to recommend the country as an investment destination.
  • Experts call for policy clarity, uniformity, and decentralization of decision-making to improve the investment climate, alongside a balanced budget that considers global instability.

Despite formally opening its doors to foreign direct investment over three decades ago, Nepal continues to struggle in attracting global investors. The country's foreign direct investment (FDI) to GDP ratio has remained critically low, hovering around 0.2 percent in recent years, a stark contrast to least developed countries like Cambodia, Bangladesh, and Rwanda that have secured significant foreign capital.

If all decision-making remains concentrated in Kathmandu or ministries only, “the result will only be delays”.

· Amlan MukherjeeHighlighting the need for decentralization of FDI decision-making.

Multinational companies operating within Nepal, while some are successful, face persistent operational and policy-related hurdles. These challenges prevent them from confidently endorsing Nepal as a favorable destination for foreign investment. There is a growing sentiment that these existing businesses could serve as crucial goodwill ambassadors if the investment environment improves.

Amlan Mukherjee, CEO of Unilever Nepal, emphasized the need for clarity and uniformity in both policy and its implementation. He suggested that if the upcoming national budget fosters an environment where existing companies can thrive, they will naturally become advocates for Nepal. Mukherjee also advocated for decentralizing FDI decision-making away from Kathmandu to expedite processes and ensure consistency.

Once there is faceless government and a decentralised policy is decided by the local authorities, there will be speed and also consistency.

· Amlan MukherjeeExplaining the benefits of decentralized policy implementation for FDI.

Mukherjee further stressed the importance of a balanced upcoming fiscal budget, considering the global instability stemming from the conflict in West Asia. He expressed expectations for a progressive budget that supports local industries, consumption cycles, and financial institutions, while also highlighting the potential of infrastructure investment to stimulate other sectors. He noted that Nepal's low manufacturing contribution to GDP, currently around 5 percent, is a consequence of its import-based economy, suggesting that domestic production would yield multidimensional benefits.

The moment Nepal begins producing within the country, the benefits will be multidimensional.

· Amlan MukherjeeDiscussing the economic advantages of domestic production.
About this summary

Originally published by Kathmandu Post. Summarized and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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