Nepal Attracts Rs 22.85 Billion in Foreign Investment Commitments Amidst Growing Challenges

In the first four months of the fiscal year 2023/24, Nepal has secured foreign investment commitments amounting to Rs 22.85 billion, as reported by the Department of Industry (DoI). However, despite the promising commitments, the actual foreign investments received by the country stand notably lower, raising questions about the challenges faced by the nation in translating commitments into tangible economic gains.

The DoI reveals that foreign investors have pledged investments of Rs 18.35 million for 178 new industries, and an additional Rs 3.72 billion for 21 existing industries. The fourth month of the fiscal year alone witnessed a commitment of Rs 2.74 billion, with Rs 1.75 billion allocated for 27 new industries and Rs 56.3 million dedicated to share purchase agreements (SPA) and share subscription agreements (SSSA) in two existing industries.

However, the Nepal Rastra Bank (NRB), the central monetary authority, reports that the country received foreign investments amounting to Rs 3.37 billion in the first three months of the fiscal year, indicating a substantial gap between commitments and actual inflows.

Comparing figures with the previous fiscal year, in the first four months of 2022/23, Nepal attracted foreign investment commitments of Rs 33.14 billion, demonstrating a decline in investor confidence. During that period, the DoI approved 327 foreign investments, with promises of creating 17,012 jobs. The commitment figure was even higher at Rs 54.14 billion in the first four months of 2021/22.

Breaking down the foreign direct investments (FDIs) for the first four months of 2023/24, commitments were made for 170 small industries, five medium-sized, and three large industries. The tourism sector emerged as the top recipient of investment commitments, followed by the service, manufacturing, ICT, and infrastructure sectors.

As of mid-July 2022, the total stock of FDI in Nepal reached Rs 264.33 billion, with contributions from 57 different countries. However, concerns arise as the trend of repatriations by foreign investors from Nepal continues to outpace the FDI received. In the first four months of 2023/24, foreign investors repatriated Rs 748.67 million as royalty and Rs 1.41 billion as dividends, surpassing the amounts repatriated in the same period of the fiscal year 2022/23.

This highlights the need for Nepal to address challenges hindering the realization of foreign investment commitments, ensuring a conducive environment for sustainable economic growth and fostering investor confidence in the country.