Source::The Kathmandu Post
With the world finally starting to recover from the COVID-19 with rapid vaccination rates, de-escalation of travel restrictions and the Omicron being milder than the other variants, good news finally reach Nepal with Foreign Direct Investment (FDI) increasing by thirty per cent from last year.
In the first six months of fiscal 2020-21, investment commitments were about Rs 23.47 million for 123 projects. Now in the first half of the fiscal year 2021-22, it has increased to Rs 30.56 billion on 129 projects. Still, the FDI pledges are lower than the fiscal year 2019-20 where it stood at around Rs 37.80 billion before dropping to Rs 32.02 billion in the second half of the fiscal year. According to the Department of Industry, China topped the list of the countries that contributed FDI pledges significantly, with the northern neighbour investing about Rs 23.37 billion in 107 projects. Meanwhile, India has invested about Rs 290 million in four projects.
The statistics show that the main areas of FDI pledges have been tourism, service sector and industrial projects. FDI allocated about Rs 9.83 billion in 57 projects, while 31 FDI pledges have invested in 21 small and medium-scale industrial projects worth Rs 3.41 billion. The service sector got a lion share with Rs 16.21 billion worth of investment for 40 projects, mostly in software development, international cargo handling and construction services.
While the new Omicron variants have rekindled some fears, many assume that with the current trend of downward cases and improved policies, the increment of FDI won't be affected much. Experts have pointed out that the rise of FDI occurred during the waning of the second wave of COVID-19.
Following the increased FDI, many policymakers have discussed changing some policies and procedures to address some problems with the current handling of FDI. Nepal's central bank has rolled out the Foreign Investment and Loan Management ByLaws 2021, which freed foreign investors from prior authorization to transfer foreign currency into Nepal after obtaining approval from the foreign investment sanctioning body. There is also talk of lowering the limit of Rs 50 million for the money to be considered FDI. Experts have argued that it is time for changing procedures to make an investment for foreigners easier by cutting bureaucratic procedures and red tape, making guidelines clear and transparent, attracting more investors.
But while the increased FDI pledges have been a sign of recovery and things to come, last year's report shows that FDI pledges and approved investments have different figures. It shows that while pledges are good things, investment for the projects is not ensured until the investment has been approved. In addition, there might be a time lag between approval and the actual investment to come through, meaning that it might take some time for the investment to make an impact.
Photo Credit: [GRID-Arendal/Flickr]
