Stakeholders have said that policy stability, investment security and transparent administration are indispensable to attract foreign investment (FDI) in the country. At an interaction program on 'How to untie the knot of foreign direct investment in Nepal' organized by the Society of Economic Journalists of Nepal (SEJON) on Monday, they said that Nepal has not yet become a reliable destination for investors due to unstable tax policy, weak infrastructure, administrative hassles, and lack of skilled manpower.

In the first nine months of the current fiscal year, only Rs 24.98 billion of the investment commitment of Rs 41.71 billion has been received. Only 59.84 percent of the investment has been received. According to Nepal Rastra Bank, the highest foreign investment of Rs 14.15 billion was received in Chaitra.

Advocate Semant Dahal said that the contribution of foreign investment to the gross domestic product (GDP) is less than 1 percent and a target should be set to increase it to 4-5 percent.

To attract foreign investment, Nepal needs to create an environment that gives investors confidence along with policy and administrative reforms, he said. 'Capital is very timid. That is why investors look for a fearless environment,' he said. 'The main question is how much we have been able to respect such an environment. Additional capital goes where investors see higher returns and a safe environment.'

Saiwal Ghosh, coordinator of the Federation of Nepal-India Chambers of Commerce and Industry (Nikki) Business Forum, said that FDI is not possible without policy stability and investment security.

Although an environment for FDI has been created in Nepal after the restoration of democracy, investment has been affected in recent years due to various reasons including economic slowdown and policy instability. 'The environment for FDI has been created after democracy came. Multinational companies like Surya Nepal and Unilever have come to Nepal,' he said.

He said that there was a long period of economic slack after the 2072 earthquake and the subsequent COVID pandemic. 'Earlier, they used to go abroad for work, now they have started going abroad for studies,' he said.

He said that when foreign investors invest in Nepal, they mainly look for investment security, arrangements for repatriating profits, brand ownership and policy stability. Stating that investors need a safe environment, he said that they will not be confident when policies change frequently.

He said that expansion of production-oriented industries is necessary to create jobs. He said that both technology and foreign investment are indispensable for that. Ghosh said that Nepal can become an attractive destination for foreign investors only if a policy focused on production, technology and long-term industrial expansion is brought in.

Advocate Dahal said that discriminatory behavior, irresponsibility and administrative complexity still persist in Nepal. ‘Investors are discouraged, especially due to delays in the clearance and approval process,’ he said. ‘It is called a one-door system, but in practice, investors are forced to visit many offices.’ Dahal says that the culture of having to pay informal ‘salaries’ after administrative hassles has also affected foreign investment. If there is less transparency in law enforcement, investment will not come to that country.’

‘The weakening of the Corruption Perception Index is also a negative sign for foreign investment,’ he said.

Dahal said that even if the IT industry cannot expand its huge investment, industries can be automated. ‘IT can play the role of an enabling catalyst to expand automation in industries like Berger to Surya Nepal,’ he said.

He said that the increasing bad debt situation and economic uncertainty have become a matter of concern for foreign investors. 'Investors conclude that they will not invest in a country with macroeconomic problems,' he said.

He said that even if the government tries to solve the immediate problems through an ordinance, it will not provide a long-term solution. 'An ordinance can address some problems immediately, but sustainable improvement is not possible through it,' he said.

According to him, the government should prioritize solving the problems of stalled projects by identifying the real obstacles.

Although Nepal is one of the most suitable places in the world for industrialization, it has not been able to attract foreign investment due to policy instability, land ownership and industry being treated the same, said Ravi KC, Vice President of Corporate Affairs of Surya Nepal Pvt. Ltd. 'Nepal is a country geographically close to a huge market,' he said, 'Nepal is in a position to reach the world's largest population within an hour's drive.'

According to KC, the Gulf countries have become rich because of fuel, while Nepal has great potential for clean and cheap electricity. ‘We also have cheap manpower. Along with Nepal, the labor markets of India and Bangladesh are also close,’ he said.

He mentioned that Nepal has the potential for environmentally friendly production and if managed properly, it can be developed as a production center. According to KC, the infrastructure and land policy required for establishing industries are the biggest problems at present.

‘The criteria for land available to an individual and an industry are the same,’ he said. ‘We talk about bringing investment, but there is no infrastructure required for industries.’

He said that land in areas with roads and electricity is very expensive. ‘The price of land in areas with roads and electricity is more expensive than in New York, America,’ he said.

Even though there are Special Economic Zones (SEZs) in the country, they have not become effective. KC said that even though multinational companies have made profits in Nepal, new investment has not been able to come in. ‘Except for Colgate, most multinational companies that have come to Nepal have made profits,’ he said, ‘but there is no investment in Nepal at the moment.’

It takes 4-5 years to establish an industry, while it takes more time to build production and brands, so investors should seek long-term policy stability, he said. ‘Investments are made based on today’s tax rates. Investors come to make profits,’ he said.

He said that different tax systems at the provincial and local levels have increased the tax burden on industrialists.

He said that the lack of skilled workers has become another challenge in industrial expansion. ‘I am providing employment to five to six thousand people, but it is becoming difficult to find the necessary skilled manpower,’ he said.

He complained that the government has prioritized trade over production. ‘The customs rates for raw materials and finished goods are the same,’ he said. He said that the government should facilitate the import of semi-furnished and raw materials, which will help make manufacturing-oriented industries competitive.