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Nepal Behind Afghanistan In FDI Inflow

  1 min 35 sec to read

Nepal is trying to lure Foreign Direct Investment (FDI) in various sectors. The Foreign Direct Investment Policy Draft 2013 has suggested active economic diplomacy and transparency to attract more FDI in the country. It has prioritised hydropower, mines and minerals related industries, agriculture and herbs processing, infrastructure development and tourism for FDI. Fast track road, railway, tunnel way, cable car, metro, flyover and international airports have been identified under the infrastructure heading in the FDI Policy Draft. The draft has also fixed a minimum floor of US$ 200,000 for FDI, whereas in hydropower the project should be of at least 30MW to be allowed for FDI. 
 
However, the lengthening of political transition is taking a toll on FDI inflow in Nepal. According to a report by United Nations Conference on Trade and Development (UNCTAD), Nepal remains one of the worst performers in South Asia to attract FDI. Nepal saw a decline of FDI inflow by 2.85 per cent in 2012. UNCTAD’s World Investment Report 2013 informed that Nepal attracted FDI worth US$ 92 million, against the 2011 figure of US$ 95 million. Nepal stood second from bottom in FDI inflow index in 2012 in the region, ahead only of Bhutan. Nepal’s performance was poorer than even Afghanistan. 
 
The country’s poor performance has put a big question mark on Nepal government’s efforts. Attracting foreign investment is a strategic agenda for Nepal. The government has long reiterated and pledged policies aiming to lure FDI. However, political instability, inefficient bureaucracy, corruption, lack of infrastructure, restrictive labour regulation etc makes Nepal one of the least competitive economy in the world thereby unable to attract potential FDI. Despite the announcement of Nepal Investment Year 2012-13 and formation of Nepal Investment Board, the prospects of FDI inflow looks bleak in the foreseeable future.
 

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