First Business News Portal in English from Nepal
KATHMANDU: Foreign investment in Nepal, so far, accounts to Rs 182.91 billion, according to a study conducted by Nepal Rastra Bank (NRB).
As per the FDI report made public by the central bank on Wednesday, FDI in Nepal accounts to Rs to Rs 182.91 billion (including (paid-up capital, loans and resources in reserve funds). As per the report, foreign direct investment declined by 8.8 percent to Rs 182 billion in 2075-76 compared to the previous fiscal year.
FDI in 2074-75 had reached Rs 200.5 billion. FDI in Nepal has declined in Nepal in line with decline in foreign investment reserves of companies. Paid-up capital has the highest share in overall FDI in Nepal. Of the total foreign investment worth Rs 183 billion, paid up capital is Rs 88 billion (48.2 percent).
Similarly, 42.8 percent or Rs 78 billion FDI is in the form of reserves whine 9 percent or Rs 16 billion FDI is in the form of loan. India has the largest share in FDI in Nepal. According to the report, India alone has 30 percent stake in overall FDI in Nepal (Rs 56 billion of Rs 183 billion).
After India, China’s share in FDI in Nepal is 15 percent or Rs 27.56 billion while Saint Kitts and Nevis is the third largest source of foreign investment in Nepal. So far, investment from Saint Kitts and Nevis in Nepal accounts for Rs 24.93 billion, or 13.6 percent of the total foreign investment.
Ireland, Singapore, Australia, UAE, Bangladesh, South Korea and USA are also major investors in Nepal. However, investment from none of these countries accounts for more than 10 percent of the total foreign investment in Nepal. As per the report, Nepal has so far received FDI from 53 countries. Of the total foreign investment in the country, 51 percent has been made in service sector.
As per the Department of Industry, 28.6 percent foreign investment has been made in processing and mining industries. Similarly, 27.4 percent foreign investment has been made in the financial sector while almost 20 percent foreign investment has been made in the water-related industry.
The study also shows that only 34 percent of the total foreign investment approved in Nepal in the last 25 years has actually entered in the country. A total of Rs 325.52 billion foreign investment was approved in between 1995-96 to 2019-20. However, actual FDI inflow amounted to only Rs 110.93 billion, as per the report. Owing to political instability, lack of infrastructure and other reasons, investment inflow was less compared to pledge, informed Prakash Kumar Shrestha, executive director of NRB.
“Lack of infrastructure, Nepal being a landlocked nation and non-tax barriers to exports have discouraged investment. However, the rate of return here is higher,” he said.
As per Shrestha, land acquisition and complex legal processes for setting up industries are also obstacles to attracting investment in Nepal. It is mentioned in the report that 51 percent of the approved FDI has entered the country in the last fiscal year 2075-76. Of Rs 25.48 billion approved FDI during 2075-76, Nepal received FDI worth only Rs 13.07. Similarly, in the last fiscal year 2076-77, an investment of Rs 38 billion was approved while Nepal received FDI worth only Rs 19.48 billion.
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