Foreign Direct Investment in Nepal as in other countries plays an important role as the source of capital for economic growth. In order to produce and transfer goods and services, it offers a bundle that includes innovative technology, management strategies, financial resources, and market access. Cost, market infrastructure, as well as technological, political, legal, and sociocultural considerations, are the primary FDI location factors. Nepal is working to resolve general FDI concerns with economic development despite a number of contradictory factors. Due to this, Nepal is now in a position where FDI can help it achieve its economic objectives.
Aspects for FDI in Nepal:
The government of Nepal has emphasized encouraging foreign direct investment as a primary focus in recent years. From the Ninth Plan, there has been a focus on encouraging foreign investment. The administration has developed a number of policies to achieve this. The level of FDI in Nepal is not as high as it should be. The majority of Nepal’s FDI projects are in the manufacturing, hydropower, mining, construction, agro-based, chemical, tourism, hotels and restaurants, specialized services, and food and beverage industries.
The major obstacle to lower FDI in Nepal:
The country’s political instability has always been a major barrier to the steady influx of FDI and investments. However, the nation now has a stable administration as a result of the 2017 elections. Soon enough, the government could put together Investment Summits like the Nepal Investment Summits of 2017 and 2019. This was done in an effort to chase and draw in global investors. Notwithstanding these measures, FDI inflows have not significantly increased in Nepal. The minimum investment ceiling, which was raised from Rs 5 million (USD 45,000) to Rs 50 million (USD 450,000), has not been effectively embraced by investors.
How can Nepal attract FDI:
The Nepali government must implement measures to draw FDI. The government must undoubtedly do more to encourage investment, notably by lowering red tape, expediting the investment process, and offering tax advantages. To attract more international investors, it must also concentrate on enhancing the nation’s infrastructure, including its highways and airports. The government ought to concentrate on resolving the problems that led to the drop in Foreign Direct Investment in Nepal. This calls for raising the country’s foreign currency reserves and enhancing macroeconomic indicators, both essential to regaining investor trust. The government should also take action to maintain banking sector stability as this will encourage long-term investment.
The development of human capital should be a priority for the government. To achieve this, more money must be put into education and training initiatives, which will result in a trained labor force that attracts foreign investors. Additionally, the government should take part in international trade shows and conferences in collaboration with the private sector, using these events as a platform to advertise Nepal as an investment location. Increasing accountability and openness in the investment process will also aid in luring Foreign Direct Investment in Nepal.
By nurturing the already available resources and making them an attractive asset for foreign investors we can attract more investors. Along with this, improving the country’s political stability needs to be highly emphasized for long-term relations with investors. With these in mind, the government can slowly work on increasing the Foreign Direct Investment in Nepal ratio to the country to improve its overall goal of economic growth.