Ram Chandra Tiwari, Director General of DoI said the slowing of the global economy is the main reason behind the disinterest of foreign investors. “Not only in Nepal, but FDI flow has also decreased globally because the energy crisis and supply chain disruptions have worsened the investment climate,” he said.
The United Nations Conference on Trade and Development recently reported that global FDI flows dropped by almost a third in the second quarter of 2022, with the investment flows to several emerging regions down significantly and flows to Africa near zero. FDI flow to Nepal declined this fiscal mainly due to a slowdown in investment commitment from China. The investors from the northern neighbor have been committing the largest amount of FDI in the last several years to Nepal. With China facing economic problems due to renewed Covid-19 crisis, and supply chain disruptions, investment pledges from the northern neighbor are also affected. “With the largest investor in economic trouble, it is natural that FDI pledges from that country come down,” said Tiwari. The tighter visa rules that the government enforced in early November 2022 discourage applicants from submitting fake documents to get business visas. DoI decided to recommend business visas for foreign investors only for three months at a time to prevent the misuse of the facility. Officials said that the move was taken to discourage the tendency of prolonging their stay in Nepal by taking concrete steps to invest in Nepal. As per the new rules, the department now recommends a business visa for three months by which time the investor has to submit a certificate of company registration. After the registration certificate has been received, DoI will recommend an extension of the business visa for another three months. Within this period, the investor needs to submit proof of having registered at the tax office and opened a bank account. According to DoI officials, the new provision has contributed to screening genuine foreign investors from fake ones and it has been reflected in reduced FDI comments. Nepal is one of the countries that receive the lowest FDI in the world. Despite many talks on attracting FDI in the country, the country has failed to attract foreign investors as expected. In November last year, the government lowered the minimum threshold for FDI to Rs 20 million from Rs 50 million to attract even the small foreign investors in the country. “The threshold was reduced as per the suggestions of stakeholders,” said Tiwari. “The decision is expected to encourage FDI in the information and communication sector which does not need big investments in physical infrastructure.”
