After the elections, a new coalition government was formed in late December involving CPN (UML) and CPN (Maoist Centre) as major parties. Then, in February, another coalition government of the Maoist Centre, Nepali Congress and other smaller parties was formed.
“The sharp decline in FDI inflows reflects the current sorry state of the political and economic situation of the country,” an economist said. “At a time when domestic investors are reluctant to invest, we cannot expect foreigners to invest in the country.” For a long time, Nepal has remained among the countries that receive the lowest FDI in the world. Despite many talks on attracting foreign investments in the country, the country has failed to attract foreign investors as targeted. At less than 1 percent of GDP, Nepal’s current levels of FDI are the lowest among similar economies. Economists say it is necessary to improve the existing policy and structural system to bring more foreign investment into Nepal. According to them, while the immediate reason for the decline in FDI might be the global recession and domestic political situation, there are structural and procedural obstacles in Nepal that discourage investors. Despite introducing a one-door system in the Investment Board Nepal and Industry Department, FDI has not come in as expected. “It has failed to facilitate FDI so far because it has failed to become a complete one-stop service center,” the economist said. In the second week of March, Prime Minister Pushpa Kamal Dahal had said that the government is seriously working on further simplifying the procedures, fully operationalizing the one-stop service, and developing necessary rules for the automatic approval of foreign direct investments (FDIs) applications. Of late, the government has eased procedures related to FDI. The Department of Industry (DoI), the government agency responsible for providing services to foreign investors, has developed a mechanism to approve foreign direct investments (FDIs) through the online channel. The mechanism allows the department to approve FDI worth Rs 100bn automatically. The government has already published a notice in this regard in the Nepal Gazette and the system will be implemented on Jestha 1. “Through the newly-developed mechanism, investors can get online approvals for FDI worth Rs 100bn,” said Ram Chandra Tiwari, Director General of DoI. Citing the complaints about the higher threshold for FDI, the government in November last year lowered the threshold to Rs 20bn from Rs 50bn. At the same time, the government tightened the business visa issuance system to prevent misuse of the facility following rising cases of investment pledges not being fulfilled after the applicant had obtained the visa. As per the new rule, the Industry Department will recommend a business visa for three months by which time the investor has to submit a certificate of company registration. While the actual flow of FDI plunged sharply during the first nine months of the current fiscal year, the amount of FDI pledges made by foreign investors has also come down during the period in the current fiscal year. According to DoI, Nepal received FDI pledges of Rs 28.11bn during the nine months of the current fiscal year compared to Rs 33.42bn in the same period of the last fiscal year. Net FDI in Nepal (First nine months)
| FY Net FDI 2022/23 Rs 2.62bn 2021/22 Rs 16.51bn 2020/21 Rs 12.35bn |
