Third Investment Summit: How to attract foreign investors?

The recent change in the governing coalition has cast a shadow over the upcoming investment summit scheduled for April 29-30 in Kathmandu. Former finance minister Prakash Sharan, who was leading the summit preparations, has been replaced by Barsha Man Pun. Before the coalition shift, Sharan had been actively engaging with various international stakeholders to organize the summit. Now, the responsibility falls on Finance Minister Pun to ensure its success.

The government is relying on significant foreign investment to recover from the current economic crisis. However, with less than a month until the summit, preparations seem to be moving slowly. Despite pledges to amend numerous laws and regulations to create a more investment-friendly environment, officials report that progress in this regard has been sluggish.

Officials at the Office of the Investment Board Nepal (OIBN) note that the change in the ruling alliance has hampered preparations for the summit. While Finance Minister Pun has urged officials to expedite preparations, the process of amending laws has not gained momentum, partly due to the federal parliament being preoccupied with political issues. 

In addition to summit preparations, the Ministry of Finance is busy with drafting principles and priorities for the fiscal year 2024/25 budget and a new five-year plan. This leaves Finance Minister Pun with limited time to focus on the investment summit.

Several committees have been formed by the government to prepare for the summit, each with specific responsibilities. The finance minister leads the Steering Committee, while the chief secretary heads the Implementation Committee, the industry secretary leads the Technical Committee, and the CEO of OIBN leads the secretariat. 

The Steering Committee initially decided to amend 10 laws and two regulations to signal to investors that the investment environment in Nepal has improved. However, priorities seem to have shifted following the sudden change in power dynamics.

A task force, chaired by the Office of the Prime Minister Secretary Ek Narayan Aryal, has been established to propose amendments to laws and regulations related to foreign investment. Its recommendations include amendments to various acts and regulations, including the Industrial Enterprise Act-2020, Foreign Investment and Technology Transfer Act-2019, Special Economic Zone Act-2016, Forests Act-2019, and National Parks and Wildlife Protection Act-1973, to improve the investment climate in Nepal.

Additionally, the task force has also suggested amendments to the Lands Act-1964, Land Acquisition Act-1977, Environment Protection Act-2019, Electronic Transactions Act-2008, Civil Aviation Act-1959, Foreign Investment and Technology Transfer Regulations-2021, and Forest Regulations-2023.

In addition to the amendments to laws, officials say the process of selecting projects for the summit has also been affected. While the implementation and technical committees have evaluated approximately 130 projects, final selections have yet to be made.

Notable projects evaluated by the committees include the Rs 104bn China-Nepal Friendship Industrial Park, the Rs 85.83bn Upper Marsyangdi-2 Hydropower Project, and the $21.02bn 40 MW solar project in Kohalpur and Banganga. Several other projects like industrial zones, special economic zones, hydropower projects, solar and wind energy projects, and reservoir projects have also been submitted for consideration to the Investment Summit Secretariat.Besides, provincial governments and the private sector have also submitted projects for inclusion in the summit. 

In the 2019 Investment Summit, the government had showcased 77 projects, including 27 from the private sector, covering sectors such as energy, infrastructure, agriculture, education, and health. Although investors expressed interest in over three dozen projects, investment agreements were signed for only 15 projects.

International investors have expressed concerns about Nepal's bureaucratic hurdles and various restrictions, hindering their willingness to invest.

For instance, American private investors are keen to invest in Nepal’s tourism, medical, and other sectors. But they are unsure about the investment environment in Nepal. Prospective investors in China and India too have concerns about funding projects in Nepal. Their concerns range from a bad investment environment to unstable politics to problems related to labor issues and exit plans. 

This will be the third summit in recent history, following those held in 2017 and 2019, with the government aiming to showcase Nepal as an emerging destination for global investors, particularly in green energy, tourism, agribusiness, and the IT sector.

Minister Pun emphasizes the government's commitment to ensuring the protection and security of investments, as well as providing efficient facilitation throughout the business cycle.

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Proposed areas for international investors 

• Agro processing 
• Education 
• Health 
• Energy 
• ICT 
• Manufacturing 
• Mines and minerals 
• Tourism 
• Transport 
• Urban development 

Why is Nepal a preferred destination for investment?

• 57 percent population is between 15-59 
• Low-cost of Labor 
• Nepal is a member of SAARC 
• BIPPA agreement with five countries 
• DTAA agreement with 11 countries 
• Treaty of Trade and Transit with India
• Treaty of Transit and Transport with China 
• 100 percent ownership to foreigners 
• Repatriation holiday 
• Competitive corporate tax system 
• Private-sector friendly laws
• Market access to two Asian giant India and China 
• Easy visa service