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The government has decided to endorse various memorandums of understanding (MoUs) to be signed between the Government of Nepal and the Government of Qatar.

The MoUs are going to be signed during the two-day state visit of the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani, 

At the invitation of President Ram  Chandra Paudel, the Emir of Qatar, Al Thani, is visiting Nepal on April 23 and 24. Accordingly, the council of ministers meeting today decided to give a public holiday on April 23.

According to Minister for Communications and Information Technology Rekha Sharma, the Cabinet also decided to approve the state visit program of the Emir of Qatar and for the Prime Minister to lead the talks with the Qatari side.

The memorandum of understanding is being signed on cooperation between Nepal and Qatar in the field of youth and sports, and in the field of education and scientific research.

Government Spokesperson Sharma informed that the Cabinet meeting decided to accept 9.91 million Swiss francs from the Swiss government for the implementation of the trekking-based tourism development project in Koshi Province and 9.8 million US dollars from the Korea International Cooperation Agency (KOICA) for Pokhara Metropolitan City.

Similarly, the meeting approved the preliminary agenda of the 12th meeting of the Nepal-China Tibet Trade Facilitation Committee to be held in Kathmandu on April 27 and 28 and decided to form a talks team under the coordination of the joint secretary of Ministry of Industry, Commerce and Supplies to participate in the meeting.

Sharing the decisions of the April 18 Cabinet meeting, Government Spokesperson Sharma said that the government decided that the Central Post Office, Postal Directorate and District Post Offices will operate on public holidays as well. Likewise, Assistant Auditor General Baikuntha Bahadur Adhikari has been promoted to the post of Deputy Auditor General and Murari Prasad Kharel has been appointed as the Secretary of the National Human Rights Commission.

In my previous column, I discussed how chronic political instability is affecting the conduct of our foreign policy. Here, I delve into how foreign powers, big and small alike, influence Nepal’s foreign policy. We often criticize our politicians for their lack of maturity and consistency. In most foreign policy discourses, I often hear this question: Who will believe us (read our politicians)? It is a reality that our politicians are neither serious nor have they realized their weaknesses. But it would be unjust to solely blame our politicians without considering other aspects like how foreign powers are behaving with us. Nepal’s key priorities are economic prosperity and social development. For a long time, we have been mobilizing our foreign policy to achieve these goals.

From Prithivi Narayan Shah to the current set of leaders, all have realized that Nepal is situated between India and China, understanding the difficulties of being caught between two global powerhouses. For a long time, our Rana rulers tried to live in isolation out of fear that opening up could threaten their regime. Nevertheless, they still endeavored to serve both their personal interests and national interests. After the 1950s, Nepal began diversifying its economic, security, development and trade policies or looking beyond its immediate neighbors. Let’s consider the current situation. We are conducting our foreign policy in accordance with the 2015 constitution.

Article 51 of the constitution states: “Safeguarding the freedom, sovereignty, territorial integrity, nationality, independence, and dignity of Nepal, the rights of the Nepalis, border security, economic well-being, and prosperity shall be the basic elements of the national interests of Nepal.” Nepal places economic diplomacy at the forefront of its engagement with the wider international community. We need money and technology to accelerate social development and economic prosperity. Lately, we have been vocal about our reluctance to take on significant loans, preferring grants for infrastructure development. Our stated position is that we will not align with any strategic or military blocs.

Nepal takes a neutral position in regional and international conflicts, consistently advocating for their resolution through peaceful means, with some exceptions resulting from adventurous policies of our politicians. Nepal believes in non-interference in each other’s internal affairs, non-aggression, and the peaceful settlement of disputes. For instance, Nepal opposed the Russian attack on Ukraine while maintaining a neutral stance on other issues. Many argue that this stance contradicts Nepal’s non-alignment policy, but it aligns with our stated policy. If one sovereign country attacks another, Nepal cannot remain neutral and opposes such actions but avoids taking sides.

Our message is clear: we do not wish to be embroiled in big power rivalries, and we urge major powers not to involve us in their geopolitical games. Currently, amid the Middle East crisis, we maintain the same policy. If not a zone of peace, we aspire to become a zone of investment. We have a straightforward message for major powers: we understand and protect your security and other legitimate concerns, but only a prosperous and strong Nepal can effectively address those issues, so invest in our country. Of course, challenges such as corruption and bureaucratic red tape exist, but the investment climate in Nepal is comparatively favorable, and we have big markets like India and China in close proximity. Despite getting huge support from major countries in Nepal’s social and economic development, the country is starting to feel the heat of geopolitical tensions. As these tensions escalate, there is a fear among our politicians that major powers may pull Nepal into their orbit through economic assistance. As major powers roll out strategic initiatives one after another, there are concerns that Nepal may become ensnared in a geopolitical ambush. Not only politicians, but senior bureaucrats also find themselves in awkward positions as they consolidate all bilateral issues under one strategic basket. And, there is a lack of understanding among politicians and bureaucrats about these issues, and there have been no efforts to educate them.

By closely monitoring negotiations between our leaders and major powers, we can see that our leaders are facing pressure. Whenever they engage in talks with their counterparts, they struggle to avoid committing to strategic projects outright. Since they cannot outright reject them out of fear for their regime’s stability, they attempt to reassure that Nepal could consider such initiatives after thorough study and consensus at home. Due to such apprehensions, our politicians are even hesitant to accept pure development projects without strings attached. Similarly, diplomats in Kathmandu bypass the due process in dealing with Nepal. Instead of going through the Ministry of Foreign Affairs, foreign countries tend to approach political leaders and certain ministries directly seeking their consent. For example, the Ministry of Foreign Affairs may be unaware of a host of initiatives proposed by major powers. If there is institutional memory, foreign countries cannot complain about policy inconsistency or lack of ownership across governments. If all proposals go through the Ministry of Foreign Affairs, which remains unaffected by changes in government, it ensures policy continuity to some extent.

Our stance remains that, due to our geopolitical location and other factors, we cannot align with major powers. Whether termed neutral, non-aligned or otherwise, our bottom line is clear: we seek engagement solely on economic terms. If major powers engage with Nepal in this manner, frequent changes in government may not pose significant difficulties. Therefore, support and invest in Nepal, so that we can safeguard the security and other legitimate interests of our friends. If major powers attempt to turn Nepal into a battleground for their conflicts, it will be detrimental not only to the Nepali people but also to the major powers. We understand that our neighboring countries, both near and distant, desire to see a stable and prosperous Nepal, as it serves their interests. My request to all: we aspire to grow with you as a sovereign and peaceful country. As I mentioned in my previous opinion piece, major countries should not favor one party over another or play them against each other. Instead, they should adopt a Nepal-centric policy with the economy at the forefront. Moreover, major parties should collaborate to formulate a common position on the issues mentioned above. We want to declare Nepal as a Zone of Investment.

The third Round of Foreign Office Consultations (FOC) between Nepal and Bangladesh was held in Kathmandu on Wednesday. Foreign Secretary Sewa Lamsal led the Nepali delegation while Foreign Secretary (Senior Secretary) Masud Bin Momen led the Bangladeshi delegation.   

The two sides discussed regional issues of mutual interest, underscoring the need to revitalize SAARC and strengthen BIMSTEC for the promotion of regional cooperation. They agreed to cooperate at various multilateral forums, especially at the UN, for pursuing common interests, especially in the areas of LDC graduation, poverty alleviation, climate change, and safety and security of migrant workers.

They discussed all major issues of mutual interest and agreed to promote cooperation encompassing all sectors, especially trade and commerce, transit and connectivity, power and energy, tourism, culture and education, the Ministry of Foreign Affairs stated in a press release.

Both foreign secretaries emphasized the operationalization of the BBIN MVA framework to contribute to the individual country’s economy not only by expanding trade and connectivity, but also by creating more opportunities to promote people-to-people contacts.

Foreign Secretary Lamsal highlighted the need to tap full potential in economic, cultural and educational sectors through a meaningful collaborative partnership between the two neighbors by involving their private sectors. 

Nepal would like to enhance trade and investment cooperation with Bangladesh, Lamsal said and asked Bangladesh to explore investment opportunities in Nepal, including in the hydropower sector. Furthermore, she requested the Government of Bangladesh to eliminate the Other Duties and Charges (ODCs) levied on Nepali products being exported to Bangladesh. Lamsal also emphasized the exchange of visits at different levels.

Foreign Secretary Momen stressed the need for an early conclusion of a power agreement between Bangladesh, India and Nepal to enable his country to import power from Nepal. He thanked the Government of Nepal for allocating land for the construction of a monastery in Lumbini, expressing hope that it would turn out to be a milestone in bilateral relations.

Despite  political and policy uncertainty, the Nepal government’s decision to organize the ‘Third Investment  Conference’ (TIC) on April 28-29 to attract foreign investment is a welcome step. Major issues/obstacles to such investment remain unaddressed amid a change of guard at Singhadurbar, including the ascension of a new finance minister. To make TIC successful is indeed a major challenge, but it is heartening to find the new finance minister committed to the cause. This article will analyze major issues related to investment and prescribe practical solutions expected to play a crucial role in making the conference successful.

A paltry FDI 

Investment, which helps to produce and reproduce goods and services, plays a pivotal role in national economic development. Despite different kinds of investment like public/private, domestic/foreign investment, the focus of this article is on private and foreign investment, especially foreign direct investment (FDI). For rapid economic development and growth, Nepal needs at least Rs 500bn in annual additional investment. Domestic investment alone will not be enough to fill this gap, so FDI is necessary.

Due to the lack of a conducive investment climate, ratio of real fixed investment (total fixed capital formation) to GDP has plunged from 34 percent (which should be around 60 percent, ideally) to 25 percent in a five-year period, whereas the share of total fixed investment of the private sector has gone down from 28 percent to 25 percent. Over the last 30 years (up to the fiscal 2023-24), FDI amounted to Rs 265bn with the average annual increment of a paltry Rs 8.5bn, marked by a receding flow in recent years. In terms of global FDI flow, Nepal’s position is pitiable, registering a 66 percent decline last year and standing shakily at the 6th position in South Asia, as the NRB Survey Report on FDI Flows in South Asia, 2021-22 shows. It is quite discouraging to note that FDI outflow is greater than its inflow.

Policy uncertainty and inconsistency is a major hindrance to both domestic as well as FDI. 

For example, the current government under Maoist leader Prime Minister Dahal is venturing into an undesirable sector by allowing the Nepali Army to run the already-privatized Hetauda Textile Factory, undermining the private sector (TPS) that contributes around 80 percent to the national economy. All this comes even as foreign investors remain quite afraid of pro-socialist provisions of the current constitution, including on the labor rights front. 

Capital flight

Worryingly, the private sector is diverting investment to a low-risk, high-profit trading sector at the expense of the industrial sector. This is not an overnight development, though. For several years, this sector had been urging the government to create a conducive environment for industrial investment in Nepal by amending relevant laws and enacting more than two dozen acts/regulations, to little avail. Instances of strikes and donation terror—the practice of seeking donations by flexing muscles—have gone down, but strong labor laws are still spoiling the investment climate. 

Notwithstanding a one-door policy on investment, there practically are three doors—the line ministry, the subordinate department and the Investment Board. Then there are infrastructural problems like load-shedding in the industrial sector, local communities’ grievances/concerns and political problems that create hurdles in the establishment of industries/factories. All these factors are also discouraging Nepali investors and triggering huge capital flight, formally and informally.  In such a situation, how can Nepal attract foreign investment?

A great dilemma

Globally, the control regime has become obsolete, thanks to a liberal economic policy adopted in the late 80s and 90s. Our neighbors—communist China and democratic India—adopted liberal economic policies and entered an era of economic growth and prosperity. In the case of Nepal and several other developing countries, some problems have appeared in the execution of liberal economic policy due to a higher degree of liberalization than their respective regulatory/supervisory capacities.  In our case, major leftwing parties have not so far committed to the liberal policy adopted 30 years ago, the need for FDI and a stronger role of the private sector for economic development. This is a great dilemma.

The author is an economist

The third round of Nepal-Bangladesh Foreign Office Consultations is taking place in Kathmandu on April 17.

Foreign Secretary of Bangladesh Masud Bin Momen is arriving today on a three-day official visit to Nepal in that connection, reads a statement issued by the Ministry of Foreign Affairs.

Foreign Secretary Sewa Lamsal will lead the Nepali delegation consisting of officials of various ministries of the Government of Nepal at the consultations.

 The two delegations will discuss wide-ranging areas of cooperation between Nepal and Bangladesh.

The Foreign Secretary of Bangladesh is also scheduled to pay a courtesy call on Deputy Prime Minister and Minister for Foreign Affairs, Narayan Kaji Shrestha during his visit.

Foreign Secretary Masud will leave Kathmandu for Dhaka on April 18, the Ministry said.

Banks are flush with loanable funds, but they are not seeing demand for loans. As a result, the Nepal Rastra Bank (NRB) has been mopping up excess liquidity from the banking system through different monetary instruments.

According to the central bank, banks and financial institutions (BFIs) have a lending capacity of over Rs 850 billion at present. However, BFIs are not able to invest. On the other hand, an unruly group has gone after the banking and financial sector unchallenged. The government seems helpless against such groups. Recent arrests of bankers on suspicion of irregularities have unleashed a situation of fear and terror in the banking and financial sector.

That is why, bankers say, despite excess cash, there has been no investment. No wonder bankers are saying there is no environment for investment in the country. Stakeholders say that unless the government takes action against the groups spreading anarchy by saying 'loans need not be repaid' and 'if you protest, loans will be waived', the situation in the banking sector will not improve.

Banks hesitant to invest

 Bankers say the servicing of loans by borrowers has been affected after unruly groups started a campaign against banks. The banking and financial sector has been facing this problem for about a year now. On the other hand, the overall economy has shrunk recently. Most businesses are in a slump as there is no demand in the market. There has been no demand for loans from banks. In such a situation, bankers say that with unruly activities getting support to destabilize the banking sector, they have to hesitate even to lend.

However, the government has not taken any action against those spreading anarchy against banks. Protests are also being organized in the name of victims of microfinance. Some bankers feel that the state has been supporting those agitating against microfinance instead of controlling them.

The Nepal Rastra Bank has set a maximum credit-to-deposit ratio (CCD ratio) of 90% for banks. The current CCD ratio of banks is only 80.02%. While deposits have been increasing daily, lending has not increased proportionately, resulting in an accumulation of cash in the system.

According to the Nepal Bankers' Association, there has been no demand creation in the market. Interest rates have declined, but there are no new borrowers. Commercial banks, development banks, and finance companies have collected deposits of Rs. 6.17 trillion and disbursed loans of Rs 5.09 trillion.

Sunil KC, president of the Nepal Bankers' Association, cites protests against banks, arrests, and unnecessary detentions of bankers as reasons for the inability to disburse loans. “Additionally, imports have declined compared to the previous year, and most industries have not been operating at full capacity. Public construction projects have also been sluggish due to a lack of funds. For these reasons, there has been no demand for loans," KC said. "As soon as money stops flowing into the construction sector, many other sectors will be affected. These are the reasons why overall loan demand has declined." Banks' non-performing loans have also increased compared to previous levels, said KC, who is also the CEO of NMB Bank.

Tightening policies

Bankers say the central bank is not relaxing certain policies because of the conditions set by the International Monetary Fund (IMF). The IMF granted Nepal concessional loans worth $395.9 million under its Extended Credit Facility (ECF). Officials, who were alarmed at depleting foreign exchange reserves and increasing current account deficit due to high imports, agreed to accept the IMF’s conditional loan which extends until February 2025. Bringing reforms to the financial system and public finance management, including amending the law to make Nepal Rastra Bank autonomous, preparing a blueprint to prevent misuse of loans, conducting external audits of 10 big commercial banks are some of the conditions set by the IMF.

The government implemented some reform measures, but it dragged its feet on the implementation of some other conditions set by the IMF. The then finance minister, however, expressed commitment to implement all reforms in October last year after the IMF withheld the third installment of its loan.

NRB’s directives on loan classification, the new provision of a six-month wait for non-performing loans to be upgraded, and the guidelines on working capital loans were met with opposition from the private sector. Private sector bodies like FNCCI and CNI have urged the government to clear IMF loans at the earliest.

NRB's requirement of raising capital reserve by 0.5 percentage points to 9% by mid-June will decrease bank's capacity to lend by around Rs 25 billion, according to bankers. Likewise, further shrinking of spread rate to 4% has hit profitability of banks.

As Nepal is soon going to approach the milestone of graduating from the list of Least Developed Countries (LDCs), there is an urgency to develop a comprehensive foreign policy that goes beyond the traditional approach of the so-called “yam between two boulders”.

Frankly speaking, I always struggled to understand the intrinsic meaning of the reasoning behind it.

Why should a nation like Nepal that, objectively speaking, is not a tiny geographical spot on the global map, reduce itself to a binary thinking that is dictated by an over reference towards India and China?

Perhaps in the past, this thinking could have been justified.

In the realm of geopolitics and international relations, there is no room for naïveté and it is impossible for a country like Nepal not to take into consideration the strategic interest of its two gigantic neighbors.

But this isn’t the last time that Nepal forged its own strategic interests beyond those of China, India or the United States of America.

But what would take for Nepal to be able to formulate a future forward, confident foreign policy?

The spirit of amity and cooperation with all the nations is a key pillar of the country’s foreign policy.

Together with the successful (though not fully completed) transition from the civil conflict, and the creation of a federal democracy, this internationalist attitude, should represent the “north star” of Nepal’s foreign policy.

Moreover, Nepal’s incredible diversity in cultures and traditions, magnificent landscapes and cordial nature of its people could also help its ways to project itself to the world.

But how to concretely leverage these sacrosanct principles and unique endowed features of the country rhetoric?

Nepal will soon do away with the “least” developed nation label that, from the marketing and branding point of view, has been disastrous, especially if you want to bring in international investors.

This development will require a reset in the way foreign policy is framed because, between now and the next few years, Nepal will have a unique opportunity to rebrand itself and not only in terms of being an attractive investment destination.

Perhaps, reminding ourselves that foreign policy is a mirror of national politics and the way of governing a nation, could be a way to start a reflection on the links between national and foreign policies.

If national politics changes for the better and becomes more transparent and effective, then the foreign policy of the nation can, consequently, also get more strategic and ambitious so that, finally, Nepal could get rid of “yam between two boulders” thinking.

Foreign policy should be instrumental in this phase of national development but a lot will depend on how politicians perform and behave at home.

The country is trying to turn from being a net recipient of international aid to being a net recipient of foreign investments.

A vision, albeit not yet perfect, is being formulated in this regard.

There is an overarching aspiration to attract business even though, for this to happen, it might mean doing away with some convenient “double standards” like the existing limitations in the shares that a foreign investor can own.

In addition, being successful at attracting investments won’t only depend on running a successful summit or in putting in place better rules that incentivise investors.

Instead, what will count will be creating a favorable investor climate thanks to better policies that enhance good governance in the realm of the economy, including serious interventions in the fight against cartels and corruption.

In addition, unless the country manages its delivery of services better, especially in the field of education and health, it will hardly succeed at becoming an investors’ magnet.

For example, there have been discussions about Nepal becoming a medical or educational hub.

Knowing the quality of the expertise and knowhow within the country, I am confident that it is possible.

There are already enough best practices and the more the country attracts back its citizens who had decided to emigrate in places like Australia and the USA, the better.

It would be even conceivable to imagine, in the near future, “Nepal Educational Expos” around the world with the best national educational institutions attracting students, starting from continents that the country has never, so far, even remotely imagined engaging with.

But can Nepal become such a hub without the right foundations?

Fixing its foundations, improving its education system at the grassroots and raising the current level of public education would be instrumental in promoting a “whole of nation” approach rather than few best practices amid a sea of mediocrity or worse.

What about starting to think about the first ever investment-focused mission of a Nepali Prime Minister to emerging nations in Central Asia or even to Africa and Latin America?

An official state delegation could discuss bilateral cooperation, including investments and the selling of some of the country’s unique proposition, tourism and of course its education and health institutions.

A substantial effort at enhancing good governance would, consequently, also be instrumental in propelling a foreign policy capable of shaping a new narrative.

The story of a country with many imperfections and unsolved challenges but also a nation that is ambitious and attempting at building a more just and developed society that can attract high human capital investments rather than low-cost manufacturing.

Good governance could also enable and facilitate innovative policy and contributions that Nepal can offer to the world, all ideas that its diplomacy could amplify and promote.

If you read the speeches of every single Prime Minister in the international forums, it is always the same leitmotif, starting from the usual (though correct) story that the country is among the most at risk of climate warming.

It is not that Nepal must stop bringing forward its legitimate grievances but it can do this differently with practical propositions, from adaptation to climate financing.

These are just some examples where Nepal could contribute not as a “bagger” but as promoter of solutions to some of the key global challenges.

But we need a non-partisan foreign policy vision of at least five years, a very pragmatic document that does not waste time in pleasing the neighborhood or other super powers but rather is purposefully fit to serve the nation’s new development aspirations.

Formulating this vision document will compel the policy-makers to truly align national priorities with its foreign policy ones.

This would help Nepal start thinking and not only in terms of foreign policy, from the perspective of being a middle-income nation even if it is, at the moment, just an aspiring one.

But it remains essential to fix the governance first.

The nation needs to really turn its mediocre at the best governance into a “good” one so that it can be in a position to truly assert its own interests, no matter what others might expect from it.

This is a real chance for Nepal to reach the point of thinking beyond what its powerful neighbors want and need from it.

Otherwise, we will continue to read about this absurd but sadly true story that Nepal is just a “yam between two boulders”.

The author is the co-founder of ENGAGE and The Good Leadership. Views are personal

Nepal defeated Hong Kong by eight wickets in their third match under the ACC Men’s Premier Cup on Monday.

In the match held at Al-Amerat Cricket Ground in Oman, Nepal achieved the target of 115 runs set by Hong Kong in 12. 2 overs.

Asif Sheikh scored highest 40 runs for Nepal while Kushal Bhurtel returned to pavilion scoring 32 runs.

Anshuman Rath scored highest 34 runs for Hong Kong, wicketkeeper Zeeshan Ali contributed 14 runs and captain Nizakat Khan and Ehsan Khan made 12 and 11 runs respectively. Other batters failed to score in double digits.

Abhinas Bohara claimed three wickets, Dipendra Singh Aire and Lalit Rajbansi took two wickets each and Karan KC picked one wicket.

The match was reduced to 18 overs due to the rain.

This is Nepal’s third consecutive victory.

Nepal defeated Malaysia by five wickets in the first match and Qatar by 32 runs in the second match.

The Asian Development Bank (ADB) projects Nepal’s economy to grow by 3.6 percent (at market prices) in fiscal year 2024. During the press conference held today to unveil the Asian Development Outlook (ADO) April 2024, a flagship publication of the ADB, it was revealed that Nepal’s economy is expected to rebound from an estimated growth of 1.9 percent in fiscal year 2023.

Arnaud Cauchois, ADB Country Director for Nepal, noted, “A gradual relaxation of monetary policy, combined with improved consumer and investor confidence, is anticipated to spur economic activity in 2024. Moreover, industry is forecasted to experience faster growth compared to fiscal year 2023, driven by increased government capital spending in the latter half of the fiscal year and the commissioning of additional hydroelectric power by the end of fiscal year 2024.”

The service sector is also expected to witness accelerated growth as credit controls ease, interest rates decrease, and tourism revenues expand. Agriculture growth may see a slight uptick from 2.7 percent in fiscal year 2023 to 2.8 percent, though a record rice harvest is offset by a shortfall in winter crops and other agricultural production due to deficient rainfall this winter season, as outlined in the ADB press release.

The report forecasts annual average inflation to drop to 6.5 percent in fiscal year 2024 from 7.7 percent in fiscal year 2023, driven by subdued oil prices and a decline in inflation in India, Nepal’s main import source. “External risks remain relatively contained. The current account deficit may return after registering a surplus in the first half of fiscal year 2024,” clarified the ADB.

According to the ADO, the trade deficit contracted by 4.7 percent year-on-year in the first six months of fiscal year 2024, while workers’ remittances expanded by 22.6 percent year-on-year, resulting in a current account surplus of $1.2bn. However, with higher imports and stable remittance inflows expected in the remainder of the fiscal year, the 2024 current account deficit is forecasted at 0.7 percent of gross domestic product.

ADB Principal Economist for Nepal, Jan Hansen, highlighted potential downside risks to the economic outlook in fiscal year 2024, including a global economic downturn affecting Nepal’s tourism and remittance receipts. “Any intensified geopolitical turmoil could disrupt supply chains, push up global inflation, and tighten global financial conditions. This may necessitate a tightening of domestic monetary policy, potentially undermining investment and consumption, and dragging down growth,” stated the press release. Hansen reaffirmed ADB’s commitment to supporting a prosperous and inclusive Nepal.

Established in 1966 and owned by 68 members, with 49 from the region, the ADB is dedicated to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while continuing efforts to eradicate extreme poverty.

An investment-friendly political and socio-economic environment is urgently needed in today’s Nepal. Foreign Direct Investment (FDI) and national private investors must be encouraged and supported by the friendly policies and programs of the Nepal government. Such policies and programs are necessary to increase the pace of economic development, achieve relevant Sustainable Development Goals (SDGs) and create concrete economic grounds for graduation from the LDC status in the year 2026. There is a high potential and possibility for such an investment-friendly atmosphere in Nepal. The lack of political willpower, interest, honesty and clear-cut policies and implementation programs are preventing the creation of such an atmosphere.

FDI flow in S Asia

Nepal is in the sixth position in South Asia regarding FDI inflow, just above Bhutan, according to World Bank data for 2022. FDI inflow was just $65m in 2022 Nepal, which is a 0.15 FDI-GDP ratio. The Maldives is on the top, having $722m in 2022, and the FDI-GDP ratio is 11.7. India was second, and Bangladesh was fourth that year. Bangladesh had $3,480m with a 0.75 FDI-GDP ratio in 2022, whereas India had $49,355m with a 1.44 FDI-GDP ratio in the same year. The 2024 data show India received $105.23bn whereas China received just $70.23bn.

According to the same source, net FDI inflows to Nepal decreased by 4.9 percent to Rs 60bn in 2021-22. There is a significant gap between approved FDI and actual net FDI inflows in Nepal. Between 1995-96 and 2021-22, the total net FDI inflow stood at around 36.2 percent of total FDI approval. This is one of the weighty matters of concern for Nepal.

Vietnam and Cambodia

According to Vietnam’s Foreign Trade Agency, the country experienced a surge in FDI in January and February of 2024, recording an influx of over $4.29bn, marking a significant increase of 38.6 percent compared to the previous year. The major areas of FDI investment are Manufacturing, Services, Agriculture and Travel.

Cambodia’s FDI registered a growth of 12.1 percent of the country’s nominal GDP in Dec 2022, while it stood at 12.9 percent in the previous year. The significant areas of FDI investment in Cambodia are agro-processing, electronics/machinery, health, industrial parts, infrastructure and green energy.

Nepal’s failure

Some of the reasons behind Nepal’s failure to attract FDI are as follows:

Legal hurdles: Some Acts and Regulations responsible for this need to be immediately amended. For example, government itself has said Industrial Enterprise Act 2020, Foreign Investment and Technology Transfer Act 2019, Special Economic Zone Act 2016, Forest Act -2019, National Parks and Wildlife Protection Act 1973, Land Act 1964, Land Acquisition Act 1977, Environment Protection Act 2019, Electronic Transaction Act 2008, Civil Aviation Act 1959, Foreign Investment and Technology Transfer Regulation 2021 and Forest Regulation 2023 need to be revised. Also, some new Acts are needed to encourage the investors with mutual advantages and benefits with clear-cut policies from the point of license receiving to total facilities and support to be given and remittances (dividend) for return.

Bureaucratic hurdles: Bribery, corruption and red-tape are the main hurdles here. Whether national or foreign investors, this is their main complaint and grievance. Our legal and executive decisions and discipline should be such that they penalize and discourage the corrupt actors.

Political hurdle: We should be very fair and impartial, and it will be unfair to blame the bureaucrats alone. Our political circle is also tainted. Our politicians, bureaucrats and brokers have some kind of nexus through which they engage in corrupt practices and discourage investors. So, concerned government authorities and relevant agencies should pay attention here, and the culprits must be brought to justice.

Instability: Lack of political instability, marked by frequent changes in government, is one of the important reasons behind the failure to attract FDI in Nepal. Investors want political stability and policy consistency, and they hardly invest in politically-unstable countries. The political parties of Nepal must pay serious attention to this matter.

Facilities and taxation: FDI calls for a clear-cut taxation policy that is congenial to them and that provides information to them about facilities they are entitled to in a transparent manner. Our taxation policy should be distinctly clear and investment-friendly. We should provide them with all basic facilities that good plants and industries need. Why should we not offer them a special industrial zone like other countries by taking a cue from this saying: Facilities attract and invite capital and capitalists?

Trade union and exit plan: The FDI needs a transparent, solid, stable and investment-friendly labor policy. Foreign investors do not accept workers’ strikes and other forms of disturbances in the industries. They do not accept politics and politically-motivated activities within industrial areas. Does the government have a political will to address these concerns? Foreign investors are also very much concerned about their exit plans. They want to take their profit safely and smoothly back to their countries. They are also apprehensive about the principal amount they invest in. Our legal system, executive decisions and practices should be amicable and supportive of their exit plan.

Proposed areas: Our priority and proposed area must be clear and solid to attract FDI. As per the need and potential of Nepal, agriculture, tourism, hydro, connectivity, education, health, IT, and agro and forest-based industries are the appropriate areas for FDI investment in Nepal.

Learning lessons: In-depth studies are necessary to find the reasons behind Nepal’s failure to attract FDI. Serious studies of countries that have managed to bring in FDI big time, especially on the facilities and incentives they provide to foreign investors,  can show Nepal the way forward when it comes to attracting FDI. 

Conclusion

In conclusion, Nepal urgently requires a conducive environment for investment to accelerate economic growth and achieve SDGs. Legal, bureaucratic and political hurdles, along with instability and unclear policies, deter FDI inflows. To address this, Nepal must enact investor-friendly laws, combat corruption, ensure political stability, offer transparent taxation policies, provide facilities and address labor issues. Learning from successful FDI attractors like India, Bangladesh, Vietnam and Cambodia, Nepal should focus on sectors like agriculture, tourism, hydro, connectivity, education, health, IT and agroforestry, at a time when the country is gearing up to organize the Third Investment Summit.

The Asian Development Bank (ADB) has projected that Nepal's economy is to grow by 3.6% (at market prices) in fiscal year 2024.

Releasing the Asian Development Outlook (ADO) April 2024, a flagship publication of the Asian Development Bank (ADB) by organising a press conference here today, it shared that Nepal's economy would go up from an estimated growth of 1.9% in fiscal year 2023.

ADB Country Director for Nepal, Arnaud Cauchois said, "A gradual relaxation of monetary policy coupled with improved consumer and investor confidence is expected to stimulate economic activity in 2024. Moreover, industry is projected to grow more rapidly than in fiscal year 2023 as capital spending by the government ramps up in the second half of the fiscal year, and as additional hydroelectricity power comes online by the end of fiscal year 2024."

Service sector growth would also likely accelerate as credit controls ease, interest rates further decrease, and tourism revenues expand. Agriculture growth may increase marginally from 2.7% in fiscal year 2023 to 2.8% as a record rice harvest is tempered by a shortfall in winter crops and other agricultural production, given the deficient rainfall this winter season, reads the press release issued by ADB.

The report projects annual average inflation to fall to 6.5% in fiscal year 2024 from 7.7% in fiscal year 2023 on subdued oil prices and a decline in inflation in India, Nepal's main import source.

"External risks remain relatively well contained. The current account deficit may fall again into deficit after registering a surplus in the first half of fiscal year 2024", clarified the ADB.

As per the ADO, as the trade deficit contracted by 4.7% year-on-year in the first 6 months of fiscal year 2024, and as workers' remittances expanded by 22.6% year-on-year, the current account recorded a surplus of $1.2 billion.

However, amid higher imports and stable remittance inflows in the remainder of the fiscal year, the 2024 current account deficit is forecast at 0.7% of gross domestic product.

Similarly, ADB Principal Economist for Nepal Jan Hansen shared, "Downside risks to the economic outlook in fiscal year 2024 may arise from a downturn in the global economy affecting Nepal's tourism and remittance receipts."

"Any intensified geopolitical turmoil could disrupt supply chains, pushing up global inflation and tightening global financial conditions. This may lead to a tightening of domestic monetary policy, undermining investment and consumption, and dragging down growth", reads the press release.

He expressed commitment to provide possible support in favour of prosperous and inclusive Nepal.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members-49 from the region. 

Kabiraj Negi Lama is the team coach for the National Para Taekwondo Team for Nepal. Holding a 6th Dan black belt, he began coaching para taekwondo in 2015, later receiving training in South Korea. Additionally, he is a certified international-level coach in Para taekwondo. Over the years, he has coached for nine international competitions, leading Nepal to claim 10 medals from both World Taekwondo and International Paralympic games.

Lama coached teams in major events like the Paralympic Games in Tokyo 2020, the 4th Asian Para Games in China, and the Asian Youth Para Games in Bahrain in 2021. He also worked for seven years as an Executive Assistant at the All Nepal Football Association (ANFA), apart from his volunteer work in Para Taekwondo coaching.

Lama lost his mother at an early age. He was raised by his aunt and grandfather, who were his guardians and strong support systems. While attending school near Pashupati Bankali, he was introduced to taekwondo, which sparked his interest in the game. Soon, he began training  children at schools and fitness clubs as well. His dedication caught the attention of the Taekwondo Association Nepal which appointed him to train for Para Taekwondo competitions, eventually earning him international coaching recognition.

At 34, Lama inspires people with disabilities to pursue sports. He believes nothing should hold them back. However, he acknowledges the difficulty of training athletes with upper limb deficiencies but he remains dedicated to training them. For these athletes, he takes on roles beyond that of a coach, acting as a parent, caretaker, and constant source of motivation. Lama prioritizes their emotional well-being and physical safety, maintaining a delicate balance throughout the training process.

Although his grandfather had hoped for him to join the British army, Lama couldn’t meet the height and weight criteria. Taekwondo, however, became his true calling and brought deeper purpose to his life. He has gained recognition as a coach within the National Sports Council and Taekwondo committee and Lama is grateful for all that he has and the path he has chosen.

Para Taekwondo began in Nepal in 2013 with the aim of promoting sports and inclusivity. As a coach, Lama first learns about the body structure of disabled athletes with upper limb deficiencies or amputations and helps them prepare mentally and physically before teaching them tactics and techniques for balance and winning kicks.

He finds joy in their success. He says he was proud when Shrijana Ghising won the Gold Medal in the Riyadh 2022 World Para Taekwondo Grand Prix Final against top-ranked opponents. Additionally, Lama reflects on Palesha Goverdhan’s historic achievement in becoming the first Nepali Paralympian to qualify for the Paris 2024 Paralympic Games. “My students never fail to impress me with their stamina and courage. I’m proud to be their couch,” he says.

Lama ensures his students are well-prepared for victory and inspires them to give nothing less than their best. He instills in them the ethos of representing their country without compromise or excuse. Win or lose, Lama encourages his students to embrace the outcome and learn lessons from every game. 

His devotion and coaching abilities have earned him fame and prestige, including the Best Coach Award from the Nepal Olympic Committee in 2022. But for Lama, true success lies in the achievements of his students. The ten medals they’ve won with his guidance show just how impactful his coaching has been.

His dedication stretches further than just coaching. He’s determined to raise the profile of taekwondo in Nepal, always busy with tasks like learning new international game rules, researching, attending seminars, and improving his coaching skills to nurture top-level athletes. Balancing training, volunteering, and other responsibilities leaves him feeling guilty for not spending more time with his family. But his family admires his sacrifices and efforts, and says he is a key player in Nepal’s victory in the international arena.

Lama believes every individual has a part to play in contributing to the country. “Our government should focus on hiring more coaches to improve professional sports,” he says. He emphasizes that coaches should be given good incentives so that they give it their all while training athletes. He also says he wishes for greater recognition of Nepalis athletes. At the moment, he’s working on getting Nepal to participate in more international games. He hopes to train more players who can bring back medals for the country.

Nepal’s tourism industry is back on track if foreign tourist arrival figures over the first three months of 2024 are anything to go by.

Foreign tourist arrivals via air recorded a year-on-year growth of 33.78 percent in the first three months of 2024. Tourist arrival data released by the Nepal Tourism Board (NTB) shows a total of 304,693 foreign tourists have entered the country till March this year, compared to 227,755 in the same period of 2023. Over the past few months, the tourism sector is playing a vital role in the tourism recovery. A report published by the World Bank on April 2 states that the services sector emerged as a primary driver of this growth on the supply side, buoyed by increased activity in tourism-related services.

A total of 128,167 foreign tourists arrived in Nepal in March this year, compared to 99,427 in March last year. This is higher than the pre-covid footfall for the month. Nepal had welcomed 127,351 in March 2019. However, the total arrival in the first three months of 2024 is still lower than the total arrivals in the first three months of 2019 when Nepal welcomed 311,047 foreign tourists.

Nepal welcomed 1,197,191 foreign tourists in 2019 which has remained the best year for the industry so far. Arrival numbers fell to 230,085 in 2020 and further to 150,962 in 2021. It improved to 614,869 in 2022 and rebounded to 1,014,876 in 2023. Arrival figures over the first three months suggest that Nepal is on track to beat the 2019 numbers this year. March marks the beginning of the spring tourism season which is considered the best for trekking and mountaineering. The spring season sees a lion’s share of mountaineering expeditions coming to Nepal. Most of the expeditions on Mt Everest, the tallest peak on earth, are organized in this season.

According to tourism entrepreneurs, tourist numbers will continue to increase till May which marks the end of the climbing season and the beginning of monsoon rains. While tourist numbers dip during the three months of June, July, and August, it starts picking up once the autumn season begins in September. The autumn season continues through December. 

As usual, India was the largest source market for Nepal in March, with 30,698 visitors. It was a year-on-year growth of 18.5 percent. The number of Chinese tourists also increased considerably to 12,093—a growth of a staggering 358 percent. The US came third with 10,763 visitors, followed by the UK with 7,241 tourists, Sri Lanka with 5,741 visitors, and Germany with 5,255 footfalls. Likewise, Thailand, Myanmar, France, and Australia were among the top 10 countries in terms of visitor numbers. Region-wise, Asia (SAARC) contributed the highest number of visitors in March, accounting for 31.8 percent of total arrivals. 

Similarly, Asia was next, contributing 22.4 percent of total arrivals, followed by Europe (21.5 percent), Oceania (4.8 percent), the Americas (9.8 percent), and Others (9.7 percent). Tourism entrepreneurs say the tourist arrivals would be much higher once the new international airports in Lumbini and Pokhara start handling international flights.

The Nepal-Switzerland Bilateral Consultations Mechanism (BCM) meeting in Switzerland reviewed the entire spectrum of Nepal-Switzerland relations including economic ties, development partnership, multilateral cooperation, and contemporary global issues such as climate change and human rights.

The BCM also discussed the exchange of high-level visits, Nepal’s graduation from the LDC category, progress made towards meeting the Sustainable Development Goals, and ways to further enhance bilateral cooperation on trade, investment, tourism, science and technology, and vocational training, among others, according to the Nepali Embassy in Geneva.

The fourth meeting of the Nepal-Switzerland BCM was held at the Federal Department of Foreign Affairs (FDFA) in Bern, Switzerland on Tuesday. 

Head of the Europe-Americas Division of the Ministry of Foreign Affairs of Nepal, Joint Secretary Ganesh Prasad Dhakal and Assistant State Secretary for Asia and the Pacific in the FDFA of Switzerland, Heinrich Schellenberg led the respective delegations.

Nepali delegation included Ambassador of Nepal to Switzerland, Ram Prasad Subedi and the Embassy Officials whereas the Swiss Delegation included officials from the FDFA and the Swiss Agency for Development and Cooperation (SDC).

On the occasion Joint Secretary Dhakal requested the Swiss side to encourage the participation of their investors in the upcoming Nepal Investment Summit being held in Kathmandu this month.

The Nepali side thanked the Swiss Government for consistently placing Nepal as a priority country for Swiss Development Cooperation. While expressing satisfaction over Nepal’s progress, the Swiss side assured of their continued support to Nepal’s development endeavors.

Nepal-Switzerland Bilateral Consultations Mechanism was established in 2015 and the next meeting will be held in Kathmandu on mutually convenient dates, adds the Embassy.

Lawmakers have demanded the prompt resumption of Nepal-China transit points closed with the outbreak of the COVID-19 pandemic.

Airing views in the 'zero hour' of the House of Representatives (HoR) meeting today, NC lawmaker Dilendra Prasad Badu expressed satisfaction over the reports that during Deputy Prime Minister and Foreign Minister Narayan Kaji Shrestha's recent visit to China, the two sides exchanged views on reopening the transit points along the Nepal-China border including Tinker in Darchula.

He said during the Prime Minister's China visit in the past, it was reported that the transit points would be resumed but this has not happened so far. "The Foreign Minister should clarify it," he asserted.

Thakur Prasad Gaire of CPN-UML urged the government to conserve Palpa's historic Rani Mahal (Palace) while Tara Lama Tamang demanded grants to sugarcane farmers.

Pradip Paudel of Nepali Congress drew the government's attention towards the issue of the server down in Tribhuvan International Airport. It was Badri Pandey from the same party who expressed his concerns over problems being faced by Bajura people in the aftermath of a landslide and a delay in constructing a bridge in Martadi. 

Devendra Poudel of CPN (Maoist Center) urged the government to establish the administration office at Galkot of Baglung to provide government services near to the locality of people who face challenges to visit the district headquarters to acquire administrative services.

Dhawal Shumsher JB Rana, Basudev Ghimire, Bindhyabasini Kansakar, Tejulal Chaudhary, Damodar Poudel Bairagi, Durga Rai, Pradip Yadav, Prabhu Hajara, Binita Kathayat, Dhruba Bahadur Pradhan, Nagina Yadav, Nirmala Koirala, Narayan Prasad Acharya, Nisha Dangi, Purna Bahadur Gharti Magar, Pratima Gautam, Pratiksha Mukhiya, Dikpal Kumari Shahi, Deepak Giri, Deepa Sharma and Dr Toshima Karki raised contemporary issues.

India’s Ambassador to Nepal Naveen Srivastava on Tuesday discussed with Nepal’s Deputy Prime Minister and Home Minister Ravi Lamichhane security mechanisms between the two countries and the need for strengthening border management to check small crimes as well as human trafficking.

Srivastava paid a courtesy call on Lamichhane at the Home Ministry in Singhadurbar here and the two sides during the meeting discussed the “efforts needed to further consolidate deep, wide and diversified people to people relations between the two countries based on historical ties and geographical proximity,” according to the Home Minister’s secretariat.

The two sides agreed that criminal activities have come under control despite having an open border between the two countries through effective coordination between the security mechanisms of the two countries, a statement said.

Ambassador Srivastava underlined the need for strengthening border management mechanisms to check small crimes and human trafficking in the border area through coordinated efforts, it said.

Srivastava expressed India’s willingness to provide grant assistance for reconstruction works in earthquake-hit Jajarkot and Rukm West districts of western Nepal and provide specialized training to Nepal Police.

Lamichhane underlined the need to expand and upgrade mechanisms in the border area for testing pesticide contents in fruits and vegetables imported from India, according to sources from the Home Ministry.