Nepal Investment Summit 2024: Charting Nepal’s Economic Course

The event aims to spotlight Nepal's enhanced investment climate, showcase the government's commitment to legal, regulatory, and procedural reforms.

Dipti Ghimire

  • Read Time 4 min.

On November 26, then Finance Minister Prakash Sharan Mahat shared plans for the nation’s upcoming fourth Investment Summit. Initially slated for April 21-22, 2024, the summit has been rescheduled to take place on April 28-29, 2024, in Kathmandu. Emphasizing a departure from its predecessors, this year’s summit is envisioned to transcend its titular designation. 

As reported by IBN Dispatch, the Nepal Investment Summit 2024 seeks to bolster private investment, encompassing Foreign Direct Investment (FDI). The event aims to spotlight Nepal’s enhanced investment climate, underscore the government’s unwavering commitment to legal, regulatory, and procedural reforms fostering investor confidence, and showcase compelling investment prospects across diverse sectors.

However, the World Bank data for 2022, reveals that Nepal’s FDI constituted a mere 0.2 percent of its GDP, a decline from the 0.5 percent recorded in 2021. In contrast, the average for lower-middle-income countries stands at 1.4 percent. Drawing comparisons, Rwanda, often regarded as a development success story by Nepali academics, attracted 3 percent of its GDP in FDI during the same period. This statistical landscape underscores Nepal’s struggle to entice sufficient foreign investors. Recognizing this challenge, the government is strategically preparing for the upcoming Investment Summit. The summit serves as a crucial platform to not only exhibit potential investment opportunities but also to allure foreign funds. 

The overarching objectives are multifaceted, aiming to stimulate economic development by emphasizing the importance of domestic investors, non-resident Nepalis, and foreign investors alike. Also, the summit seeks to foster networking opportunities and create an environment conducive to sustained growth by amending over a dozen laws essential for attracting and retaining foreign investment. 

Shortly after the declaration of the Investment Summit for 2024, Axiata Group stunned the market by selling its 80 percent ownership in Ncell to Spectrlite, marking a significant move just seven years after entering Nepal’s telecommunications sector. The Malaysian multinational telecommunications conglomerate formally declared its intention to part with its NCELL stake on November 30, 2023. Simultaneously, Habib Bank, a long-standing FDI partner, exited Nepal after three decades. While reasons remain undisclosed, these exits highlight challenges for foreign investors in Nepal, impacting the nation’s stance on welcoming foreign investment.

The upcoming investment summit follows in the footsteps of its predecessors in 2017 and 2019. The 2017 summit faced criticism for its poor planning and mismanagement, but subsequent strides were made in the 2019 edition. In preparation for the 2019 summit, the government took proactive measures by enacting three pivotal laws – The Foreign Investment and Technology Transfer Act, the Public-Private Partnership and the Special Economic Zone Act (First Amendment). These legislative initiatives were a response to concerns surrounding unfavorable business regulations.

During the 2019 summit, the government presented 50 significant infrastructure projects to potential investors. Notably, 14 projects received qualified proposals totaling $11.88 billion. The selected proposals encompassed seven agricultural infrastructure projects, five hydroelectric schemes, the eagerly awaited Nijgadh International Airport, and the Kathmandu Outer Ring Road Project. However, both the Nijgadh International Airport and the Kathmandu Outer Ring Road Project have faced delays. 

Environmental concerns regarding Nijgadh, coupled with a Supreme Court decision to halt construction, have impeded progress.A similar predicament engulfs the Tamor Storage Hydroelectric Project. Despite a joint venture agreement between the government-owned Hydroelectricity Investment and Development Company and Power China for the 756 MW Tamor Project, it remains in limbo, with the Investment Board Nepal annulling the joint venture agreement. Out of the total projects presented, only 10 have advanced to conduct the necessary studies for implementation. 

The 2023 Investment Climate report by the US Department of State unequivocally acknowledges Nepal’s potential as an investment hub. However, it highlights persistent concerns among investors, particularly revolving around issues such as corruption, bureaucratic red tape, and policy ambiguity and instability in the country. The complicated process of securing permits for investment, business operations, and management in Nepal adds an additional layer of complexity, involving multiple ministries from Finance to Industry. In an effort to streamline procedures, the government introduced the One-Stop Service portal, an online platform aimed at providing investors access to “all investment-related services.” 

Despite this initiative, investors often encounter the inconvenience of being required to submit ‘missing’ documents in person rather than through the designated portal.Nepal presents a plethora of challenges for investors, ranging from the cumbersome renewal processes and company registration and to intricate land acquisition and vexatious taxation systems. The arbitration processes for resolving business disputes further deter potential multinational investors, given the prolonged durations and frequent discrepancies involved in repatriating investments and remitting dividends.

The scarcity of adequate infrastructure remains a perennial bottleneck for Nepal’s quest to attract higher levels of investments. Despite hosting numerous investment summits, Nepal’s business environment needs substantial improvement, and existing hurdles must be effectively addressed to realize the anticipated influx of Foreign Direct Investments (FDIs). Without these crucial enhancements, Nepal’s aspiration to attract the desired FDIs will remain in the realm of fantasy.

The overall health of the nation’s economy is crucial to create an investor friendly environment. A sound economy requires the government to adopt appropriate fiscal and monetary policies.

Ahead of the forthcoming summit, the government has committed to revising over a dozen laws to eliminate obstacles that might impede the execution of approved projects by amending legislation. The decision, while important, seems too hasty. Making almost half a dozen amendments to the legal system before the investment summit seems unlikely.

Investors, be it foreign or domestic, prefer stable and clear government policies as well as personnel as it minimizes risk, making future returns on their investments more predictable. However, the policies and laws enacted by the Nepali government are anything but stable and transparent. A lot of important decisions are made overnight without consulting the stakeholders and without letting enough time for businesses to adjust to. Moreover, the frequent changes in government, accompanied by frequent turnovers in finance officials responsible for economic policies, further exacerbate the situation and undermine confidence in the country’s governance and economic environment.  

For Nepal to genuinely cast itself as a magnet for investments, it must prioritize a laundry list of improvements, including addressing corruption, streamlining bureaucratic processes, implementing controlled currency exchange facilities, ushering in a sovereign credit rating process, and ensuring policy consistency. The government’s forthcoming actions, especially leading up to the Investment Summit, are poised to be the main event in the grand theater of whether foreign investors will rediscover confidence in Nepal’s economic potential. The ball is firmly in the government’s court – it’s not just about articulating plans, but also about showcasing an unwavering commitment to cultivating a business-friendly environment that not only beckons but sustains foreign investment.

Dipti Ghimire is a researcher at Samriddhi Foundation, an economic policy think tank based in Kathmandu. The views expressed in this article are the author’s own and do not represent the views of the organization.