Nepal receives only 1.5 trillion of 4 trillion foreign investment commitments

Kathmandu, October 13 — Over the past 15 years, Nepal has received foreign investment commitments exceeding NPR 4 trillion, yet only NPR 1.5 trillion has been realized. From the fiscal year 2008/09 to 2023/24, the total commitment amounted to NPR 406.49 billion.

According to data from Nepal Rastra Bank, only 37.01% of these commitments have materialized as actual foreign investment. 

The highest investment commitments during this 15-year period occurred in the fiscal year 2014/15, while the lowest commitments were recorded in 2011/12, despite a substantial amount of investment being realized that year. In 2011/12, commitments totaled NPR 7.38 billion, with actual investment reaching NPR 9.1954 billion, equivalent to 128.8%.

In 2014/15, the investment commitment was NPR 67.455 billion, but the actual investment that year was only NPR 4.3826 billion, representing just 6.5% of total commitments.

Former Industry Secretary Bharat Thapa points to a trend where significant foreign investment commitments are made, but actual investment remains low, indicating an unsuitable investment environment in Nepal. 

"Investors come and commit funds, but the expected level of investment does not follow. The main issue is that the investment environment does not match what is projected before they arrive," Thapa stated. He cited challenges related to land acquisition, taxation, and business registration as major deterrents for investors.

Thapa also noted that the federal structure has complicated the investment process. "The number of obstacles has increased due to the involvement of three tiers of government. Currently, there are 761 governments (federal, provincial and local), which adds to the complexity. After making commitments, investors evaluate the market and overall environment, including labor, skills, and discipline."

Political parties in the government also have an impact on foreign investment, according to Thapa. Regardless of which political party is in power, he remarked, foreign investment has not been successfully attracted. "Political parties may encourage investment verbally, but they may not fully understand the necessary policies and regulations. It’s not enough to simply invite investors; a secure environment must be established along with legal assurances."

Which administration attracted the most investment?

In percentage terms, the highest foreign investment was recorded in the fiscal year 2011/12, at 128.8%. This period was under the leadership of Jhalanath Khanal, who served until August 28, 2011, followed by Dr. Baburam Bhattarai.

In terms of total amount, the highest investment came in the fiscal year 2021/22, with NPR 19.5127 billion. During this period, the government, led by KP Sharma Oli until July 13, 2021, saw three government changes by December 25 of that year, leading to a total commitment of NPR 32.1728 billion, of which 60.6% was realized.

In the fiscal year 2020/21, under Oli's leadership, the country received NPR 19.4787 billion in actual foreign investment, with commitments totaling NPR 37.8085 billion, resulting in 51.5% being realized.

In the fiscal year 2022/23, the actual investment was NPR 18.5603 billion, while commitments reached NPR 54.1589 billion. Despite high commitments, the investment realized was only 34.3% of the total.

In the fiscal year 2017/18, NPR 17.5046 billion was realized. The government, under the leadership of Pushpa Kamal Dahal until June 7, 2017, faced similar challenges, with commitments totaling NPR 55.6705 billion, but only 31.4% materialized.

Highest investment commitments

The most significant investment commitments occurred in the fiscal year 2014/15, amounting to NPR 67.455 billion, yet the actual investment that year was the lowest recorded. Until February 2014, the government was led by Khila Raj Regmi, and thereafter by Sushil Koirala.

Under Koirala's administration, investment commitments soared, but the actual investment realized was just 6.5%, amounting to NPR 4.3826 billion.

The second-highest investment commitment occurred in 2017/18, totaling NPR 55.6705 billion, with only 31.4% or NPR 17.5046 billion actually realized.

In the fiscal year 2022/23, commitments reached NPR 54.1589 billion, but only NPR 18.5603 billion was realized, again under Dahal's leadership, resulting in just 34.3% of commitments being fulfilled.

In the fiscal year 2020/21, commitments were NPR 37.8085 billion, with actual investment reaching NPR 19.4787 billion, achieving 51.5% of the commitments. 

In 2021/22, commitments amounted to NPR 32.1728 billion, with 60.6%, or NPR 19.5127 billion, being realized. This was also during KP Sharma Oli's administration.