FDI in country sees downward trend

Lately, the country has been receiving fewer foreign direct investments (FDI) due to perennial problems like poor industrial relations, political instability, lack of quality physical and social infrastructure, more fragmentation and enforcement of contracts, coupled with the lack of intellectual property protection and security threats, despite huge potential.

"Nepal received six times less FDI at only four paisa for every Rs 100 foreign direct investment that entered South Asia in 2005-2010, from some 23 paisa in 1998-2000," said former economic advisor of the Finance Ministry Keshav Acharya.

The FDI that the country received was, however, the lowest in the South Asian countries like India — the largest foreign direct investment receiver — followed by Pakistan, Bangladesh, Sri Lanka, Maldives and Bhutan, he said, adding that the trend of foreign direct investment revealed that more than 90 per cent of the foreign direct investment that has entered the country was equity investment, whereas less than three per cent entered under technology transfer, and equity and technology transfer combined.

Similarly, the small scale industry is the most favourite among foreign investors, as it has attracted some 72 per cent of the total FDI in 2006, and it increased to 78.87 per cent in 2010, whereas attraction towards large industry seems to the least.

"Large scale industries failed to attract foreign direct investment as it attracted some 11.5 per cent of the total FDI in 2006, which further declined to 8.96 per cent in 2010," Acharya added.

Sector wise, the manufacturing sector is the most favourite with foreign investors, followed by others sector that include energy, construction and mines. "Though foreign direct investment in manufacturing, services and agriculture is declining, investment in others sector has been increasing," he said.

On the occasion, vice chair of National Planning Commission (NPC) Deependra Bahadur Kshetry said that the government has been requesting development partners and investors to invest in agriculture, as it will not only propel economic growth but also check the outflow of unemployed youth.