Nepali Times Asian Paints
PAAVAN MATHEMA
My Two Paisa
Keep politics aside


PAAVAN MATHEMA


If the objective of Nepal Investment Year 2012-13 is to attract investments, then it does not seem to be working.
According to the Department of Industry, Foreign Direct Investment (FDI) commitments to Nepal declined by
31.03 per cent during the first nine months of the current fiscal year. The money coming in has slumped to Rs 5 billion from Rs 7.25 billion during the same period in the last fiscal year. The number of inquiries made by potential investors has also declined. According to the latest UNCTAD's World Investment Report, Nepal ranks 134th in the FDI Inflow Index. Even among the least developed countries, we are at the bottom of the heap in attracting foreign capital.

This is hardly surprising. Growing political uncertainty, militancy of trade unions, crippling power shortages and absence of rule of law do not exactly make Nepal a prime spot for investment. Let's face it, how can we attract investors when our officials shamelessly demand hefty sums simply to move a file from one table to another.

Last week, two oil exploring companies suspended their Nepal operations. Cairn Energy, a Scottish company and Texana from the US, which hold potential petroleum sites in the Tarai belt, both cited force majeure and blamed political instability along with bureaucratic hurdles for their decision to pull out. The frustrated companies decided to shelve their plans after months of running from one minister to another trying to make changes that were already permitted by the original contract. Why would they risk investing in a country that refuses to take any step to secure their interests?

Apathy shown by political leaders does not help either. Nepal once again faces the risk of being blacklisted by Financial Action Task Force (FATF), the global anti-money laundering watchdog, for not endorsing three bills against money laundering. The FATF plenary takes place on 18 June and if the bills are not passed through an ordinance by then, Nepal will be blacklisted, and the consequences will be dire for our financial system and economy.

Foreign investment is likely to plummet further if FATF takes action. Yet, opposition leaders are protesting, arguing that a caretaker government has no mandate to enact laws through ordinance. A timely budget is also in limbo for the same reason. Political polarisation and internal bickering are holding our economy hostage.

If we are serious about inviting foreign investors or keeping the ones we already have, we have to mend our ways. However, there has been slight progress in the past few months. Nepal climbed up three places to 107 out of 183 economies on ease of conducting business in Doing Business 2012.

Relaxing property registration process, enacting policies to protect investors and ensuring contracts have helped. But they won't be enough. As long as we tolerate political interference in economic matters, the numbers will keep dropping.

See also:
Last chance on FATF, PAAVAN MATHEMA
In our obsession with the constitution, let's not forget the other deadline Nepal has to meet



LATEST ISSUE
638
(11 JAN 2013 - 17 JAN 2013)


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