Nepal has witnessed a significant 18.34% increase in Foreign Direct Investment (FDI) pledges during the first seven months of the fiscal year 2023/24, reaching Rs. 26.84 billion. This marks a rise of Rs. 4.16 billion compared to the same period in the previous fiscal year when FDI commitments stood at Rs. 22.68 billion. The growth reflects Nepal’s improving investment climate and the government’s efforts to attract foreign capital. Below is a detailed breakdown of the FDI trends:
1. Key Highlights of FDI Growth
- Total FDI Pledges: Rs. 26.84 billion (up from Rs. 22.68 billion in FY 2022/23).
- Breakdown of Commitments:
- Automatic Route: Rs. 2.67 billion (introduced in October 2023 to streamline investments).
- Manual Process: Rs. 24.17 billion.
2. Automatic Route: Simplifying FDI Approvals
- Introduced: October 2023.
- Purpose: To expedite FDI approvals in seven priority sectors:
- Energy
- Agriculture and Forestry
- Infrastructure
- Tourism
- Information Technology (IT)
- Services
- Manufacturing
- Eligibility: Foreign investors can submit online applications for investments up to Rs. 500 million.
- Impact: The IT sector has particularly benefited from this streamlined process.
3. Sector-wise FDI Commitments
- Tourism Sector:
- 168 firms pledged Rs. 17.32 billion, accounting for 64.53% of total FDI commitments.
- Service Sector:
- 48 firms secured Rs. 5.69 billion, making up 19.8% of the total.
- Other Investments:
- Rs. 1.94 billion came through share purchase agreements, share subscription agreements, and technology transfer agreements.
4. Project Classification
- Small-scale Projects: 375 (majority of FDI projects).
- Medium-scale Projects: 7.
- Large-scale Projects: 4.
5. Government’s FDI Target
- FY 2023/24 Target: Rs. 44 billion.
- Current Achievement: Rs. 26.84 billion (61% of the target).
What This Means for Nepal
- Economic Growth: Increased FDI pledges signal growing investor confidence in Nepal’s economy.
- Job Creation: Investments in tourism, services, and IT are expected to generate employment opportunities.
- Infrastructure Development: FDI in energy and infrastructure will support long-term economic development.
Conclusion
Nepal’s FDI landscape shows promising growth, with an 18.34% increase in pledges during the first seven months of FY 2023/24. The introduction of the automatic route has streamlined investment approvals, particularly benefiting the IT sector. With the tourism and service sectors leading, Nepal is on track to achieve its FDI target of Rs. 44 billion for the fiscal year. This growth underscores the country’s potential as an attractive destination for foreign investors, paving the way for sustainable economic development.