Foreign Direct Investment (FDI) in Nepal: Some Observations

I just finished reading an excellent article written by Kundan Pokhrel Majagaiya (Donghua University, Shanghai, China) published in the website of Telegraph Nepal. If you are interested about the country then I would recommend you to read it: Foreign Direct Investment in Nepal. Kundan Pokhrel Majagaiya has given us a overall picture of the foreign direct investment (FDI). When it comes to the matter of FDI, Nepal seems to get out shadowed completely by its two large neighbors India and China. Even, it does not attract the same level of attention like other regional neighbors in South Asia Bangladesh and Pakistan.

Well, first of all, Nepal has a major obstacle- it is a landlocked country and it does not have any sea port. This is perhaps a strong negative factor that discourages the potential foreign investors. At the same time, most people in the country are poor and Nepal does not have a big market for large companies. Export oriented FDIs seem to be most viable option. However, the country has a thriving tourist industry and a significant portion of FDIs come in this sector. Textile and Ready Made garments is also getting some foreign investment.

I am a bit surprised to see that no big foreign investment came in the telecom sector yet. In my own country Bangladesh, it is the telecom sector that has attracted huge foreign investment in the last one decade. I believe that Nepalese market has the same potential.

Nepalese government will have to focus on developing the infrastructures and also ensure liberal trade policies for foreign companies. Bangladesh has set up Export Processing Zone in the capital Dhaka and it has brought some success in generating jobs and foreign exchange through export. Nepal can do the same thing and set up some Export Processing Zones where the investors will get all the facilities and support.

Nepal suffered from political instability and violence for many years and only in the last 3 years, there is some peace. So, it is the right time for the government to start a media campaign about the facilities that foreign investors can get.

(This entry was originally published in April 2009 and it based on the context on that time.)