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Promoting Foreign Investment in Nepal: Prospects and Challenges

Basudev Sharma Poudel 1

Abstract

FDI is an important source of capital for economic growth in developing countries. It provides a

package which constitutes new technologies, management techniques, finance and market access

for the production and movement of goods and services. However, attracting FDI is a major

challenge for host countries as it faces the challenge of identifying the major factors that motivate

and affect the FDI location decision. The main FDI location factors are cost factors, market

factors, infrastructure, technological factors, political and legal factors and social and cultural

factor. Despite several conflicting circumstances, Nepal is attempting to sort out overarching

issues of FDI concerning with economic development. That's why Nepal is at a point wherefrom it

can excel for economic goals via FDI. The set trends illustrate that various indicators pertaining

to FDI in the country has been improving since peace process was begun in 2006. This analysis

comes to conclusions that the country owns unique advantages and, thereby, opportunities of FDI

useful for the countrys prosperity. Yet FDI in the country is not free of challenges, thus, that

need to be timely addressed with prudent measures.

Key word; FDI, TNCs, LDC, SEZ

IntroductionForeign Direct Investment (FDI) is generally considered as a useful means so as to

energize an economy. One common view is that FDI helps accelerate the process of

economic development in host countries (Hanson, 2001, p1).However; FDI is not free of

disputes. Despite of all controversy, FDI has been a major economic policy issue for the

great majority of nations around the world. The increasing mobility of international firms

and the gradual elimination of barriers to global capital flows have stimulated

competition among governments to attract foreign direct investment. FDI per se is one

manifestation of globalization and the world economy over the past two decades. FDI is

an important indicator to boost the economic growth of Nepal. FDI was identified as a

medium in order to acquire skills, knowledge, technologies and to internationalize

1 Mr Poudel is a Under Secretary, Ministry of Finance Privatization cell /GoN in Kathmandu. A gold Medalist inM.Phil in management. P.Hd Scholar in Faculty of Management Tribhuvan University , Kathmandu, Nepal

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business and at the same t ime to reduce debts.McKern (1996), Kathuria (1998, 2000 and

2001) and Noorbakhsh et al., (2001) believed that foreign direct investment does not take

place automatically in a nation. Whereby, inflow of foreign direct investment should be

encouraged.

FDI, also known as (international) direct investment, forms part of the capital account of

the balance of payments. Direct Investment is defined as an investment that adds to,

deducts from, or acquires a lasting interest in an enterprise operating in an economy other

than that of the investor where the purpose is to have an effective voice in the

management of the enterprise. According to the IMF, FDI is the category of international

investment that reflects the objective of obtaining a lasting interest by a resident entity in

one economy, in an enterprise resident in another economy.

Foreign direct investment was considered as a medium for acquiring skills, technology,

organizational and managerial expertise. Unfortunately, the recent bulk of the inflow has

been directed to only a limited number of countries. Mohd Ridauddin Masud et al (2009)

claimed there were four elements that encouraged the inflow of foreign direct investment

to the host country, which was the component of investment, origin of foreign investor,

economic sectors and investment income generated. The openness of the economy with

the rest of the world has significant liberalization in terms of trade. The open economic

encouraged more confident investment. Other than trade liberalization, financial

liberalization was also important to sustain capital inflows.

Countries do welcome FDI for its various potential benefits. These include employment

creation, capital accumulation, transfer of technology, improved provision of services and

increased competition (UNCTAD, 2006: p1). Contrary to such positive views, skeptical

views run against FDI. Skepticism suggests inward FDI can also impose costs in the form

of displacement of local firms and workers and possible monopolistic practices, and there

can be valid economic rationales for restricting inward FDI (ibid, p1). Staying away from

economic rationales, political and social views do hold high handedness in denouncing

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FDI. There may also be non-economic reasons for limiting foreign ownership and

control, relating to national security or economic nationalism (ibid, p1).

Current financial and economic crises erupted since 2008 have downplayed the agenda of

investment attraction through liberalization and protecting foreign investors. With this

respect, Nepalese case per se is a unique as its agenda for economic transformation has

been shadowed in a hazy and hostile political situation. This process emerged when the

country posed years of internal war which shattered the mission of inviting FDI. The

situation is further complicated by protracted transition in which major two tasks -

constitution making and peace process - are not concluded yet.

At a time the country is striving for strengthening its infant republican democraticsystem, political and economic agenda should go hand-in-hand. Whatever the nature or

size of system the country is going to switch over to, the future state will have to

ultimately deliver in economic term to common people. If delivered the peace dividend,

the system-in-design will sustain and vice-versa. Keeping it in mind, a sound

preparedness is a must in the direction of economic prosperity. Alleviating poverty in a

period of ten years in Nepal may require at least 8 per cent of sustained growth in GDP.

On top, growth has to be converted into inclusive growth as long as possible. Such

quantum and nature of growth is attainable only when FDI boosted investment will come

true.

It is an irony that the size of FDI to Nepal has been a meager for a long time, on one

hand. On the other, China and India have been enjoying one of the highest chunks of

global FDI. Now the time has come for Nepal to make an honest introspection and

retrospection so that a set of prudent and pragmatic measures could be designed

accordingly for both policy as well as operational levels in the times ahead.

Objectives of the Study

This paper aims to meet the following objectives:

1. What are the main trends observed in the FDI to Nepal?

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2. What are the major prospects for FDI in Nepal?

3. What are the chief challenges to be dealt by Nepal?

Trend of Global FDI

Recent years have painted somewhat negative sort of picture of FDI at global level.Following statement of World Investment Prospects Survey (2010-2012) is the

manifestation of the current pessimistic scenario:

Faltering profits, reduced access to financial resources, and declining market opportunities,

as well as the perceived risk of a possible worsening of the global economic downturn are

among the reasons for a fall in FDI flows, as witnessed in 2009. Falling FDI in turn also

raises concerns among host countries especially those in the developing world that rely on

international investments to finance their domestic growth and employment creation

(UNCTAD, 2010: p3).

Like trade, foreign direct investment (FDI) has occurred throughout history. From the

merchants of Sumer around 2500 BCE to the East India Company in the 17th century,

investors routinely entered new markets in foreign dominions. In 1970 global FDI totaled

$13.3 billion. By 2007 it was nearly 150 times higher, peaking at $1.9 trillion. The

economic crisis slashed global FDI flows by about 40% in 2009, affecting all economies,

sectors, and forms of investment. FDI in developing economies fell 35% in 2009,

compared with 41% in high-income economies. Most indicators signal that FDI will be

higher in 2012 than in 2011. The recovery in FDI is good news for economies suffering

from the global economic downturn and seeking to stimulate economic growth.Statistical

data shows that the level of FDI was continuously increasing during 1990-2008, but the

directions and amount of such inflows differs significantly between the countries.

European countries proved to be successful in attracting FDI. According to UNCTAD

(2007) total FDI inflow in the world was 945.8 billion USD, of which developed

countries received 590.3 billion USD which is 62.4 % of the total FDI inflow in the

world, whereas in the same year developing countries received FDI only 314.3 billion

USD. It was only 38.6 % of the total FDI inflow in the world. Even that one can observe

a slight drop in total amount of FDI inflows in the world in 2008 developed countries

continuously dominate over the developing countries in attracting the FDI.

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Statistical data shows that the level of FDI was continuously increasing during 2003-

2007, but the directions and amount of such inflows differs significantly between the

countries. European countries proved to be successful in attracting FDI. According to

UNCTAD (2007), in 2005 total FDI inflow in the world was 945,8 billion USD, of which

developed countries received 590,3 billion USD which is 62,4 percent of the total FDI

inflow in the world, whereas in the same year developing countries received FDI only

314,3 billion USD. It was only 38,6 percent of the total FDI inflow in the world. Even

that one can observe a slight drop in total amount of FDI inflows in the world in 2008

(Table 1) developed countries continuously dominate over the developing countries in

attracting the FDI.

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Foreign direct investment has grown dramatically worldwide over the last decade.

Inflows of foreign direct investment into developing countries grew by an average of 23

percent a year during 1990-2000 (IMF, 2003). In addition, foreign direct investment was

now the largest and the most stable source of private capital for developing countries and

also economies in transition, which accounting for nearly 50 percent of all capital flows

(Kraay, 1998). However, less developed countries have greater expectation on foreign

direct investment.

Global foreign direct investment (FDI) flows rose moderately to $1.24 trillion in 2010, in

(table 2) but were still 15 per cent below their pre-crisis average. This is in contrast to

global industrial output and trade, which were back to pre-crisis levels. UNCTAD

estimates that global FDI recovered its pre-crisis level in 2011, increasing to $1.4 1.6trillion, approaching its 2007 peak in 2013. This positive scenario holds, barring any

unexpected global economic shocks that may arise from a number of risk factors still in

play.

Table 2: FDI Flows and Stock InflowYear In billions US dollars Annual percent changes

2005/07 14722007 1971 0.342008 1744 -0.122009 1185 -0.322010 1244 0.05

Source: UNCTAD, weblink: www.unctad.org/fdistatistics

For the first time, developing and transition economies together attracted more than half

of global FDI flows. Outward FDI from those economies also reached record highs, with

most of their investment directed towards other countries in the South. Furthermore,

interregional FDI between developing countries and transition economies has been

growing rapidly. In contrast, FDI inflows to developed countries continued to decline.

Some of the poorest regions continued to see declines in FDI flows. Flows to Africa, least

developed countries, landlocked developing countries and Small Island developing States

all fell, as did flows to South Asia. At the same time, major emerging regions, such as

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East and South-East Asia and Latin America, experienced strong growth in FDI inflows.

International production is expanding, with foreign sales, employment and assets of

transnational corporations (TNCs) all increasing. TNCs production worldwide generated

value added of approximately $16 trillion in 2010 about a quarter of global GDP.

Foreign affiliates of TNCs accounted for more than one-tenth of global GDP and one-

third of world exports. State-owned TNCs are an important emerging source of FDI.

There are some 650 State-owned TNCs, with 8,500 foreign affiliates across the globe.

While they represent less than 1 per cent of TNCs worldwide, their outward investment

accounted for 11 per cent of global FDI in 2010. The ownership and governance of State-

owned TNCs have raised concerns in some host countries regarding, among others, the

level playing field and national security, with regulatory implications for the international

expansion of these companies.

The global financial crisis and subsequent economic downturn led in 2008-2009 to rapid

and significant contraction in international trade and investment. But the first half of 2010

has seen a gradual though cautious upswing in global consumer demand, investor

confidence, and economic activity. The resurgence of international commerce and

investment is creating new opportunities for companies and countries alike. The factors

driving investment decisions by multinational corporations are changing. When seeking

business opportunities, companies are now more concerned about financial and political

risks, with a focus on stable and predictable business environments. In response,

governments everywhere recognize that their chances of attracting more foreign

investment depend on making their investment climates more competitive.

The Investing across Border (IAB) indicator measures FDI regulation in 4 specific policy

areas. They aim to complement existing measures of the quality of business

environments. A company seeking to expand its global presence will assess its options before deciding on a location for its investment. One of the first determinants of location

is whether the company is allowed to enter and operate in a specific market. Though most

economies have liberalized and opened most sectors to foreign investment, some

industries continue to b e protected from foreign competition. IABs investing across

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sectors indicators find that while primary and manufacturing sectors are mostly open,

some industries such as media, transportation, energy, and telecommunications remain

restricted in many economies. Some of the more restrictive economies include large ones

such as China, Mexico, the Philippines, and Thailand .

Even if a foreign company can enter a particular sector, it may face other barriers to

market access and operations. Onerous start-up procedures, excessive licensing and

permit requirements, and time-consuming export and import processes are among the

factors that can make an economy less attractive to foreign investors. IABs starting a

Foreign Business indicators show that in some economies foreign companies must

complete lengthy procedures to obtain investment approvals, adding weeks and

sometimes months to the start-up time. In other economies the procedures can be doneonline and take only a few days.

South Asian Experience

As evident from the table below, Nepal seems to be low performer amongst other

competing countries in the South Asian countries. Only in 1999/2000 and 2007, it got a

bright picture, whereas the rest years it was grappled with appalling prospects. As per the

UNCTAD s World Investment Prospects Survey 2009 -11, India stands among the five-

most attractive place for FDI globally.

Table 3: Inward FDI Flows

Source: UNCTAD: World Investment Report 2009

$ million as a % of gross fixed cap formation

1999-00 2005 2006 2007 2008 1999-00 2006 2007 2008

India 1705 7606 20336 25127 41554 1.9 6.9 6.5 9.6

Pak 463 2201 4273 5590 5438 5.1 16.1 18.3 18.3

Sri Lanka 159 272 480 603 752 5 6.8 7.5 7.3

Bangladesh 218 845 793 666 1086 2.9 5.3 4 5.9

Maldives 9 9 14 15 15 7 2.8 2.9 2.5

Nepal 6 2 -7 6 1 0.9 -0.3 0.2 NA

Bhutan 9 6 73 30 0.4 1.2 10.9 3.9

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Apart from India, the other big countries in South Asia namely Pakistan, Bangladesh and

Sri Lanka have also benefitted from FDI flows. Yet investment flows into Nepal, Bhutan

and Maldives have so far been meager.

Trends in NepalThis analysis observes following trends mainly seen in recent FDI of Nepal.

1. Increasing number of FDI related projects

The table 1 shows that till the year 2002 the number of FDI induced projects

witnessed series of ups and downs. However, a steadily growth was observed since

2005 and that trend continued till 2009. In the subsequent years, the number of FDI

related projects slightly plummeted to Rs 179 from Rs 205 million. By and large,

since 2005 the line of trend has shown a new hope which was lost amidst conflict run

in the country.

2. Rolling back the cost of projects

The table 1 highlights that the year 1993 was the period when one of the largest

amounts invested ever. On the contrary to that, the following years except 1997 saw

series of downfall in the investment. The momentum again rolled back in 2008, 2009

and 2010. The situation of later years seems to be encouraging.

3. Rising the total fixed costJust like the acceding case of total project cost, 1993 was the year when a big surge in

fixed cost was witnessed. Similarly, 2008 and afterwards a rising trend in the fixed

cost was seen. But the data shows a distressing situation in between the year 1993 and

2008. However, a happy note is that since 2008 a rising fixed cost is in effect.

4. Growing foreign investment

Except the year 1993 the rest all years covered in this study witnessed a constant

fluctuation in foreign investment, including little ups and downs. However, since

2007 onwards an encouraging course has substituted the situation.

5. Slow going employment opportunity

The year 1993 is marked as the highest scoring period with respect to generating

employment opportunities as an outcome of FDI in the country. However, it remained

short-lived as the following years failed to sustain the gained momentum. Breaking

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the embarrassment continued till 2005, the year 2006 brought back once again the

hope. The largest number ever of employed man power was in 2008 when employed

figure grew up to 12480.

Table 4: Foreign Investment Projects in Nepal up to 2067/09/28 BS (Rs. in millions) ============================================================================Fiscal Year Total Project Total Foreign EmploymentIn AD No. Est Cost Fixed Cost Investment============================================================================Up to 1990 95 7722.98 6549.23 868.92 206581991 24 1179.16 965.27 501.57 41301992 58 7101.33 6120.28 1110.25 72191993 55 15379.89 13822.37 3350.14 127161994 22 2258.47 2025.34 515.10 28901995 39 8910.55 8202.26 2208.23 61771996 46 3815.16 3356.29 757.16 59491997 88 11647.93 9712.39 3315.98 92461998 66 2933.73 2581.25 1150.86 2750

1999 52 4868.00 3820.63 2178.98 25212000 95 5094.39 4061.94 1494.33 67922001 94 7228.00 4345.59 3136.62 64342002 60 2876.81 2446.66 1361.40 30652003 81 4562.68 3133.24 1773.13 20722004 68 3206.98 2726.72 2108.95 58332005 106 2644.02 1791.11 2398.64 49552006 130 4371.04 3694.91 3377.54 76492007 194 8213.65 6385.36 6541.95 75322008 225 18038.82 14761.09 8389.33 124802009 205 9168.45 8170.48 4057.60 88242010 179 12568.18 13461.91 9295.75 8999=====================================================================

Total 1986 143847.72 122180.13 59923.76 149109=====================================================================Source: Department of Industry, Nepal 2011

6. Urban-centric FDI

Table 5 shows that FDI in Nepal varies district wise. The table of up to fiscal year

067/068 depicts a very uneven picture of FDI hosted by various administrative districts.

In a case of hosting FDI above Rs 2000million, Kathmandu is the front-runner which is

followed by seven other countries. The others include Lalitpur, Kaski, Rupandehi, Parsa,

Makawanpur, Dhading and Bara. In quantum, a huge variance was observed between thedistricts located in the KathmanduValley and the other districts. Out of the total FDIalone

Kathmandu based two districts scores 44.93 per cent, while the later group possesses only

55.07 per cent.Likewise the stated eight districts invited 68.38 per cent whereas the rest

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other districts could attract the remaining 31.62 per cent of the total FDI.By and large, the

FDI is glued with a certain urban centers that cater a huge number of customers.

Table 5: Districts hosting FDI up to 2067/068 No District Amount in (mill)and Percent

1 Kathmandu 23477.00 ( 34.49%)2 Lalitpur 7101.97 ( 10.44%)3 Kaski 4130.58 (6.06%)4 Rupandehi 2958.59 (4.34%)5 Parsa 2052.85 (3.41%)6 Makawanpur 2321.73 (3.41 %)7 Dhading 2171.00 (3.19 %)8 Bara 2072.08 (3.04 %)9 Others 21,764.17 ( 31.62%)

Total 68,049.97 (100)Source: Department of Industry/GoN, 20117. Source of FDI

Source wise Nepal has India, China, South Korea, Japan and Canada in the list of such

five countries which account 67 per cent share in the total invested FDI, while 22 per cent

was invested from the group of traditional OECD countries. India and China, amongst the

five countries, are the countries having much greater share than the rest three countries.

Having compared to the case of other SAARC countries, location factor seems to be

strong in practices. Location factor in the FDI is an interesting part to be studied over.

Table 6: Sources of FDI

Share of 5 top investors in Individual South Asian Countries (%)

Host Country Year Top 5 CountriesShare of top 5

countries (%)

Share of traditional

OECD countries (%)

No of identified

source countries

India2006 &

2007

Mauritius, UK,

Singapore, US, NRI66.1 27 100

Bangladesh2005 &

2006

US,UK,Egypt,

UAE,Norway68 51.2 31

Pakistan

2006-7

& 2007-

8

US,UK,

UAE,Netherlands,

Switzerland

64.1 60.5 33

Nepal 2005-08India, China, South

Korea, Japan, Canada67 22 25

Sri Lanka 2002Malaysia, Singapore, UK,

62 NA NA

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India, USA

Sources: BOI: Pakistan and Bangladesh; DOI Nepal; SIA India; ESCAP (2003): Srilanka

8.

The volume of FDI: size of industry and type of investment wiseAnnex 7,looking at the FDI up to 2067/68, illustrates a picture thatthe size of investment

is greater for both equity investment and technological transfer vis--vis for technological

transfer. Likewise, small sized industries accounted higher number of projects as

compared to medium and large sized industries. It is a clear manifestation that small

industries attracted bigger number whereas medium and big industries attracted smalleras

compared to the earlier.

9. The volume of FDI: sector wise

Annex 8 succinctly sheds light on the fact that the largest sector hosting FDI is

manufacturing that accounts Rs 58,291.54 million. That is followed by electricity, water

and gas that accounts Rs 38,718.70 million whereas third positioned hotel and resort,

fourth positioned service industry and fifth positioned construction sectors account Rs 21,

318.54 million, Rs 18,320.53 million and Rs 6,124.92 million respectively. The rest are

taken by some other sectors.

Prospects of FDI in Nepal

Despite contesting views on impact of FDI, on certain areas FDI has been seen to have

stimulated domestic investment. One study carried out by Research and Information

System in 98 countries covering the 1980-98 period depicts that in Asian countries such

as Bangladesh, Korea, Nepal, Sri Lanka and Thailand, FDI has had a positive effect on

FDI by crowding in domestic investment. The same study continues to demonstrate that

of the 107 countries surveyed, FDI has had a positive effect on domestic investment in 22

countries (OECD, 2002: p4).

Peace process undergoing in the country is already felt to be resulting in a great

implication for FDI. As the table 1 suggests, the year 2006 and afterwards almost all

potential sides of FDI have been improved. Number of projects, committed total cost,

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committed fixed cost, size of foreign investment and employment opportunities all were

arisen. These vividly signal that the prospects for FDI in the country is getting more and

more optimistic day by day as peace process is gradually consolidated. By this, one

assumption seems to be pretty valid that once peace process concludes, FDI will bring in

multiple positive implications. Thus, the undergoing peace process and prospects for FDI

are interlinked.

Nepals economy is badly crippled over the last one decade; however, a big opportunity

is awaiting the country at its door-step. Despite the size of its own market is limited for

surging its volume of trade, two giant markets of the world, i.e. Indian and Chinese, are

just in arm reach. To access the markets, because of the proximity the transaction cost for

Nepalese goods and services is lowered that of the other countries. Besides, being Nepala Least Developed Country (LDC) Nepalese goods and services are granted zero-tariff

market access in those markets. With the advantage of this General System of

Preferences (GSP) facility, Nepalese goods and services do enjoy better cost

competitiveness. It is an obvious hypothesis that lower cost is meant higher trade

prospects.

One recent phenomenon is that in the current era business and investment is gradually

shifting to East and South countries from West and North countries. The North countries

represent developed and the South countries represent developing as well as LDC group

of countries like Nepal. Part of the reason for this shift is lower labor cost in the South

vis--vis that of the North countries where it has always been on rise due to hit-syndrome

to be appeared in economy. Besides, chance of trickle down in investment from China

and India to Nepal seems to be encouraging in the years ahead. By these virtues, Nepal

could greatly entice FDI in the forthcoming times.

As the Law of Comparative Advantages , as propounded it by a classical economist

David Ricardo (1772-1823), argues every country has look at its own prime advantages.

Ricardo insisted there is mutual benefit from trade (or exchange) even if one party (e.g.

resource-rich country, highly skilled artisan) is more productive in every possible area

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than its trading counterpart (e.g. resource-poor country, unskilled labourer), as long as

each concentrates on the activities where it has a relative productivity advantage

(Wikipedia).While applied the law in the Nepalese case, natural endowment is such one

example wherein the country is blessed with many advantages. As Nepal Trade

Integration Strategy (NTIS) 2010 has succinctly identified, there are 19 areas in which

the country is much richer than other competing countries. This list includes cardamom,

ginger, honey, lentils, tea, noodles, medicinal herbs/ essential oils from agro food

category. Similarly, handmade paper, silver jewelry, iron and still, pashmina and wool

products are included from craft and industrial goods category. Likewise, tourism, labor

services, IT and BPO services, health services, education, engineering, hydro-electricity

are selected from services sector. Finally, transit trade services between Tibet and India,

sugar, cement, dairy products and transformers are picked up as other potential exportsectors (MoCS, 2010, p.10). In these sectors, Nepal could excel provided that suggested

matrix of the NTIS 2010 are implemented to ensure competitiveness.FDI can be easily

attracted to invest in these sectors since that are salable in destination markets.

Policy wise Nepal has already been a liberalized economy. Accession to WTO in 2004,

membership of BIMSTEC, becoming a part of SAFTA, new Trade Policy 2009, new

Industrial Policy 2010, Nepal Trade Integration Strategy 2010 are some instances of a

liberalized economy. In recent days, at high level the country has held Bilateral

Investment Promotion and Protection Agreement (BIPPA) and Double Taxation

Avoidance Agreement (DTAA) agreements with India in 2011 during the visit of Nepals

PM to India. One more agreement Nepal signed on Trade and Investment Framework

Agreement (TIFA) with the United States in 2010. Such arrangements are potential in

sending around good gesture and instilling confidence in prospective foreign investors so

as to feel them stepping into the country. They themselves are self-explanatory stating to

what extent Nepal is opened up along with treasury of tremendous opportunities. In terms

of tariff rates in-effect, the country is more liberal vis--vis many developing world. With

these credentials, foreign investors have leverage enough for profitability.

In institutional front, in the later days Government of Nepal (GoN) is underway of some

headway. The major initiatives include:

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a) Formation of Board of Investment

In pursuit of expediting the investment process with a new vigor, a separate Board is

placed in the system. A set of beauty lies with this newly placed institution. First, it is

free of regular bureaucratic configuration and procedures. Second, it is headed by the

Prime Minister of the country. Third, it is represented by leaders of all big ministries

and agencies, hand-in-hand, by business leaders from various umbrella associations

of business sector. Last and the least, the way it has been designed it is looked as pool

with sound professionals who know every bit and pieces of investment compared to

ordinary bureaucrats.

b) Declaration of Nepal Investment Year (2012/2013)

In view of creating a big momentum for investment in Nepal, the GoN has declaredYear 2012/2013 as the Nepal Investment Year. To make its grand success, the

government has formed following sub-committees and fixed their coordinators at a

very high level:

i) Program PMO Secretary

ii) Investment promotion FNCCI President

iii)Investment sector identification CEO of Board of Investment

iv) Act, rules, and policies revision Vice Chairman of NPC

Challenges in Nepal for FDI

Nevertheless the country enjoys very bright prospects; so far it is not free of challenges.

The major are as follows:

1. Scenario as per World Investment Prospects Survey

Looking at the indicators applied in the World Investment Prospects Survey 2007-2009,

war and political instability factor scores the most critical threat which is followed by

other such compounding factors as changes in investment regime; global economic

downturn and financial instability (Please refer the following table).

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Table 7: Major threats to global FDI flows in 2007-2009 Not important Important Very important

1. Financial instability 12 60 272. War and political instability 13 32 553. Change in investment regime 15 57 28

4. Global economic downturn 22 50 275. Perceived corruption 24 52 24

Sources: World Investment Prospects Survey 2007-2009, UNCTAD, p.2

Contextualizing the same factors into Nepalese case, data depicts that conflict and

turmoil political situation turned Nepal began sliding down its once rising FDI. This

situation per se seems self-evident that FDI in the country is hugely challenged by war

and political instability factor.

2. Transitional politics

Ending more than a decade long war, Nepal in 2006 stepped into new republican system.

However, its peace process is taking longer time than it had been expected at its outset.

As it happens elsewhere in a situation of big transition, the total environment in the

country is not yet out of fragility for the same reason. Obviously, in such t imes political

agenda vis--vis economic agenda gets smaller space while prioritizing public policies.

The government seems to have beheld a great amount of passion for economic agenda; as

a result, positive message is spread up to prospective investors. However, they are still

concerned with the amount of uncertainty associated with the transitional politics. In such

a circumstance, feeling of insecurity is stemmed from uncertainty.

3. Acute power crisis

For a couple of years, the country is under the grip of acute and pathetic power crisis. It

has resulted in, on one hand, a force shift towards diesel option for meeting the powergap

in business sector, on the other, a continuous down turn in the countrys cost

competitiveness for the fact that cost of production has risen. Unless the solution of this

power crisis devised, the situation would go daunting against prospective investors.

4. Good governance

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Joseph, A., Park, D., & Wang, P. (2009) , The Impact of Exchange Rate on FDI and theinterdependence of FDI over time , The Asian Development Bank (ADB)

Kathuria, V. (2001). Foreign Firms, Technology Transfer and Knowledge Spillover toIndian Manufacturing Firms: A Stochastic Frontier Analysis , in Applied Economics , (33),625-642Keller, W.,& Yeaple,S. (2009) ,Multinational Enterprises, International Trade, and

Productivity Growth: Firm Level Evidence from the United States ,in The Review of

Economics and Statistics , 91 (4)

Kevin, G. (2010), Rethinking Foreign Investment for Sustainable Development: Lessons

from Latin America . London, Anthem

Kraay, A. (1998 ),In Search of the Macroeconomic Effects of Capital Account

Liberalization , The World Bank Group

Masud, Ridauddin,M., Yusoff, Zuraini, M., Hamid, Hisham A. and Yahaya,N.

(2009 ),Foreign Direct Investment in Malaysia findings of the Quarterly Survey of

International Investment and Services

MoCS (2009), Trade Policy, Kathmandu: GoN/MoCS

MoCS (2010), Nepal Trade Integration Strategy 2010, Kathmandu: GoN/MoCS

MoICS (2009), Foreign Investment Opportunities, Kathmandu: GoN/MoICS

Noorbakhsh, F., Paloni, A., & Youssef, A. (2001 ),Human Capital and FDI inflows to

Developing Countries: New Empirical Evidence ,In World Development ,29(9), 1593-1610

OECD (2002), Foreign Direct Investment in Asia : How to Maximize Its Benefits?, in

Global Forum on International Investment: Attracting Foreign Direct Investment for

Development , 5-6 Dec 2002

UNCTAD (2003), Investment Policy Review Nepal, UNCTAD/ITE/IPC/MISC/2003/1 New York and Geneva: United Nations

UNCTAD (2006), Measuring Restrictions on FDI in Services in Developing Countriesand Transition Economies, New York and Geneva: United Nations

UNCTAD (2007), World Investment Prospects Survey 2007- 2009, New York andGeneva: United Nations

UNCTAD (2009), Foreign Direct Investment in Landlocked Developing Countries:Trends, Policies and the Way Forward , New York and Geneva: United Nations

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UNCTAD (2010), World Inv estment Prospects Survey 2010- 2012, New York andGeneva: United Nations

UNCTAD (2009), World Investment Report 2009 , New York and Geneva: United

Nations

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Annexure

Annex 1: Industries Approved for FDI Districtwise( Upto F.Y. 2067/68) (Rs. mln.)

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District No. of

Industries

Total

Project Cost

Total

Fixed Cost

Foreign

Investment

Total No. of

Employment

1 Dhankuta 1 46.62 37.62 0.00 120

2 Ilam 2 145.00 117.90 145.00 188

3 Jhapa 13 1036.14 663.90 278.35 32844 Morang 26 3403.83 2687.41 1661.47 4795

5 Okhaldhunda 1 250.00 245.00 19.00 122

6 Sankhuwasabha 1 500.00 488.00 500.00 250

7 Saptari 2 410.00 384.00 282.40 144

8 Siraha 4 2494.00 2230.07 1913.20 702

9 Solukhumbu 9 2959.17 2856.59 926.13 198

10 Sunsari 20 2324.17 1693.97 1252.25 3111

11 Taplejung 2 12.10 10.14 11.90 44

12 Bara 43 7265.35 5752.70 2072.08 4424

13 Bhaktapur 46 1958.25 1213.12 762.23 373914 Chitwan 48 3440.17 2752.25 1128.36 7581

15 Dhading 9 2405.89 2351.70 2171.00 721

16 Dhanusha 3 291.04 249.71 165.52 292

17 Dolkha 5 5800.20 5281.03 1505.73 325

18 Kathmandu 1176 53018.67 43890.58 23477.00 67891

19 Kavre 51 1780.94 1493.79 1121.92 4472

20 Lalitpur 261 10250.57 8047.69 7101.97 14422

21 Makwanpur 49 4720.38 3594.07 2321.73 4355

22 Nuwakot 8 220.58 193.65 110.70 665

23 Out Of Valley 1 24.34 21.22 24.34 70

24 Parsa 41 3393.32 2387.50 2052.85 5586

25 Ramechhap 1 291.34 237.89 262.21 200

26 Rasuwa 5 2622.40 2522.28 1236.43 176

27 Rautahat 1 559.18 509.18 44.06 589

28 Sindhuli 1 9.00 7.70 9.00 105

29 Sindhupalchowk 8 6832.73 6603.59 1292.08 2892

30 Terai Region 1 60.00 55.00 16.00 97

31 Arghakhachi 2 1342.09 199.27 449.60 331

32 Gorkha 4 704.09 648.32 75.23 758

33 Kalikot 1 0.00 1800.00 1520.00 125

34 Kapilbastu 9 421.71 206.42 307.81 300

35 Kaski 116 12308.46 11665.90 4130.58 5145

36 Lamjung 5 343.93 311.25 124.15 513

37 Manang 2 915.00 898.00 203.00 289

38 Manang,Tanah 1 75.00 69.75 47.01 635

39 Mustang 2 461.74 449.11 1.07 115

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District No. of

Industries

Total

Project Cost

Total

Fixed Cost

Foreign

Investment

Total No. of

Employment

40 Nawalparasi 21 2771.18 2373.76 513.40 2904

41 Palpa 2 330.00 183.38 304.90 136

42 Parbat 1 1100.00 1089.00 1.50 261443 Rupandehi 29 5630.09 4603.14 2958.59 3104

44 Tanahu 3 89.02 73.20 37.50 237

45 Undefined 3 251.67 154.37 37.00 146

46 Banke 16 513.83 404.44 152.43 1393

47 Bardiya 7 57.88 50.96 29.14 264

48 Dang 8 259.90 218.40 199.90 1078

49 Humla 5 41.00 37.20 19.24 96

50 Rolpa 3 32.22 28.31 29.00 156

51 Surkhet 2 3587.00 2819.40 2187.00 229

52 Achham 4 571.18 550.68 418.18 41153 Baitadi 4 80.00 71.80 65.00 365

54 Darchula 1 34.00 32.00 2.94 60

55 Doti 1 10.00 7.20 10.00 33

56 Kailali 3 919.04 868.81 192.80 929

57 Kanchanpur 13 776.37 695.11 147.72 1466

58 Kavrepalanchock 1 30.00 28.00 20.40 40

Total 2108 152181.75 129116.39 68049.97 155432

Annex 2: Number of Industries Approved for Foreign Investment byDistrict (F.Y. 2067/68)

(Rs. mln)

S.N. District No. ofIndustriesTotal

Project CostTotal

Fixed CostForeign

InvestmentTotal No. ofEmployment

1 Ilam 2 145.00 117.90 145.00 1882 Jhapa 2 50.00 32.00 50.00 1883 Morang 3 1314.98 1179.93 1314.98 624 Siraha 1 1800.00 1570.00 1800.00 1945 Sunsari 5 210.00 134.20 205.00 2146 Taplejung 1 10.00 9.10 10.00 447 Bara 1 8.30 5.50 8.30 238 Bhaktapur 6 133.77 116.60 65.32 1589 Chitwan 1 10.00 9.00 10.00 36

10 Dhanusha 1 206.48 188.01 103.24 12511 Dolkha 1 200.00 195.00 200.00 10012 Kathmandu 122 3763.87 3222.82 3623.38 597913 Kavre 3 495.00 411.50 495.00 28214 Lalitpur 35 598.95 448.09 486.15 194315 Makwanpur 4 314.50 236.77 314.50 268

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Country Category No. ofIndustries Total

Project Cost Total Fixed

Cost Foreign

Investment Total No. ofEmployment

Total 25 5081.87 4892.78 2166.54 1926

China

Agriculture 17 193.30 163.84 181.08 627Construction 7 361.21 257.71 336.93 431Energy Based 8 4754.68 4498.31 1072.94 530

Manufacturing 126 4760.23 2997.89 2454.49 10336Mineral 29 651.60 559.10 640.60 3993Service 106 2008.13 1716.67 1545.08 4279Tourism 108 818.39 705.79 805.05 3129Total 401 13547.54 10899.31 7036.17 23325

ColombiaTourism 1 2.40 1.50 2.40 7Total 1 2.40 1.50 2.40 7

CongoService 1 2.50 2.10 2.50 28Total 1 2.50 2.10 2.50 28

Croatia Service 1 2.50 2.10 2.50 15Total 1 2.50 2.10 2.50 15

Cyprus Service 1 1000.00 974.00 304.00 235Total 1 1000.00 974.00 304.00 235

CzechRepublic Service 1 3.50 2.50 3.50 12Total 1 3.50 2.50 3.50 12

Denmark

Agriculture 1 110.00 98.00 44.00 50Construction 1 42.00 34.60 4.10 74Manufacturing 7 558.02 491.38 99.59 566Service 5 12.40 9.20 12.40 84Tourism 6 38.27 33.38 33.27 156Total 20 760.69 666.56 193.36 930

Dutch Service 1 18.90 13.90 18.90 80Total 1 18.90 13.90 18.90 80

Ecuador Manufacturing 1 2.50 1.30 2.50 45Total 1 2.50 1.30 2.50 45

EgyptManufacturing 1 10.00 6.00 10.00 98Service 1 10.00 8.50 2.00 0Total 2 20.00 14.50 12.00 98

FinlandManufacturing 2 10.00 6.86 4.55 91Tourism 3 15.00 12.90 10.00 58Total 5 25.00 19.76 14.55 149

France

Agriculture 1 7.00 4.90 7.00 27Construction 2 65.04 51.24 18.33 169Manufacturing 15 299.68 247.45 144.74 1004Service 8 45.31 36.82 27.23 210Tourism 23 179.82 157.35 112.55 626Total 49 596.85 497.77 309.85 2036

Germany

Agriculture 4 111.42 98.09 14.24 287Construction 2 59.25 43.90 58.90 137Energy Based 6 1361.00 1302.90 452.30 207Manufacturing 15 234.12 147.70 101.63 1293Service 28 274.36 233.04 106.62 1140Tourism 24 324.17 299.00 193.02 784Total 79 2364.31 2124.64 926.72 3848

Ghana Service 1 6.50 6.18 1.95 0Total 1 6.50 6.18 1.95 0

Guatemala Manufacturing 1 10.00 5.00 2.50 84

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Cost Foreign


Total 1 10.00 5.00 2.50 84

Holand Tourism 1 7.00 0.00 1.79 0Total 1 7.00 0.00 1.79 0

Hong Kong

Construction 2 83.88 39.85 59.55 236

Manufacturing 5 387.72 262.58 155.58 852Service 7 430.03 202.25 279.17 609Tourism 5 959.91 933.67 246.54 919Total 19 1861.54 1438.34 740.84 2616

Hungeri Tourism 1 10.00 8.90 5.00 29Total 1 10.00 8.90 5.00 29

India

Agriculture 7 792.91 343.06 416.81 784Construction 17 2246.19 1614.33 1876.32 830Energy Based 12 8336.00 9810.31 5146.55 1222Manufacturing 296 29492.51 21023.28 14687.28 36142Mineral 6 4477.02 3632.50 2260.70 1521Service 112 12355.13 10016.43 6485.21 11781Tourism 51 5025.25 4678.73 1517.43 4127

Total 501 62725.01 51118.64 32390.31 56407

Iran


Ireland


Israel

Manufacturing 2 603.00 501.88 72.50 68Service 5 44.80 34.21 35.45 218

Tourism 5 33.40 30.55 31.30 119Total 12 681.20 566.64 139.25 405

Italy


Japan


KazakistanService 3 15.40 13.03 15.40 67Total 3 15.40 13.03 15.40 67

KyrgystanManufacturing 1 5.00 2.80 3.00 50Service 3 31.50 29.25 19.50 125Total 4 36.50 32.05 22.50 175

LebnonService 1 2.00 1.60 2.00 15Tourism 1 5.00 3.90 5.00 34Total 2 7.00 5.50 7.00 49

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Cost Foreign


Libiya Manufacturing 1 5.00 2.80 5.00 80Total 1 5.00 2.80 5.00 80

Malaysia

Agriculture 1 5.00 4.20 1.50 33Manufacturing 2 70.59 51.64 64.24 184

Service 6 456.31 441.08 20.10 109Tourism 4 159.34 148.30 159.34 118Total 13 691.24 645.22 245.18 444

MauritiusEnergy Based 3 900.00 879.00 765.00 558Manufacturing 2 2080.00 2030.87 2080.00 334Total 5 2980.00 2909.87 2845.00 892

Mexico Tourism 2 17.93 16.35 15.33 35Total 2 17.93 16.35 15.33 35

N. KoreaService 1 44.82 41.20 12.55 71Tourism 2 20.00 17.60 20.00 76Total 3 64.82 58.80 32.55 147

Netherlands

Agriculture 2 59.45 41.10 18.27 428Manufacturing 3 984.59 816.26 386.08 405


New Zealand


Norway

Agriculture 1 6.00 5.10 6.00 50Construction 1 158.55 154.01 62.46 25Energy Based 3 7580.00 6292.41 933.23 394Manufacturing 2 236.11 185.05 10.94 119Service 1 60.93 60.93 54.70 0

Tourism 4 75.00 69.30 68.50 138Total 12 8116.59 6766.80 1135.83 726

Pakistan


Panama Manufacturing 1 83.28 65.17 24.98 121Total 1 83.28 65.17 24.98 121

Philippines

Agriculture 1 10.00 9.00 10.00 35Manufacturing 5 1154.18 989.53 72.35 1452Service 1 2.50 2.00 2.50 40Tourism 4 14.43 9.15 12.43 106Total 11 1181.12 1009.68 97.28 1633

Poland

Energy Based 1 84.94 84.00 5.00 16Manufacturing 1 4.78 1.55 2.39 23Service 1 2.50 2.00 2.50 38Tourism 4 46.00 41.00 45.50 117Total 7 138.22 128.55 55.39 194

Russia

Service 1 2.50 2.00 2.50 23Portugal 1 2.50 2.00 2.50 23Agriculture 1 8.00 7.00 6.00 15Manufacturing 4 93.08 54.87 42.23 412

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Cost Foreign



S. Africa

Manufacturing 1 10.00 7.20 10.00 33


S. Korea


Singapore

Agriculture 1 7.50 6.50 7.50 45Energy Based 1 530.00 518.00 530.00 110Manufacturing 4 44.86 31.70 21.04 82


SloveniaService 1 4.19 3.94 4.19 0Total 1 4.19 3.94 4.19 0

Spain

Construction 2 75.40 37.50 53.98 138Manufacturing 2 10.00 5.20 6.25 38Service 2 7.60 6.40 7.60 46Tourism 7 61.02 53.94 39.40 143Total 13 154.02 103.04 107.23 365

Sri Lanka Service 4 89.15 65.10 47.41 99Total 4 89.15 65.10 47.41 99

Sweden

Agriculture 1 3.30 0.99 3.30 35Manufacturing 1 1.50 1.01 1.50 12Service 4 16.70 14.76 13.90 105Tourism 2 8.90 6.50 8.90 71Total 8 30.40 23.26 27.60 223

Switzerland

Agriculture 1 6.00 4.50 4.20 52Energy Based 1 23.44 22.94 0.25 8Manufacturing 9 365.48 311.51 58.65 124Service 8 44.78 29.20 29.85 129Tourism 12 294.77 296.89 238.30 315Total 31 734.48 665.05 331.25 628

Syria Service 1 2.50 2.10 2.50 17Total 1 2.50 2.10 2.50 17

Taiwan


TchadService 1 2.50 1.86 2.50 18Total 1 2.50 1.86 2.50 18

ThailandEnergy Based 1 70.00 65.00 21.00 22Manufacturing 6 410.12 290.68 90.64 666Service 2 6.25 4.61 2.66 16

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Cost Foreign


Tourism 2 546.00 524.50 2.00 455Total 11 1032.37 884.79 116.29 1159

Turkey

Agriculture 1 10.00 9.00 10.00 50Service 6 28.20 22.12 28.20 114

Tourism 2 10.00 7.20 22.50 61Total 9 48.20 38.32 60.70 225

UAE

Manufacturing 2 278.54 87.24 80.00 398Mineral 1 34.00 32.00 2.94 60Service 1 823.20 170.00 403.37 139Tourism 1 500.00 444.50 400.00 124Total 5 1635.74 733.74 886.31 721

UK

Agriculture 2 12.50 11.75 12.50 52Construction 2 230.00 210.50 75.00 145Energy Based 2 1800.00 1782.00 145.66 2657Manufacturing 27 1966.55 1563.34 857.40 3276


UkraineService 2 91.70 83.25 16.40 52Total 2 91.70 83.25 16.40 52

USA

Agriculture 6 63.90 51.58 28.85 156Energy Based 1 4760.00 4680.00 1071.00 1240Manufacturing 50 3413.36 2603.34 1475.87 4885Service 76 3704.20 3363.65 1930.00 3168Tourism 41 1951.00 1861.91 450.17 2838Total 174 13892.46 12560.48 4955.90 12287

Uzbekistan Manufacturing 1 10.00 7.50 10.00 52Total 1 10.00 7.50 10.00 52

Vietnam Tourism 2 24.60 22.80 24.60 55Total 2 24.60 22.80 24.60 55Total 2108 152181.75 129116.39 68049.97 155432

Annex 4: Number of Industries Approved for Foreign Investment byFiscal Year & Category (Up to F.Y.2067/68)

(Rs. mln)

Fiscal Year Category No. of Industry AuthorizedCapitalFixed

CapitalForeign


Upto Ashad 2046

Construction 1 52.71 43.81 6.00 103

Manufacturing 39 4702.74 3921.64 347.36 7894Service 7 32.36 22.37 13.58 1297

Tourism 11 314.99 283.78 82.63 1292

Tot al 58 5102.80 4271.60 449.56 10586

2046/47

Construction 1 42.00 34.60 4.10 74

Manufacturing 16 750.11 570.65 84.03 6415

Mineral 1 826.80 755.10 28.70 1111

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CapitalForeign


Service 5 85.97 73.55 9.54 1162

Tourism 7 733.32 705.69 272.14 753

Tot al 30 2438.19 2139.60 398.51 9515

2047/48

Energy Based 1 23.44 22.94 0.25 8

Manufacturing 18 800.33 631.06 398.84 2679

Service 1 3.52 3.51 0.70 29

Tourism 3 36.27 33.23 6.49 258

Tot al 23 863.56 690.74 406.28 2974

2048/49

Agriculture 2 10.94 9.98 5.43 35

Manufacturing 23 2672.77 2086.08 362.75 4485

Service 4 124.03 117.36 31.94 128

Tourism 9 700.43 688.68 197.72 967

Total 38 3508.17 2902.10 597.84 5615

2049/50

Energy Based 2 6100.00 5589.00 736.50 2664

Manufacturing 38 4950.22 3963.69 779.92 8182

Service 9 3548.57 3427.77 1150.56 1012

Tourism 15 3287.44 3230.35 416.68 2015

Total 64 17886.22 16210.81 3083.67 13873

2050/51

Agriculture 5 181.56 162.32 28.19 368

Construction 1 30.45 22.20 10.98 348

Manufacturing 20 2781.16 2328.39 980.90 3033

Service 5 241.04 189.13 61.56 233

Tourism 7 499.02 473.63 297.13 752

Total 38 3733.23 3175.66 1378.76 4734

2051/52

Agriculture 1 28.40 22.75 12.80 65

Manufacturing 14 973.22 624.18 411.92 1774

Service 1 31.89 31.00 31.36 31

Tourism 3 593.77 569.93 21.51 516

Tot al 19 1627.28 1247.85 477.59 2386

2052/53

Agriculture 1 74.90 67.16 26.97 270

Energy Based 1 4760.00 4680.00 1071.00 1240

Manufacturing 24 3040.07 2586.22 698.08 3102

Service 8 176.18 150.41 54.52 1690

Tourism 13 1996.32 1914.76 369.30 1730

Tot al 47 10047.47 9398.54 2219.86 8032

2053/54

Agriculture 1 34.33 32.26 1.39 73

Construction 2 168.43 161.45 72.34 45

Manufacturing 28 2574.33 2006.74 773.88 5739

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CapitalForeign


Mineral 1 3.22 3.00 0.00 18

Service 27 3442.79 2398.57 1079.57 1957

Tourism 18 2336.15 2090.13 468.35 1515

Tot al 77 8559.25 6692.15 2395.54 9347

2054/55

Manufacturing 25 1200.45 993.58 394.70 1855

Service 24 1031.08 898.54 431.54 598

Tourism 28 3337.85 3250.20 1174.04 1883

Total 77 5569.38 5142.32 2000.28 4336

2055/56

Agriculture 1 11.40 10.00 4.70 0

Energy Based 2 2923.11 2766.61 525.65 108

Manufacturing 19 1566.61 867.37 734.20 1291

Service 15 487.53 445.83 201.95 187

Tourism 13 335.78 290.36 199.93 560

Tot al 50 5324.42 4380.17 1666.42 2146

2056/57

Energy Based 1 146.96 141.88 22.04 27

Manufacturing 31 1306.60 722.12 490.98 3567

Service 22 846.29 702.19 736.51 498

Tourism 17 369.24 344.04 168.08 611

Tot al 71 2669.09 1910.24 1417.61 4703

2057/58

Agriculture 1 10.00 9.75 10.00 31

Energy Based 3 2105.00 2047.91 395.60 352Manufacturing 54 4024.02 2555.85 1816.01 5234

Service 19 883.28 672.32 343.08 579

Tourism 19 895.31 836.66 537.87 684

Tot al 96 7917.62 6122.49 3102.56 6880

2058/59

Agriculture 2 76.62 60.99 4.90 144

Construction 3 90.00 81.00 69.00 285

Energy Based 1 84.94 84.00 5.00 16

Manufacturing 37 2643.94 1036.93 893.57 2285

Service 21 318.93 210.87 144.45 684

Tourism 13 104.10 85.80 92.73 317

Tot al 77 3318.53 1559.59 1209.65 3731

2059/60

Construction 8 538.52 404.04 345.44 464

Energy Based 3 2574.45 1767.85 448.68 344

Manufacturing 27 660.67 442.04 335.66 1279

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CapitalForeign


Service 12 987.19 858.36 565.61 944

Tourism 24 161.00 135.96 98.38 541

Total 74 4921.82 3608.25 1793.77 3572

2060/61

Construction 1 53.88 14.69 53.88 0

Energy Based 1 734.40 719.28 41.43 4

Manufacturing 22 1179.59 841.06 925.05 276

Service 31 2241.56 2084.40 1622.35 1603

Tourism 23 114.31 116.43 122.09 261

Tot al 78 4323.74 3775.86 2764.80 2144

2061/62

Agriculture 1 12.00 10.00 7.38 37

Construction 2 88.28 53.85 63.95 18

Manufacturing 25 887.09 527.49 1181.98 2072

Service 24 756.54 513.85 348.93 3195

Tourism 11 52.20 44.29 33.53 237

Tot al 63 1796.10 1149.49 1635.77 5559

2062/63

Construction 2 81.30 63.00 28.23 112

Energy Based 3 251.00 223.00 156.00 136

Manufacturing 33 1472.62 944.70 924.47 2974

Service 40 2082.49 1876.57 1332.93 2739

Tourism 38 233.67 189.68 164.68 1397

Total 116 4121.08 3296.95 2606.31 7358

2063/64

Agriculture 1 5.00 4.20 5.00 20

Construction 5 82.50 52.36 78.22 290

Energy Based 1 111.00 107.30 30.30 0

Manufacturing 44 1911.20 1333.73 1897.95 2796

Mineral 1 10.00 5.00 10.00 128

Service 81 990.79 898.25 938.20 2669

Tourism 55 315.08 249.72 267.12 1486

Total 188 3425.57 2650.56 3226.79 7389

2064/65

Agriculture 11 127.20 99.79 107.35 377

Construction 13 2118.71 1584.80 1803.71 1143

Energy Based 8 7346.12 7287.59 2867.60 967

Manufacturing 51 3028.52 1920.23 1244.06 3775

Mineral 7 3630.00 2852.85 2230.00 722

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CapitalForeign


Service 55 3370.03 2454.24 813.29 1513

Tourism 67 783.30 696.77 744.99 2180

Tot al 212 20403.88 16896.27 9811.00 10677

2065/66

Agriculture 8 618.70 204.79 302.07 671

Construction 1 88.57 31.61 56.97 8

Energy Based 9 3519.77 3440.51 2244.72 1011

Manufacturing 48 1464.42 895.37 1178.26 2396

Mineral 17 479.00 417.20 474.00 2635

Service 78 2273.88 1645.70 1235.97 2587

Tourism 70 973.55 894.84 763.11 1800

Tot al 231 9417.89 7530.02 6255.09 11108

2066/67

Agriculture 2 10.00 8.60 10.00 69

Construction 1 20.00 15.70 20.00 36

Energy Based 5 9961.05 9765.15 4747.00 493

Manufacturing 37 3751.50 3420.93 2605.35 1994

Mineral 4 100.00 87.85 94.00 514

Service 72 976.05 760.37 906.11 3205

Tourism 50 1035.17 929.39 717.53 1537

Tot al 171 15853.78 14987.98 9100.00 7848

2067/68

Agriculture 23 473.36 393.03 367.12 1337

Construction 1 150.00 120.00 150.00 90Energy Based 6 2018.00 1738.00 1227.00 577

Manufacturing 39 6269.01 5135.46 6135.92 3312

Mineral 5 113.60 102.60 67.54 446

Service 88 1020.92 783.33 918.81 3555

Tourism 47 1205.30 1103.05 1184.33 1570

Tot al 209 11250.19 9375.46 10050.71 10887

Grand Total 2108 152181.8 129116.4 68049.97 155432

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Annex 5: Number of Industries Approved for Foreign Investment byFiscal Year (Up to F.Y.2067/68)

(Rs. mln)

Fiscal Year No. ofIndustries Total Project CostTotal

Fixed CostForeign


UPTO ASHAD 2046 58 5102.80 4271.60 449.56 10586

2046/47 30 2438.19 2139.60 398.51 9515

2047/48 23 863.56 690.74 406.28 2974

2048/49 38 3508.17 2902.10 597.84 5615

2049/50 64 17886.22 16210.81 3083.67 13873

2050/51 38 3733.23 3175.66 1378.76 4734

2051/52 19 1627.28 1247.85 477.59 2386

2052/53 47 10047.47 9398.54 2219.86 8032

2053/54 77 8559.25 6692.15 2395.54 9347

2054/55 77 5569.38 5142.32 2000.28 4336

2055/56 50 5324.42 4380.17 1666.42 2146

2056/57 71 2669.09 1910.24 1417.61 4703

2057/58 96 7917.62 6122.49 3102.56 6880

2058/59 77 3318.53 1559.59 1209.65 3731

2059/60 74 4921.82 3608.25 1793.77 3572

2060/61 78 4323.74 3775.86 2764.80 2144

2061/62 63 1796.10 1149.49 1635.77 5559

2062/63 116 4121.08 3296.95 2606.31 7358

2063/64 188 3425.57 2650.56 3226.79 7389

2064/65 212 20403.88 16896.27 9811.00 10677

2065/66 231 9417.89 7530.02 6255.09 11108

2066/67 171 15853.78 14987.98 9100.00 7848

2067/68 209 11250.19 9375.46 10050.71 10887

TOTAL 2108 152181.75 129116.39 68049.97 155432

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Annex 6: Number of Industries Approved for Foreign Investment byCountry of Origin (Up to F.Y. 2067/68)

(Rs. mln)

S.N. Country of Origin No. ofIndustries Total


Cost Foreign

Investment Total No of

Employment 1 Australia 34 463.91 400.11 395.22 9742 Austria 15 205.56 158.46 81.36 5613 Azerbaijan 2 9.90 8.60 9.90 504 Bangladesh 26 520.15 263.10 264.66 41665 Belgium 11 53.77 38.10 41.84 3356 Bermuda 6 1995.25 1694.03 118.27 14747 Bhutan 3 27.26 20.58 3.61 988 Brazil 5 541.07 513.20 520.83 5249 Bri.Virg.Is 3 2739.78 2636.19 961.43 1018

10 Canada 25 5081.87 4892.78 2166.54 192611 China 401 13547.54 10899.31 7036.17 23325

12 Colombia 1 2.40 1.50 2.40 713 Congo 1 2.50 2.10 2.50 2814 Croatia 1 2.50 2.10 2.50 1515 Cyprus 1 1000.00 974.00 304.00 23516 Czech Repbul 1 3.50 2.50 3.50 1217 Denmark 20 760.69 666.56 193.36 93018 Dutch 1 18.90 13.90 18.90 8019 Ecuador 1 2.50 1.30 2.50 4520 Egypt 2 20.00 14.50 12.00 9821 Finland 5 25.00 19.76 14.55 14922 France 49 596.85 497.77 309.85 203623 Germany 79 2364.31 2124.64 926.72 384824 Ghana 1 6.50 6.18 1.95 025 Guatemala 1 10.00 5.00 2.50 8426 Holand 1 7.00 0.00 1.79 027 Hong Kong 19 1861.54 1438.34 740.84 261628 Hungeri 1 10.00 8.90 5.00 2929 India 501 62725.01 51118.64 32390.31 5640730 Iran 7 24.20 15.35 19.70 13231 Ireland 6 723.90 680.60 340.97 32032 Israel 12 681.20 566.64 139.25 405

33 Italy 19 1423.69 1300.45 264.63 51634 Japan 154 3195.03 2713.48 1171.24 668335 Kazakistan 3 15.40 13.03 15.40 6736 Kyrgystan 4 36.50 32.05 22.50 17537 Lebnon 2 7.00 5.50 7.00 4938 Libiya 1 5.00 2.80 5.00 8039 Malaysia 13 691.24 645.22 245.18 444

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S.N. Country of Origin No. ofIndustries Total


Cost Foreign

Investment Total No of

Employment 40 Mauritius 5 2980.00 2909.87 2845.00 89241 Mexico 2 17.93 16.35 15.33 3542 N. Korea 3 64.82 58.80 32.55 14743 Netherlands 34 1309.42 1076.07 588.89 304644 New Zealand 9 296.63 239.71 30.07 206945 Norway 12 8116.59 6766.80 1135.83 72646 Pakistan 15 2169.45 1883.77 149.73 240347 Panama 1 83.28 65.17 24.98 12148 Philippines 11 1181.12 1009.68 97.28 163349 Poland 7 138.22 128.55 55.39 19450 Portugal 1 2.50 2.00 2.50 2351 Russia 18 254.80 189.19 125.78 79352 S. Africa 5 47.30 37.84 47.30 13753 S. Korea 149 8343.56 7840.81 4320.89 623254 Singapore 23 2916.32 2788.34 1505.39 196555 Slovenia 1 4.19 3.94 4.19 056 Spain 13 154.02 103.04 107.23 36557 Sri Lanka 4 89.15 65.10 47.41 9958 Sweden 8 30.40 23.26 27.60 22359 Switzerland 31 734.48 665.05 331.25 62860 Syria 1 2.50 2.10 2.50 1761 Taiwan 9 414.75 360.43 174.62 59662 Tchad 1 2.50 1.86 2.50 1863 Thailand 11 1032.37 884.79 116.29 1159

64 Turkey 9 48.20 38.32 60.70 22565 UAE 5 1635.74 733.74 886.31 72166 UK 103 4684.35 4150.54 1539.71 857867 Ukraine 2 91.70 83.25 16.40 5268 USA 174 13892.46 12560.48 4955.90 1228769 Uzbekistan 1 10.00 7.50 10.00 5270 Vietnam 2 24.60 22.80 24.60 55

Total 2108 152181.75 129116.39 68049.97 155432

Annex 7: Foreign Investment and Technology Transfer by Type and Scale (up to2067/68)

Category No. of

Industries

Type ScaleEquityInvest.

Eqt. Invest.& Tech. Tran

TechnologyTransf. Small Medium Large

Manufacturing 714 631 41 42 505 130 77

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Hotel & Resort 565 21318.54 19993.66 8688.95 25227

Transport & Communication 82 4575.34 3205.48 2060.50 6688

Housing & Apartment 25 1136.13 443.94 339.38 2234

Service Industries 501 18320.53 16036.22 9268.75 21091

Total 2108 152181.75 129116.39 68049.97 155432

Project Cost for Foreign Investment Industries

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Annex 9: Number of Industries Approved for Foreign Investment byScale Wise (Up to F.Y.2067/68)

(Rs. mln)

Category No. ofIndustries Total Project CostTotal Fixed

CostForeign

Investment Employment

Large 185 115318.14 104128.39 47401.19 42841

Medium 248 18083.29 12686.87 8321.21 31455

Small 1675 18780.33 12301.12 12327.58 81136

Total 2108 152181.75 129116.39 68049.97 155432

Annex 10: Number of Industries Approved for Foreign Investment byCategory (Up to F.Y.2067/68)

(Rs. mln)

Category No. ofIndustriesTotal Project

CostTotal Fixed

CostForeign


Agriculture 60 1674.42 1095.61 893.29 3497

Construction 42 3605.34 2683.10 2762.81 3016

Energy Based 47 40759.24 40381.02 14518.77 7947

Manufacturing 712 54611.18 40355.50 25595.87 78409

Mineral 36 5162.62 4223.60 2904.24 5574

Service 650 25955.40 21220.18 12974.65 32127

Tourism 561 20413.55 19157.38 8400.34 24862

Total 2108 152181.75 129116.39 68049.97 155432

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