The government showcased different projects with a target of attracting investment commitments of over Rs 600bn during the third Nepal Investment Summit held in Kathmandu on 28-29 April 2024. However, most of the projects showcased during the event failed to attract serious interest from investors.
One year on, the Office of the Investment Board Nepal (OIBN) has admitted that foreign investor response has fallen short of expectations. “Although many projects were showcased during the summit, investor interest has not materialized as anticipated,” said Pradyumna Prasad Upadhyaya, the spokesperson for the OIBN. He, however, added that overall sentiment toward investing in Nepal remains positive. OIBN is the specialized government body to handle projects above Rs 6bn and hydropower projects exceeding 200 MW.
Nepal first organized the investment summit in 2015, primarily to support post-earthquake reconstruction. The first summit generated commitments of around Rs 1.4trn whereas the second investment summit held in 2019 saw investment pledges worth Rs 3.2trn.
Investors from China, India express interest
Neighboring countries China and India have shown willingness to invest in select projects. Chinese investors are close to signing a Project Development Agreement (PDA) for the Damak Clean Industrial Park. They have also shown interest in the Panchkhal Special Economic Zone (SEZ) in Kavre and submitted a proposal to start a processing zone in Nuwakot. Meanwhile, Indian investors have proposed establishing an edible oil company in Janakpur and submitted proposals for IT parks around Chobhar, Khumaltar and Nuwakot, along with a solar energy project.
The Muktinath Cable Car, spanning roughly 81 km from Birethanti on the Kaski–Parbat area to Muktinath Temple of Mustang is also moving forward. The project is currently in the environment impact study phase with the Detailed Project Report finalized.
Other progressing projects include the long-stalled West Seti Hydropower Project and the SR6 hydropower project, which is close to the final DPR submission stage. The OIBN has also received a proposal for a fertilizer plant in Bardaghat that will consume 300 MW.
Upadhyaya said they have received proposals for unique projects like seabed mining. Korea’s railway company, KORAIL, has shown intent to invest in Nepal’s railway sector. “Though exact figures on the investments received are not available, many project negotiations have made significant progress,” he added. Former OIBN CEO Sushil Bhatta, who led the Board during the third summit, explained that large investments often begin with expressions of interest and take time to materialize. “Rather than asking how much investment has come, we need to evaluate how projects are progressing,” he said.
FDI inflow of Rs 141bn
Since the third Nepal Investment Summit, Nepal has attracted Rs 141.14bn in foreign direct investment (FDI). However, this inflow is not directly tied to projects showcased at the third summit. Most investments are in projects under the Rs 6bn threshold. Before the summit, the government amended several investment-related acts via ordinance.
The private sector had previously identified 52 acts and regulations as barriers. Although most of these legislations were revised, lack of accompanying procedures and guidelines has slowed progress in implementation. “Investors frequently ask us why procedures and directives have not followed legal amendments,” said a senior official from the Ministry of Industry, attributing delays to poor coordination among government agencies.
Upadhyaya said while drafts of some working procedures are in progress, the OIBN’s limited autonomy, having to rely on the Prime Minister’s Office for decisions, has complicated matters. “Policies evaluated by the OIBN are often misunderstood or delayed by other agencies,” he said.
Former OIBN CEO Bhatta said that procedural, legal and institutional reforms must be followed by behavioral reforms to ensure smoother project transitions. “Our credibility will be enhanced if projects in the pipeline goes into implementation as per the set timelines,” Bhatta said. “We also need to learn from international experiences on these aspects.”
Will graylisting affect FDI?
Nepal was recently placed back on the Financial Action Task Force (FATF) “gray list” for deficiencies in curbing money laundering and terrorist financing. Though this does not block investment outright, it can raise doubts among investors. “Nepal needs to address these concerns seriously,” said Upadhyaya: At a time when investor interest is growing, reputational risks could affect future FDI flows.
