Nepal govt warns foreign firms over investment delays

Kathmandu: In a stern warning issued today, the Department of Industry (DoI) has cautioned approved foreign firms to expedite their pledged investments within the stipulated timeframe or face severe consequences.

According to a public notice released by the DoI, authorized to oversee foreign direct investment (FDI), registered foreign firms must commence business operations within 35 days and withdraw their deposited amounts. Failure to notify the department about business operations within this period will result in the confiscation of deposited funds, the notice stated.

The warning comes amidst concerns over the actual realization of FDI falling significantly short of pledged amounts. Records from both the DoI and Nepal Rastra Bank reveal that during the first 10 months of the previous fiscal year, the country received only 15 percent of the committed FDI amount. Specifically, between mid-July and mid-May of FY 2023/24, investment commitments totaled Rs 54.86 billion, whereas actual FDI received amounted to just Rs 8.16 billion.

Throughout FY 2023/24, a total of 402 foreign firms committed to investing Rs 61.78 billion in FDI, marking the second-highest commitment amount recorded. However, historical trends suggest that actual investment realization may be substantially lower.

The DoI’s report titled “Foreign Investment in Nepal-2024” underscores that while Nepal has attracted commitments totaling Rs 425.72 billion over the past 13 years, only Rs 148.87 billion has been realized – a mere one-third of the pledged amount.

International reports, such as the Nepal Development Update 2022 by the World Bank, highlight Nepal’s FDI inflow at just 0.5 percent of GDP, the lowest among South Asian nations. Efforts to increase FDI include streamlining regulatory approval processes and offering flexibility to attract capital and technology transfers.

Nevertheless, concerns persist regarding firms exploiting business visas without fulfilling investment pledges. Last year, the DoI tightened visa regulations, limiting business visas for foreign investors to three months to curb misuse.

In response to potential challenges faced by foreign investors, the DoI’s notice invites complaints related to issues such as discounts, concessions, visas, foreign currencies, land use, industrial security, and bureaucratic obstacles.

With Nepal keen to boost FDI for economic growth and development, the DoI emphasizes the urgency for foreign firms to honor their commitments promptly or face stringent penalties.