FDI commitments soar 172pc in H1

- SANJEEV GIRI, Kathmandu

Jan 22, 2015-

Foreign direct investment (FDI) commitments soared 172.65 percent in the first six months of the current fiscal year boosted particularly by pledges in the energy sector, the Department of Industry said.

According to the department’s stats, FDI commitments swelled to Rs 39.59 billion between mid-July and mid-December from Rs 14.52 billion during the same period of the last fiscal year.  

The growth in investment pledges has been fuelled mainly by commitments in the energy sector followed by tourism, manufacturing, mineral and service sectors. The energy and tourism sectors have recorded a faster growth rate compared to other sectors. Investment pledges in agro and forestry saw a negative growth during the review period.

Investment commitments in the energy sector jumped 228.3 percent to Rs 33.75 billion. The energy sector accounted for 85.42 percent of the total commitments of Rs 39.59 billion in the first six months. Investment pledges in the energy sector during the last fiscal year stood at Rs 10.28 billion. Three projects in the energy sector sent overall investment commitments soaring. A joint venture of SC Power Company, Nepal and KSK Ventures Limited India has pledged to invest Rs 33.68 billion to develop a hydropower project in Kalikot. The Indian company holds a 80 percent stake in the joint venture (JV).

Two other projects based in Kathmandu and Okhaldhunda have made investment commitments of Rs 24 million and Rs 47.5 million respectively. The project in Kathmandu has applied to carry out a feasibility study of a hydroelectric project.

“Though the figures as of now seem to be impressive, the successful execution of a couple of projects will play a key role in attracting investments in big projects,” said Khadga Bahadur Bisht, president of the Independent Power Producers’ Association Nepal (Ippan).  

According to Bisht, foreign investment will be directed mostly at projects having a generation capacity of up to 100 MW since there are certain issues with the domestic consumption pattern of Nepal.  

The energy sector has been showing impressive progress with a power trade agreement (PTA) with India in place and the successful completion of project development agreements for the Upper Karnali and Arun III projects.

According to Pashupati Murarka, senior vice-president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the progress in FDI pledges is impressive, but doubts over their actual translation into investment is important. “Foreign investors are showing interest. But again, we need to win their confidence,” Murarka said, adding that the political instability that has resumed due to the failure of the political parties to draft a constitution on time might take a toll on investor confidence.

The services sector has attracted investment worth Rs 2.38 billion, up from Rs 2.4 billion previously. “People are stepping forward to pour money into the energy sector. If we can win their confidence, we can attract capital to the services and tourism industry too,” Murarka said. “The current investment level in these sectors is not enough.”

Meanwhile, investment pledges in mineral-based industries too have witnessed a growth. While FDI in construction-based industries has bounced back this fiscal year, agro and forestry-based industries failed to charm potential investors and investment pledges have plunged almost 22.69 percent.

Published: 23-01-2015 09:52

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