Foreign direct investment (FDI) commitment to Nepal records a 56 percent rise during the first nine months of the current fiscal year, local newspaper The Kathmandu Post Tuesday reported.
As peace prevails in the country, Nepal received an FDI commitment of 2.45 billion Nepali rupees (around 37.4 million U.S. dollars) during the period, whereas it was 1.56 billion rupees ( around 23.8 million U.S. dollars) in the same period last year, report of Department of Industry (DoI) says.
However, challenges lie ahead in materializing the FDI commitments into reality, report says.
"The rise in volume of commitment is a good sign," said Dr. Dilli Raj Khanal, economist and lawmaker of the Communist Party of Nepal (Unified Marxist-Leninist), "It is, however, vital that we convert the commitment into actual investments."
DoI record shows that one-third of the FDI commitments received in a year never enter the country due to political instability, labor stir and bureaucratic red tape.
And the incoming two-thirds FDI projects also take at least two years to come into operation. In such a situation, DoI officials said stronger reform was needed to take benefits of the FDI potential.
The DoI has approved 121 FDI projects during the nine months of 2006/2007 fiscal year, which is higher than the number (86 projects) recorded during the same period last year.
Dr. Khanal also noted that labor stir, which impacted industrial operations severely in the past months, could send a negative signal abroad. "Situation like that must be averted," he said.
"On the positive side, we have presently secured more FDI commitment in the manufacturing sector, which is the largest generator of employment compared to other sectors," said a DoI official.
Statistics of DoI shows that Nepal received maximum FDI commitment, totaling to 1.28 billion rupees (19.5 U.S. dollars) in the manufacturing sector. Likewise, FDI commitment of over 940 million rupees (around 14.4 million U.S. dollars) has come for 56 projects under the service sector.
Tourism industry has also managed to secure FDI commitment of over 150 million rupees (around 2.3 U.S. dollars) during the period.