Today I found a promotional promotional booklet FNCCI (Federation of Nepalese Chambers of Commerce and Industries) has prepared to promote foreign direct investment in Nepal. It has a section called "Why Invest in Nepal?" where following 10 reasons have been outlined. Accompanying the reasons are my comments.
1. Located in between two emerging economic giants, India and China, and preferential access to their market: That's a huge advantage for us but it is also necessary to consider the question: If two emerging economic giants are our neighbors, why should an investor invest in Nepal? What additional incentives can we offer them to make us more appealing than our neighbors?
2. Huge potential of growth and untapped natural resources: I would say that's a prime reason why investors should be interested in Nepal. The potential for growth and amount of natural resources we have is amazing!
3. Liberal rules for investment including foreign investment: Well, not exactly. In the Index of Economic Freedom, which ranks countries around the world based on their friendliness to entrepreneurs and economic activities, Nepal scores 5 out of 100 in the Investment Freedom criteria.
Here is what Heritage Foundation has to say about it:
Most new foreign investment must be approved by the government. Bureaucracy and regulatory administration are burdensome, non-transparent, inconsistently implemented, and inefficient. Political instability, pervasive corruption, and inadequate infrastructure and administrative capacity also inhibit investment. Residents may hold foreign exchange accounts in specific instances; most non-residents also may hold such accounts. Convertibility is difficult and not guaranteed. Most payments and transfers require prior approval by the government. There are restrictions on most capital transactions, and real estate transactions are subject to controls. Foreign investors may acquire real estate only for business use.
4. Ease in repatriation of foreign exchange
5. Comparatively lower tax rates especially for industries: That's an advantage we can capitalize on. But despite the low taxes, the cost of doing business in Nepal is relatively high due to militant labor unions, lack of infrastructures, small scale market, corruption etc. This factor has to be considered as well.
6. One Window Policy: Well, it could be encouraging to the investors. However, this policy is not new to Nepal. In theory, one window policy has existed in Nepal since the Panchayat Era but we are yet to see its effective implementation.
7. Relatively small and accessible government: Although our leaders have very little, if any, interest towards national economic issues, they are relatively accessible , at least for the foreign investors and that's another advantage we could capitalize on.
8. Open and liberal export/import rules: Compared to India, maybe. But there is too huge a room for improvement in this area before it can really work to our advantage.
9. Hardworking people: Really?? What about our militant labor unions who are slowly but steadily destroying whatever little industries we have? What about the excessive politics that goes on with these unions?
10. Many sector-specific incentives
So what do you think about these reasons? Are these the right reasons for investing in Nepal? Are there any additional reasons? Share your views below!