● Brief Analysis on “A survey report of FDI in Nepal in the FY 2019/20: NRB– April 2021” In accordance with the UNCTAD’s report 2021.
Trend of FDI Inflows (World)
FDI inflows of Developed Economies = Increased by 5.1 % (2019) because according to the UNCTAD report the main reason for this is due to the cross border transactions, merger and acquisitions and dividend repatriation by the developed economies.
FDI inflows of Developing Economies = Decreased by 2.1 % (2019). Though the FDI inflows in the developing countries had increased earlier in the year 2018 (8.1 %, UNCTAD report), this time because the developed economies had taken away the cake, the FDI decreased.
Asia remained the largest FDI recipient region: 30.8 % out of global inflows because India being the main and dominant recipient of the FDI in Asia, the number is counted on high.
FDI inflows in Asia decreased from USD 498.56 to 473.90 billion in 2019 because according to the World Investment Report the FDI inflows to Hong Kong has fallen sharply as compared to the increment in 2018.
FDI inflows in South Asia increased by 10 % to USD 57.43 billion in 2019 because India’s FDI has increased (USD 51 billion) and it ranked World’s 9th ranked FDI (UNCTAD report).
Trend of FDI Flows (Nepal)
Gross FDI inflows increased by 18.2 % to Rs. 19.68 billion in 2019/20 because of the various development projects that has started by foreign countries, especially China.
Repatriation of foreign investment during 2019/20 remained at Rs. 199.8 million (1% of Gross FDI Flows).
Actual FDI inflow stood around 34.1 % of total FDI approval in Nepal.
International Investment Position of Nepal
Net International Investment Position (IIP) = 188,856.4 (Rs. Million) [in 2018 it was 282,123.9]
Province wise FDI stock’s share
Province 1 = 7.8 %
Province 2 = 9.9 %
Bagmati = 65.5 % (Largest because Bagmati province is the most developed state in Nepal and Kathmandu being the capital maximum FDI’s entail through this).
Gandaki = 14.2 %
Lumbini = 1.9 %
Karnali = 0.7 %
Sudur Paschim = 0 % (Least because due to the lack of proper research on the prospects of the FDI over here, no any Foreign Investors seek to approach here, and government is also naive to launch any specific projects – nation pride’s one over here recently).
FDI inflows by major sectors in Nepal
The following sectors attracted the most FDI in 2019/20.
Electricity, Gas and Water = 16072.6 (Rs. Million). This has highest share (81.7%) because there is a huge investment in hydropower in Nepal, Bio Gas in Terai and Drinking Water projects.
Analysis: We should not be so happy by this highest share because this sector has been dominant to have taken largest share because this has not come out of profuse research. We have fallen back to research other probable sectors where the FDI can be oriented.
Transport, Storage and Communication = 1368.2 (Rs. Million). This has the lowest Share (7%) because this sector in my opinion is already saturated sectors of Nepal. However, Transportation and Storage system should be highly prioritized.
Dividend Repatriation = The approval amount equivalent to Rs. 12.90 billion of dividend repatriation by the foreign investment companies was provided in the FY 2019/20.
Dividend Repatriation approval of the Industrial Sector in the FY 2019/20 was the highest. Let’s see below:
Industrial Sector – 7527.1 (Rs Million)
Hydro energy Sector – 32.3 (Rs. Million)
Financial Sector – 4799.6 (Rs. Million)
Communication Sector – 0 (Rs. Million)
Other Service Sector – 544.1 (Rs. Million)
FDI stock in Nepal
S.N
Particulars
FY 2019/20
Percentage Change
1.
Paid Up Capital
88158.3
14.7%
2.
Reserves
78381.9
-27%
3.
Loans
16379.4
0.5%
Total FDI stock
182919.6
-8.8 %
In the year 2019 the reserves, paid up capital and loans amounted to 53.6 %, 38.3 % and 8.1 % of the total FDI stock respectively.
FDI stock by Sectors
The manufacturing, mining and quarrying has the highest FDI stock of Rs. 52.24 (Billion).
Similarly, the Financial Intermediation has the share of Rs. 50.10 (Billion) and Electricity, Gas and Water have Rs. 36.66 (Billion).
FDI stock by countries
India has the highest share (30.6 %) and then comes the China (15.1%), both being the neighboring countries of Nepal and then Saint Kitts and Nevis (13.6 %).
Thus, this how FDI has been inflowing to Nepal.
Thank you
Aditya Pokhrel, Asst Director (NRB)
MBA, MA Economics, MPA(prsng)
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