As a businessperson, Jiba Lamichhane is among the few successful Nepalis who have made their mark as non-resident Nepalis (NRNS). Originally from Chitwan, he went to the erstwhile Soviet Union to study Civil Engineering. In the early 1990s, Lamichhane and some of his friends started business together in Russia that later morphed into Sanima Group in Nepal with investments in sectors including hydropower, hospitality, finance, education, health, insurance and media.
Lamichanne, who is also a well-known writer and is now settled in Germany, is one of the founders and a former President of the Non-Resident Nepali Association (NRNA). In a conversation with the HRM, he talked about the current business environment in Nepal, Sanima Group’s investments and the socio-economic contributions of the Nepali diaspora, among other topics. Excerpts:
It’s been nearly 25 years since your first major business investment in Nepal as Sanima Hydropower Limited. How these two and half decades have been for the group?
As Sanima Group, our first investment in Nepal was in 1998. Before that, we were doing business in Russia. We thought if the first-generation diaspora has to diversify their business, the first thing they have to look at is their home country. There is an emotional side to it; people seek recognition from the country where they were born and have their roots. Once the diaspora community reaches a position where they can contribute, they believe in giving back to the country and society directly or indirectly. A good return on investment is another factor when it comes to investing money.
We started with investing in hydropower when the government opened the doors to the private sector to invest in the sector. We were attracted to invest because of the government assurance to purchase the electricity produced by the private sector through Nepal Electricity Authority (NEA). At that time, Nepal was facing power shortages and our investment in hydropower contributed to some extent to addressing that crisis later on.
Sanima Group first invested in the 2.5 MW Sunkoshi Small Hydropower Project. So far, the Group has completed three hydroelectric projects with a total capacity of 32 MW and the power plants have been connected to the national grid. The construction of the other three projects with a combined capacity of 115 MW will be completed by 2023. Besides, Sanima Group also maintains a good presence in the banking insurance, and hospitality sectors.
What changes have you observed in terms of doing business in the country over the years?
When we began investing in Nepal, the Maoist insurgency was spiraling into a big conflict. So, doing business was difficult and risky at that time. But, even after the Maoists came to mainstream politics, those difficulties refuse to go away, especially during the period of the country’s political transition. Our projects faced a lot of non-cooperation, particularly from the locals of the project areas.
We had operated businesses in Russia where doing business was also not so easy in the 1990s. After the breakup of the Soviet Union in late 1991, Russia adopted the free-market economic model. During the period of transition, we observed several anomalies there as well.
There are bureaucratic hurdles and corruption in Nepal. Of late, I have made my base in Germany. If we compare Nepal and Germany, what I find fundamentally different is rule of law works in the largest European economy. The system and processes work there with ease whereas, in Nepal, we have to wait for years to get clearances.
The government claims that a series of legal reforms undertaken in recent years have created an environment conducive to investments for domestic foreign as well as foreign investors. Do you agree? Do you think government entities responsible for facilitating foreign investments are doing their job effectively?
When it comes to the FDI regime, I find the laws and regulations in Nepal are liberal compared to other South Asian countries. There are not many restrictions for foreign investors as many sectors have been made open for FDI.
What investors generally look for is hassle-less repatriation of dividends and exit. The FDI regime in Nepal has become liberal in this regard. Hence, I don’t see many issues with Nepal’s FDI laws. The NRN community has also been given the same status and facilities as foreign investors which is positive going forward. But there are problems in terms of the implementation of the policies. It is not easy for foreign investors as we have also faced issues and hurdles in the bureaucracy. Prolonging the process and finding errors unnecessarily by the government machinery are the common problems investors have to face. Even the things that have been laid down by the law and clearly written down in practice take years to come.
Since 2020, the Nepali economy has faced whirlwinds like never before. First the pandemic-induced slowdown and now a global recession caused by the energy crisis, food price hikes, and skyrocketing inflation alongside Nepal’s internal problems like the ongoing severe shortage of investable liquidity in the banking system. How did the Covid-19 pandemic and liquidity crisis in the banking sector affect your group’s investment plan?
It has not been long since we entered the hospitality sector. But a very difficult situation emerged as the sector was almost at a standstill for two and half years due to the Covid-19 pandemic. On the other hand, the surge in the price of construction materials has hit our under-construction hydropower projects.
As banks and financial institutions are grappling with a liquidity crisis, there is an acute shortage of investment-grade liquidity. So much so that banks are unable to disburse loans even for projects that have completed financial closures. Over the last one year, the interest rate on loans has increased by up to 4 percent. Due to this situation, we have not made any new investment plans as of now. Our focus is to complete the projects that we have started.
With the country’s forex reserves depleting, the government made a request to the NRN community to open a dollar account in Nepal. How do you take this government’s call to the NRNs to bail out the country from the forex reserve crisis?
What we must be clear about is, even though the NRN community has grown numerically, we are the first generation of the Nepali diaspora. Unlike the non-resident Indians (NRIs) who have been abroad for more than four generations, we are a relatively young diaspora.
NRIs came to rescue India when western countries including the United States imposed economic sanctions following the nuclear tests in 1998. When the then-Indian government asked the diaspora to help their motherland by purchasing the Resurgent India Bond, NRIs overwhelmingly subscribed the bond. This was also because NRIs were economically sound to bail out their native country.
In our context, we are the first generation to live and settle abroad. As of now, the NRN community is struggling to establish itself and we have not yet reached a position where we can make big contributions to Nepal’s economy.
The success stories of some NRNs are something to be proud of, but most people are just trying to establish themselves, taking risks, and trying to become entrepreneurs. Nonetheless, as we are emotionally connected and if we have to diversify our business, NRNs will choose Nepal.
You have been involved in the campaign to bring together the Nepali diaspora and establish Non-Resident Nepali Association (NRNA) since its inception. How do you see the journey of two decades of NRNA?
With the beginning of the new millennium and the acceleration of globalization, immigration emerged as a global phenomenon. According to United Nations data published in 2020, there are currently 280 million first-generation immigrants in the world. If there is a separate country only for immigrants, it will overcome the combined population of both Brazil and Argentina. It is estimated that first-generation immigrants make up 3.6 percent of the world’s population.
The beginning of the trend of Nepalis going abroad started after the Sugauli Treaty (1814-16). British India recruited 5,000 Nepali soldiers for the first time in the Gurkha Regiment. After that, there is a history of Nepalis migrating to work in tea plantations, security, and animal husbandry, among others works. The migration of Nepalis gained acceleration after 1990 as a large number of Nepalis started going abroad for higher studies and work purposes. As a result, Nepal’s once agriculture-based economy has become dependent on remittances sent by people living abroad. We estimate that the number of NRNS across the world is now around 6 million.
We noticed that from 1990 to 2000, some 2.5 million Nepalis were living and working abroad. So, in 2000 we began to bring Nepalis residing in different countries under an umbrella, and in 2003, NRNA was officially established by holding a large conference in Nepal.
The objective of establishing NRNA was to bring the Nepali diaspora into a platform from where they can contribute to Nepal more effectively enabling them to engage in charitable works for the home country. The NRNA also came forward as a platform for those who want to invest in Nepal and facilitate foreigners who want to do something here.
What major contributions of the Nepali diaspora would you like to highlight?
The Nepali diaspora, which is expanding not only numerically but also qualitatively, has already made a significant mark by investing in fields including hydropower, banking, tourism, health, and education, among others, in Nepal. Also, many Nepalis living in different countries of the world have made small but impactful investments in their villages which has helped in running the rural economy and creating jobs.
In recent years, it has been seen that the Nepali diaspora can play an important role in strengthening Nepal’s international relations. This can be diplomatic leverage to be used by the government to promote its economic diplomacy. There are several examples of many diaspora Nepalis acting as catalysts to bring foreign investment through their efforts. Diaspora can also help the government in adopting suitable social and economic policies of developed countries that they have seen and experienced abroad.
Charity is another area where the Nepali diaspora has contributed immensely. Whether during the 2015 earthquake, devastating floods that occurred over the years or a crisis like the Covid-19 pandemic, Nepalis scattered all over the world have united and joined hands to help their motherland.
As the organized NRN movement nears two decades of existence, how do you see the future of the Nepali diaspora?
Besides increasing involvement in business, there are many Nepali experts working at the academic and research level of prestigious universities around the world. The generation of Nepalis working at the highest level of multinational companies is increasing. It can easily be assumed that within the next 10-15 years, the Nepali diaspora can make a significant contribution to Nepal. There is no doubt that the economic transformation of Nepal will be easier and faster if the emerging Nepali international community can be involved in the process. The continuous increase in the number of Nepalis who are involved in various businesses abroad indicates that the diaspora is moving toward new heights.
The prosperous future of the Nepali diaspora can be assessed right now as the history of the development of other diasporas of the world, who are contributing greatly to the prosperity of their motherland, has also happened in this way.
The second generation of the Diaspora community is emerging more strongly. Since this generation has more opportunities abroad than the first generation, it is undeniable that the contribution they can make to their parents’ homeland is even greater.
