Credible and bankable projects are crucial for realising investment commitments
the HRM
The government is hosting the Third Investment Summit on April 28-29 in Kathmandu to attract foreign and domestic private investments along with investments from the Nepali diaspora in multiple sectors including infrastructure development to unleash the country’s growth potential.
The government has joined hands with private sector umbrella bodies – Federation of Nepalese Chambers of Commerce and Industry, Confederation of Nepalese Industries and Nepal Chamber of Commerce – to organise the summit. The private sector umbrella bodies as the co-organisers have played a crucial role as members of the task force, which was convened by the secretary of the Office of the Prime Minister and Council of Ministers, to prepare the report that recommended the Nepal Investment Summit 2024 Steering Committee chaired by the Minister for Finance to amend a dozen laws that have been hindering investments.
Various provisions of a dozen laws including primary laws concerned with foreign investment like the Foreign Investment and Technology Transfer Act (FITTA) and Rules will be amended. Along with FITTA, 2019 and Foreign Investment and Technology Transfer Rules 2021, are other laws that have been proposed to be amended to create a conducive investment climate including the Public Private Partnership and Investment Act, 2019; Industrial Enterprises Act, 2020; Special Economic Zone Authority Act, 2019; Forest Act, 2019; National Park and Wildlife Protection Act, 1973; Land Act, 1964; Land Acquisition Act, 1977; Environment Protection Act, 2019; Electronic Transaction Act, 2008; Civil Aviation Authority Act, 1996 and Forests Regulations, 2022.
Based on the report prepared by the task force, the Ministry of Industry, Commerce and Supplies (MoICS) has prepared the Bill titled ‘Some Nepal Acts Amendment Bill for Investment Facilitation 2024’. Along with the Bill, the MoICS has also submitted the framework of the Bilateral Investment Agreement (BIA) to the Cabinet for endorsement. The MoICS will be able to sign BIA with different FDI source countries to assure investors that the Government of Nepal is committed to providing optimum protection and security to investors by ensuring better returns as well as easy repatriation of profit.
“While coming to invest in Nepal, primarily, investors look at the investment climate, which means an amiable legal regime and hassle-free, simplified and transparent procedures along with returns on investment as well as easy repatriation,” said Finance Minister and Coordinator of the Nepal Investment Summit 2024 Steering Committee, Barsha Man Pun. He added, “As investors from India, China, UK, USA, Australia, Europe, Gulf nations and Malaysia, among others, are expressing interest to invest in Nepal, we must be well prepared with credible (projects with a certain level of study) and bankable projects along with supporting foreign investors to explore the appropriate investment opportunities in various sectors including advising them on B2B networks of their preference.”
Minister Pun further said that the summit will serve as a platform to showcase Nepal as an emerging destination for global investors. “Nepal possesses a dynamic investment landscape, especially in green energy, tourism, agribusiness and the IT sector. We will ensure optimum protection and security of investments, returns and repatriation, along with efficient and effective facilitation for the entire business cycle,” said Minister Pun, underpinning the need of investment in all forms, capital, technology and skillsets to unleash the country’s potential.
Commitment of the government
Prime Minister Pushpa Kamal Dahal is excited about the summit. He also has the experience of hosting Nepal Investment Summit in 2017 as the Prime Minister, which was the first investment summit hosted by Nepal after the decade-long insurgency (1996-2006) came to an end and the country embarked on the path to peace and prosperity. Prior to that, the Ministry of Industry, Commerce and Supplies had hosted Investment Summit in the 1990s after the restoration of democracy, when the country had made a raft of reforms to create an investor-friendly environment.
The Prime Minister has been providing direct guidance to the steering committee chaired by the Finance Minister and there are other mechanisms to look after different activities to convene the summit successfully. Prime Minister Dahal has not only been consulting with the existing foreign investors and private sector, but he also briefed the ambassadors to Nepal and high-ranking representatives of Development Partners (DPs) on April 9 (check date) and sought support for positioning Nepal as a promising investment destination.
Similarly, the Finance Minister-led steering committee has held consultations with Nepali missions abroad and urged them to sensitise investors in their respective nations about Nepal Investment Summit and showcase investment opportunities in Nepal to potential investors. The steering committee is the final authority to give a go-ahead to all the activities to convene the summit successfully.
The meeting of the Cabinet held on November 9 last year had formed different committees with proper responsibilities to convene the Nepal Investment Summit. Along with Steering Committee, there is Implementation Committee chaired by Chief Secretary and comprising of secretaries of different ministries to further work out on the projects, laws (amendment) and other preparatory activities that are received from other committees, task force and Nepal Investment Summit Secretariat. Leaders of the private sector umbrella organisations – FNCCI, CNI and NCC – are members in both the Steering and Implementation committees.
The Technical Committee (for project selection), chaired by secretary of MoICS, has worked on projects to be showcased at the summit. Further, the task force chaired by the secretary of the OPMCM has carried out a study of legal reforms and submitted the report to the Steering Committee following the final round consultations at the Implementation Committee. Moreover, to perform the overall activities concerned with organising the summit, Nepal Investment Summit 2024 Secretariat has been formed under the leadership of the chief executive officer of the Office of the Investment Board, Nepal.
The government’s commitment to reform laws, ensure procedural simplification, provide handholding to investors for the entire project cycle is overwhelming, according to investors, however the result will depend on the implementation of these commitments in an effective manner.
Sushil Bhatta, Coordinator of the Nepal Investment Summit 2024 Secretariat and CEO of Office of the Investment Board, Nepal, has said the reforms are a regular process and that Nepal Investment Summit 2024 has triggered the pace of reforms in the investment landscape. “We should analyse the summit in a holistic perspective. All the government agencies, private sector, Nepali missions and investors are doing groundwork on legal, policy and institutional reforms, project preparation and reaching out to investors,” he said, adding, “We will also follow up after the summit is over and do everything within our capacity to realise the investment commitments.”
Bhatta further said the summit is an effective tool to promote the country as an attractive investment destination, promote our institutions and disseminate information about the investment procedures, our competitive strengths, opportunities for investors and most importantly, the projects and sectors where we are pursuing investments.
Though the summit could be considered the national flagship event for investment promotion, Investment Board Nepal – investment promotion agency and national Public Private Partnership (PPP) agency – has been hosting investment seminars, conferences on financing, meet and greet sessions with the investors, investment marts and project roadshows in the country and abroad to pursue investments, according to Bhatta. “Along with project development and management we have given due priority to investment promotion. We collaborate and forge partnerships with different private sector agencies, national and international chambers, professional institutions, Development Partners (DPs), bank and financial institutions, think tanks, network of IPAs and different organisations/institutions in line with our priorities to achieve our targets,” he mentioned, adding, “Further, we are focusing on institutional development for effective facilitation to investors as well as grow as a knowledge-based institution and transfer knowledge to other agencies to engage them to develop the PPP culture in the country.”
Key attractions of the summit
Nepal Investment Summit 2024 will provide an opportunity for domestic and foreign private sector as well as Nepali diaspora to interact with policy makers, explore investment opportunities, B2B and G2B meetings and networking as well as to consult with lenders – Multilateral Development Banks (MDBs), Development Finance Institutions (DFIs) and banks and financial institutions (BFIs). The two-day summit will have various sideline events, B2B meetings, stalls and projects being showcased, among others. Another major attraction of the summit is ‘Meet the Prime Minister’, where reportedly investors will have an opportunity to meet the Prime Minister. Various thematic sessions will be held, according to Bhatta, coordinator of NIS Secretariat. As per him, “The summit will be a well-orchestrated event bringing potential global investors, policymakers, experts and development finance institutions to help them explore investment opportunities in Nepal and forge partnerships with local business leaders.”
He further said the government will display various supporting publications/knowledge products at the summit. Nepal Investment Guide, sectoral opportunities, project factsheets, project screening tools and study reports will be displayed.
The fundamental attributes of the summit are undoubtedly drawing attention of investors to the projects to be showcased and helping potential investors navigate sectoral opportunities in energy, tourism, ICT, agro-processing, manufacturing, health, education, transportation, urban development, and mines and minerals, among others.
A total of 133 projects will be showcased during the summit. Three projects, namely, Upper Marsyangdi-2 Hydroelectric Project, China-Nepal Friendship Park and 250 MW Grid Connected Solar Project in Kohalpur and Banganga (with total storage capacity of 40 MW) are under preparation to sign the Project Development Agreement (PDA). Another reinvestment project, Capacity Expansion and Product Diversification of Dabur Nepal Pvt. Ltd., is expected to seal the Project Investment Agreement (PIA). Dabur Nepal Pvt. Ltd., a first-generation FDI company in Nepal, will make an investment of Rs 9.68 billion for capacity enhancement and product diversification.
The private sector will also showcase projects during the investment summit to seek investments – loan and equity – to develop projects. A total of eight projects will be showcased by the private sector, namely, Sikles_Annapurna Cable Car Project; Jalpadevi Cable Car Project; Bharatpur Island Resort and Waterland Project; Middle Kaligandaki Hydroelectric Project; Tiplyang Kaligandaki Hydroelectric Project; IME Cement Project (Baitadi); Kathmandu Technical School (Kathmandu) and Limestone mining in Arghakhachi and Pyuthan.
The government is preparing to call Expression of Interest (EoI) of 21 projects. The list includes projects like Daiji Industrial District, Pokhara International Convention Center (PICC), Development and Construction of Babarmahal Administrative Plaza, High End Resort, Mahadev Khola Impounding Reservoir, Karnali Chisapani Wind Power Project (10 MW), Chandragiri-Chitlang-Palung-Chitwan Expressway, Janaki Heritage Hotel and Cultural Village Project, Janakpur, Dhulikhel Medicity Project, Khaptad National Park Integrated Development, Sudurpashchim Public Transport Project, Naumure Multipurpose Project (218 MW), Khimti Those Siwalaya Storage Hydropower Project (1216 MW), Humla Karnali Hydropower Project (61.02 MW), Upper Chameliya Hydropower Project (53.85 MW), Kawadi Khola Hydropower Project (30 MW), Kaligandaki-2 Storage Hydropower Project (650 MW), Bharbhung Storage Hydropower Project (377.1 MW), Tom Dogar Budhigandaki Hydropower Project (40.02 MW), Super Budhigandaki Hydropower Project (34.93 MW) and Panchkhal Special Economic Zone.
Largely, there is domination of energy projects in the list of projects that are under preparation to call Expression of Interest (EoI). Nepal has been receiving significant investment propositions to invest in energy as this sector is gaining momentum along with the rising demand for clean energy and market assurance at the regional level particularly in India and Bangladesh.
Previous summits
Following the establishment of Investment Board Nepal, two summits have been hosted so far in 2017 and 2019. In 2017, Nepal had received a huge investment pledge for 26 projects. Investors from various countries submitted Letter of Intent (LoI).
The first Investment Summit was held on March 2-3, 2017, in Kathmandu. Till date, 25% of the Letters of Intent, worth $13.74 billion, have moved towards realisation, according to the Office of the Investment Board, Nepal.
The government’s announcement that it would adopt flexible policies for mining helped in luring large cement manufacturing giants, namely Hongshi Shivam Cement (6,000 tonnes per day capacity) and Huaxin Cement Narayani (3,000 tonnes per day capacity) which are now in operation.
During the first summit, there were no individual projects showcased. The government had presented sectoral opportunities for investment, and the focus was on legal and procedural framework, investment climate and matchmaking with the private sector during the summit.
Similarly, the second investment summit was held on March 29-30, 2019, in Kathmandu. The summit was attended by more than 800 foreign delegates from 40 different countries and over 500 Nepali participants. According to the Office of the Investment Board, Nepal, 70 applications were received during the summit for 30 projects from the energy, tourism and infrastructure sectors, among others. Sixteen memorandums of understandings (MOUs), which were signed between private parties and government agencies, are at various stages of study and development.
The private sector had advised to focus on credible and bankable projects as well as make adequate follow-ups with the investors to realise the commitments.
“We have rich insights that are not just reflections but guiding sources for what we are about to embark on. The experiences we have garnered, and the lessons learned have all been instrumental in shaping our approach to the Nepal Investment Summit 2024,” said Chandra Prasad Dhakal, President of FNCCI, adding, “It is these very experiences that have become our compass, offering us direction and perspective as we navigate towards our forthcoming goals.”
Since its establishment, Investment Board Nepal has approved investments of around Rs 1,350 billion for 46 projects – 32 energy and 14 non-energy projects – and among them projects with cost worth Rs 915.8 billion are under different stages of development.
“We often talk about the huge gap in investment commitments and realisation. While making such interpretations we have to realise that the investment commitments in the projects will be realised in the due course of project execution. We cannot realise entire investment until the project is completed,” said Yagya Raj Koirala, Director General of the Department of Industry.
The Government of Nepal has two reference points for dealing with foreign investments. Office of the Investment Board, Nepal deals with large scale investments of above Rs 6 billion as well as energy projects with capacity of 200 MW and above. The Department of Industry (DoI) is responsible to deal with investments below the aforementioned threshold.
FDI source countries and investors’ perspective
Foreign Direct Investment (FDI) has been serving as a catalyst for development in an open integrated economic system. Since 1980s, cross-border linkages through FDI have been an important feature of financial globalisation and liberalisation process, according to Nepal Rastra Bank.
Nepal has also introduced many provisions to attract FDI including a set of legal, regulatory and institutional framework. Though FDI inflow in Nepal is low compared to neighbouring countries, it has been on an increasing trend in the recent past.
The share of Foreign Direct Investment to the country’s GDP ratio is merely 0.4%, the lowest in the South Asian region. Instable government, lack of policy consistency, ambiguous laws, procedural hassles, lack of provision of exit (closure of company), and difficulties in profit repatriation are often cited as obstacles to pursuing FDI.
The government should listen to the private sector, create an environment for more people to embrace entrepreneurship, focus on vocational education and boost business confidence with favourable investment policies and incentives to attract foreign and domestic private sector investment, opined Tae-Young PARK, ambassador of the Republic of Korea to Nepal.
Republic of Korea is predominantly emerging as the top FDI source country. In terms of investment commitments, it ranks at the top in the first eight months of this fiscal (July 16, 2023 to March 15, 2024), as per the Department of Industry.
Assaulting private sector dents government’s effort
On one hand, the government has been keeping its effort to lure private investment including foreign, domestic and Nepali diaspora community. At the same time frequent assault from the state machineries to the private investors including foreign investment dent the government effort. On the other hand, local obstruction at the project site hurting investors. Dr. Devendra Raj Pandey, former minister, advised the government to satisfy the existing investors first. There should be amiable laws and policies first, projects should be in place prior to hosting the investment summit. Private sector players have lost confidence due to the frequent assaults and cases filed by the state machinery. Very recently, the Department of Revenue Investigation prosecuted Cotiviti Nepal Pvt. Ltd. with a claim of Rs 5.18 billion revenue embezzlement. However, the substance of the case filed by the Department of Revenue Investigation has been questioned both in the Parliament and the public sphere.
This has substantiated the claim of 2023 Investment Climate Statement of the US Department of State regarding Nepal. The report stated that despite considerable potential, particularly in the energy, tourism, information and communication technology (ICT), infrastructure and agriculture sectors in Nepal, political instability, widespread corruption, cumbersome bureaucracy, and inconsistent implementation of laws and regulations have deterred potential investment.
Against this backdrop, the government has to provide an investment friendly climate to pursue more private investment including foreign investments under the direct equity investment and Public Private Partnership investment models to dismiss the allegations and position Nepal as a competitive investment destination with more transparent legal regime, needful facilitation, incentives and everything that is required for an investor-friendly environment. If this happens then Nepal could become a preferred investment destination for global investors.
Foreign Direct Investment (FDI) has been serving as a catalyst for development in an open integrated economic system. Since 1980s, cross-border linkages through FDI have been an important feature of financial globalisation and liberalisation process, according to Nepal Rastra Bank.
Nepal has also introduced many provisions to attract FDI including a set of legal, regulatory and institutional framework. Though FDI inflow in Nepal is low compared to neighbouring countries, it has been on an increasing trend in the recent past.
The share of Foreign Direct Investment to the country’s GDP ratio is merely 0.4%, the lowest in the South Asian region. Instable government, lack of policy consistency, ambiguous laws, procedural hassles, lack of provision of exit (closure of company), and difficulties in profit repatriation are often cited as obstacles to pursuing FDI.
The government should listen to the private sector, create an environment for more people to embrace entrepreneurship, focus on vocational education and boost business confidence with favourable investment policies and incentives to attract foreign and domestic private sector investment, opined Tae-Young PARK, ambassador of the Republic of Korea to Nepal.
Republic of Korea is predominantly emerging as the top FDI source country. In terms of investment commitments, it ranks at the top in the first eight months of this fiscal (July 16, 2023 to March 15, 2024), as per the Department of Industry.
Assaulting private sector dents government’s effort
On one hand, the government has been keeping its effort to lure private investment including foreign, domestic and Nepali diaspora community. At the same time frequent assault from the state machineries to the private investors including foreign investment dent the government effort. On the other hand, local obstruction at the project site hurting investors. Dr. Devendra Raj Pandey, former minister, advised the government to satisfy the existing investors first. There should be amiable laws and policies first, projects should be in place prior to hosting the investment summit. Private sector players have lost confidence due to the frequent assaults and cases filed by the state machinery. Very recently, the Department of Revenue Investigation prosecuted Cotiviti Nepal Pvt. Ltd. with a claim of Rs 5.18 billion revenue embezzlement. However, the substance of the case filed by the Department of Revenue Investigation has been questioned both in the Parliament and the public sphere.
This has substantiated the claim of 2023 Investment Climate Statement of the US Department of State regarding Nepal. The report stated that despite considerable potential, particularly in the energy, tourism, information and communication technology (ICT), infrastructure and agriculture sectors in Nepal, political instability, widespread corruption, cumbersome bureaucracy, and inconsistent implementation of laws and regulations have deterred potential investment.
Against this backdrop, the government has to provide an investment friendly climate to pursue more private investment including foreign investments under the direct equity investment and Public Private Partnership investment models to dismiss the allegations and position Nepal as a competitive investment destination with more transparent legal regime, needful facilitation, incentives and everything that is required for an investor-friendly environment. If this happens then Nepal could become a preferred investment destination for global investors.
‘Public Private Partnership to harness potential’
Chandra Prasad Dhakal, President, Federation of Nepalese Chambers of Commerce and Industry
The private sector of the country has been giving pivotal priority in strengthening the partnership between the private sector and government. Public-Private Partnerships (PPPs) are crucial to transforming our infrastructure landscape which requires substantial investments. These partnerships are not just a pathway to economic growth but a magnet for foreign direct investment.
Moreover, we are advocating for policies that genuinely foster entrepreneurship, underscoring Nepal’s unwavering commitment to crafting an investor-friendly ecosystem. We will be drawing attention to the governmental reforms aimed at enhancing the business environment and the pressing need for infrastructure development that has long been an obstacle to Nepal’s prosperity. Highlighting sectors for promotion will include tourism, hydropower, manufacturing and information technology, among others.
Our collaboration with the government continues a tradition of partnership to spotlight potential projects during the summit. Together, we are compiling a list of prospective investors, both domestic and international, for sectors ripe for growth. We are dedicated to providing the government with insights into Nepal’s investment landscape and facilitating business-to-business engagements. Our aim is to bridge connections and forge partnerships between investors and local enterprises. Leading up to the summit, we are joining forces with the government to host awareness events and policy reform discussions, leveraging our network to spread the word about the summit.
We should admit that we are not in isolation; many economies are competing by laying down a red carpet to welcome investors. Simultaneously, we should look at the success stories of developed economies around the globe. One thing that is clear is that they have a robust mechanism for collaboration between the government and the private sector. It is very important that the government understand, see and speak from the perspective of the private sector while dealing with investment.
By integrating the private sector’s hands-on experience and innovative solutions into policy formulation, we will create a regulatory environment that is not only conducive to business but also aligned with global best practices. The private sector is always ready to provide feedback on existing policies and advocate for necessary reforms. A collaborative approach builds trust, attracts investments and contributes to sustainable development. This trust is a powerful magnet for investments, as it assures investors of a stable, supportive and dynamic business environment.
‘Creating favourable legal regime to attract FDI necessary’
Nara Bahadur Thapa, Former Executive Director, Nepal Rastra Bank
As the country is pursuing private investment to achieve accelerated development, focus should be given to making a sound legal regime that is favourable to the investment landscape. Foreign Investment and Technology Transfer Act, 2019 is the primary law for foreign investment. Some of the provisions in the FITTA need to be amended and a few provisions need to be added.
We should remove the provision of preapproval for Foreign Direct Investment that is aligned with the national priority sectors. Further, the fiscal budget 2023/24 has announced to withdraw the provision of minimum threshold in the ICT sector, which should be included in the amendment. Moreover, the ICT companies should be granted certain amount of exchange facility through Nepal Rastra Bank to open contact offices in foreign countries for marketing and branding their products and services. ICT should be given due priority as this sector is emerging prominently as a sector of competitive and comparative strength like tourism and this will certainly pay the country back.
In addition, as per the provision of FITTA, foreign investors are compelled to bring in 70% of the pledged amount during the construction period and 30% in the operation phase, which is impractical. We should not demarcate the portion for construction and operation period and allow them to bring in till the operation phase as per their requirement for implementing projects.
FITTA has envisioned only equity as investment, it has not envisioned venture capital and alternative financing and their regulations. FITTA should add provisions, such as multiple regulations in venture capital and alternative financing should be streamlined through single regulation of the Securities Board of Nepal and foreign companies should be invited to provide hedging (fund) services.
Apart from this, the Special Economic Zone Act should include a provision that revokes the existing provision of penalty if the industries established in the Special Economic Zones (SEZs) fail to meet minimum export threshold. Instead of penalising industries, the Act may introduce a provision of suspending fiscal incentives if the concerned industry fails to meet the minimum export threshold.
IBN approves investments worth Rs 99.18 billion prior to Investment Summit
Investment Board Nepal has approved investments worth Rs 99.18 billion for four energy projects through its recently held Board meeting chaired by Prime Minister Pushpa Kamal Dahal. The 57th Board meeting of IBN approved investments worth Rs 34.59 billion for 166 MW Super Tamor Hydroelectric Project, Rs 10.08 billion for 42 MW Upper Modi-A, Rs 21.10 billion for 250 MW Solar Energy Project (Bangana and Kohalpur), and Rs 33.41 billion for 139.2 MW Lower Manang Marsyangdi Hydroelectric Project. Among them, 250 MW Solar Energy Project and Lower Manang Marsyangdi Hydroelectric Project are foreign investment projects.
IBN has also formed a Project Development Agreement Committee to negotiate with developers of 327 MW Upper Marsyangdi-2 Hydroelectric Project and 250 MW Solar Energy Project (Bangana and Kohalpur) project under the convenorship of the chief executive officer of the Office of the Investment Board, Nepal. As Ambuja Cement of India has offloaded its shares from Dang Cement, the board has provided a nod to repatriate the funds as per the share purchase agreement. The board extended the time for two study committees formed to study on project development and investment modality of Nijgadh International Airport and study of Tamor Storage Hydroelectric Project, respectively. Moreover, the board chaired by Prime Minister also instructed to take forward the Project Development Agreement with NepWaste Pvt. Ltd. for execution of Package I of solid waste management of Kathmandu valley as per the Public Private Partnership and Investment Act, 2019 and Public Private Partnership and Investment Regulation, 2020.
In addition, the board has acknowledged the requirement of institutional sustainability of the Office of the Investment Board, Nepal and decided to strengthen the institution based on the proposed Public Private Partnership and Investment Act, 2019 amendment report submitted by the study panel formed by the 55th Board meeting.
Following the meeting, Finance Minister and Vice Chairperson of Investment Board Nepal, Barsha Man Pun, stated that the IBN Board meeting has made significant decisions prior to the investment summit which are crucial to boosting investors’ confidence.
Nepal should enable competitive investment climate
Nepal and Korea commemorate the semi-centennial of their diplomatic ties this year, which were established in 1974. Various events, including cultural exchanges, policy dialogues, and sports, are being organised to celebrate the 50th anniversary of diplomatic relations. Simultaneously, both countries are strengthening economic relations through B2B (Business to Business), G2B (Government to Business), and P2P (People to People) interactions. In terms of trade and investment, the Republic of Korea ranks as a top Foreign Direct Investment (FDI) source country based on investment commitments during the first eight months of fiscal year 2023-24. The HRM Nepal recently interviewed Taeyoung Park, Ambassador of the Republic of Korea to Nepal, to discuss how both nations are enhancing their diplomatic, economic and socio-cultural ties.
Q. Nepal and Republic of Korea are going to soon mark the semi-centennial of diplomatic ties. How are both countries planning to celebrate this landmark journey of diplomatic ties?
A. We have been greatly enjoying our semi-centennial friendship between Nepal and Korea. This year marks the 50th anniversary since diplomatic relations were established in 1974. This is the right time to take a look at the previous 50 years of friendship and cooperation and think about the next 50 years of cooperation for shared prosperity of each other. We are planning to host various kinds of celebrations. We had a very successful launch ceremony of the 50 years commemoratory logo in January. On the occasion of the 50th anniversary, we need to upgrade our understanding of each other through cultural exchanges. In this regard, we are planning different types of cultural events. We will have Korean culture performance team in Kathmandu, and we will host a Taekwondo competition here among Nepali athletes. We will also present the taste of our Korean cuisine to Nepali people. Apart from these cultural activities, in terms of substantial aspects, we are planning to hold several kinds of policy seminars to share our experiences of Korean development history with Nepal. It might be a good opportunity to learn about the Korean experience. We have another seminar on cooperation in the agriculture, environment and energy sectors. Most importantly, we are also planning to have some celebrations between the private sector of Nepal and Korea. Further, Nepal Mountaineering Association and Nepal Tourism Promotion Agency along with Korean Mountaineering Association will conduct a joint climbing event in the Jugal Himal area; this will be the first expedition in that area. This will be a celebration of the 50th anniversary among climbers from the two countries and also an event to help promote tourism to attract more Korean trekkers and tourists to Nepal.
Q. In the context of deepening trade, investment, and labour relations between Nepal and the Republic of Korea, how would you assess the economic ties between the two countries?
A. Economic cooperation has been pretty good, in terms of trade, investment and other kinds of cooperation. However, there is room to further this cooperation. Nepali products could be introduced in the Korean market. For example, medicinal herbs, tea, coffee and pashmina and other commodities are very unique and have a competitive advantage. In terms of investment, Nepal has very good potential in energy, tourism, manufacturing and agriculture, among others. However, there should be more promotional activities to attract foreign investors including Korean investors. This is why I think the Government of Nepal has planned to host Nepal Investment Summit towards the end of April. In addition, as part of economic cooperation, labour cooperation is a very crucial component between the two countries and a very solid foundation of cooperation between the two countries. The EPS (Employment Permit System) is a great cooperation programme.
Q. The Republic of Korea ranked within the top five countries in terms of inward FDI to Nepal. Many Korean companies are expanding their footprint in Nepal. In what areas are Korean firms willing to invest in Nepal?
A. South Korea is one of the main sources of foreign investment in Nepal. I am happy to share the statistics of the Department of Industry, Government of Nepal. In the first eight months of the current fiscal year, South Korea has ranked at the top position in terms of investment commitments, which means many Korean companies are trying to explore possibilities and potential to do business or put their investment in Nepal. In the manufacturing sector, Samsung Electronics – a global company – started an assembly line in Bhairahawa in April last year. Small and medium size companies are also doing good here. For instance, Mandumo, a Korean wig company employs more than 600 Nepali women and exports customised wigs to South Korea and Japan. Similarly, the energy sector is a very interesting field and Nepal has huge potential in the hydroelectric sector. Upper Trishuli-1 project is being constructed by a Korean companies. By 2027, they will start their commercial operation. Actually, it is the third hydropower plant being constructed by a Korean company. So far, Korean companies have constructed the Modi Khola (2000) and Chameliya (2018) hydroelectric power plants. I think many Korean companies are interested in exploring more opportunities to invest in the energy sector. As far as I know, there is not a single manufacturing plant of automobiles or auto parts. Laxmi Hyundai is working on building an assembly line in Nawalparasi and preparations are almost complete. In May, they will host a grand opening ceremony and start commercial operation of ‘Made in Nepal’ Hyundai cars in Nepal.
Q. Apart from trade investments, how are investments from South Korea contributing to enhancing productive capacity, job opportunities, and technical know-how?
A. During the early stages of development in the manufacturing sector of South Korea, we were trying to get as much investment as possible from outside. At that time, we did not have technology, or enough money to invest or skilled workers. Bringing foreign investments provides an opportunity to create jobs, and they also share their technology (which is known as technology transfer) and know- how in specific industrial sectors. These are the beauty of foreign investment and South Korea witnessed the same when we were just about to start on our journey to development.
Q. The Nepali government is going to host the Nepal Investment Summit in April. How can we improve the investment climate to attract Korean companies to Nepal?
A. I believe the Government of Nepal has been trying to create an investment-friendly environment in Nepal, which is why the government is hosting the third investment summit in a successful manner. I appreciate the initiatives taken by the Government of Nepal. This is the right way to promote Nepal as an investment destination among global investors. To attract more Korean investments in Nepal, there are several things that need to be improved in Nepal. I believe the Government of Nepal is working on those aspects, and these kinds of improvements/adjustments should be done through the perspective of foreign investors. All countries around the world are competing to get more foreign investments, and Nepal has very competitive neighbouring countries to attract investments. Therefore, Nepal should have a more investor-friendly environment including incentives in taxation and employment, among others. I do not mean Nepal has not been providing these incentives, but there should be more things to offer to attract investors. To be very honest, foreign companies want to make profit. Nepal should provide a conducive climate for foreign investors to make money easily in the country. If this happens, they will bring their capital and technology to Nepal, create job opportunities for Nepali people, and share their technology and know-how with Nepali workers and partners. One of the important things to mention is Nepal has many existing foreign investors already. They could be a very strong promoter to share their experiences in Nepal. I believe, the Government of Nepal is trying to provide the best services to the existing investors.
When it comes to investment in the manufacturing sector like promoting ‘Made in Nepal’ products like Samsung Electronics and Laxmi Hyundai, I would like to suggest one customs duty policy to attract more foreign and Nepali companies to establish manufacturing or assembly lines within Nepal. The government should pay more attention to substantially reduce customs duty on raw materials and parts. Without some beneficial room in those kinds of materials, ‘Made in Nepal’ products will be more expensive than imported products. To promote ‘Made in Nepal’ products, the government should bring down the customs duty of intermediary goods. I am saying this based on Korean experience. While promoting ‘Made in Korea’ products at the early state of manufacturing sector, intermediary goods were almost duty free. There should be some change in the customs duty system, especially for intermediary goods. South Korea wishes to have bilateral investment treaty with Nepal. When I meet potential Korean investors, they often ask, ‘Do we have Bilateral Investment Promotion and Protection Agreement with Nepal?’ I think this a basic framework for their investment overseas.
Q. Some of the projects like Upper Trishuli-1 and others set a new benchmark in investment relations. Nepal and India have also signed a deal whereby India will purchase 10,000 megawatts of clean energy from Nepal. Do you think these could be promoted to lure more Korean investors in the energy sector?
A. Nepal has a huge potential in the energy sector. That is why we are doing our own project. Upper Trishuli-1 is a very sound project of Public-Private Partnership (PPP) model. The Korean company successfully obtained investment from nine investors, including International Finance Corporation of the World Bank Group and Asian Development Bank. When we conclude this project successfully, then other Korean companies will recognise the huge potential of the energy sector of Nepal. Several Korean companies are trying to develop transmission line projects.
Q. The Republic of Korea moved towards the journey of economic prosperity by investing in transformative infrastructure, deregulating the market and technology-driven manufacturing. What are your recommendations for Nepal and what lessons can we draw from the Korean success?
A. South Korea attained economic prosperity from scratch after the Korean War. Of course, there is no one magic recipe for economic development. In the case of Korea, the fundamental factor of success would be human resources. because after the Korean War, we had nothing except our people. More specifically, two factors were considered fundamental for our prosperity. One is education for people and second is entrepreneurship of the private sector. Many Korean companies embraced entrepreneurship and they have been doing a great job in terms of creating opportunities. Human resources are very important in the case of Nepal, as well. I think vocational training might be more important. In the process of development, we need skilled workers and for that we require better vocational training centres in Nepal. That is why Korean agencies like KOICA have been working together with the Government of Nepal to establish vocational training institutions. Secondly, entrepreneurship is equally important for Nepal. In my opinion, if there is a door of economic prosperity, the government should not open it because the key of the door belongs to the private sector. We have to promote private sector to make profit and create more job opportunities in Nepal.
To promote the private sector, the government should carefully listen to the voice of the private sector and create the best environment for business. In many ways, I believe in the power of free market system for private sector growth.
Q. Along with G2G and B2B, Republic of Korea and Nepal share relations at the People-to-People level. The employment opportunity that Nepalis are obtaining in the Korean job market, has supported the grassroots people in many ways. Considering the availability of cheaper labour in Nepal, are there any plans to increase the number of workers to Korea from Nepal?
A. Since introduction of EPS (Employment Permit System) in Nepal in 2007, more than 100,000 Nepali workers have got the chance to work in South Korea. Last year alone, 20,000 people had the opportunity to work in South Korea, which is a record high and Nepal ranks top among our 16 EPS partner countries. I think it is a very significant achievement in terms of labour cooperation between the two countries. At the moment, manufacturing, agriculture and livestock, and ship building industries are open for Nepali workers. More and more Nepali youths are desiring to work in Korea accordingly, I believe that labour cooperation between two countries will deepen further. However, there are still practical issues that need to be considered. I was saddened by the tragic incident in December last year where two young Nepalis lost their lives during protest. In my understanding, there is a huge gap between supply and demand, which may lead to similar bad cases recurring and make difficult to optimally utilise the labour force in Nepal. We need to come up with effective ways to address these issues and further enhance cooperation.
Q. The Republic of Korea has long been supporting Nepal’s development endeavours through soft loans from Exim Bank as well as through KOICA. Are there other alternatives for availing subsidised financing from Korea like through development financing institutions?
A. The Republic of Korea, which has transformed from a recipient country of ODA (Overseas Development Assistance) to a significant donor, has designated Nepal as one of ODA priority partner countries for 15 consecutive years. This enduring partnership has witnessed transformative initiatives aimed at supporting Nepal’s socio-economic development, notably in the fields of agriculture, healthcare, energy, technical education and vocational training. Korea has been providing two types of financial support to Nepal- grant and concessional loan. We have been providing grant support to implement development cooperation projects through KOICA (Korea International Cooperation Agency). The annual grant assistance to Nepal is around 15 million USD. The other part is concessional loan by Export-Import Bank of Korea (Korea EXIM bank). So far, we have had just two projects executed through the soft loan of the Korea EXIM bank, and these were energy projects. As per my understanding, our condition is much better than other soft loans. Other South Asian countries have also been trying to actively utilise soft loan of the Korea EXIM bank. I am keen to bring more concessional loan projects in Nepal in the future.
Q. Would you like to convey any specific messages to our valued readers or the friends of the Republic of Korea?
A. I would like to wish the Nepal Investment Summit a grand success and I hope there is a concrete investment outcome. I hope many business people from around the world will understand and explore investment opportunities in Nepal. Promoting and revitalising the private sector could generate more sense of hope in the future. This year Nepal and South Korea are celebrating the 50th anniversary of diplomatic relations. In the future, through our friendship, we would love to share economic prosperity with various cooperation between the two countries.
