The major challenge here is how can we hold the hands of foreign investors and make sure that the experience itself is good.
My experience working as a banker and then as the CEO of Investment Board Nepal (IBN) tells me one of the critical areas to mobilize investments is client service. Be it banks or government agencies, any organization will be successful only if it handles client service well. For this, one needs to understand what exactly the client is looking for. Without understanding the perspectives of clients, organizations cannot achieve their objectives.
In Nepali banks, the usual trend is when a proposal for loans comes, bankers judge the client based on their looks to see how well off they are. Not much homework is done for that particular project that the client is asking for.
We should never try to get investments thinking that investments will come randomly or irrationally. This means that when we talk about attracting investments, we will have to work for the long haul.
The same applies to foreign direct investment. Foreign investors always compare what are they getting in other countries and what the Nepal government can offer. The major challenge here is how can we hold the hands of foreign investors and make sure that the experience itself is good. Similarly, we also need to find ways to intrinsically guarantee profits for their investments.
The country’s political leadership needs to understand that the investors don’t invest money come for the sake of their love for Nepal. People may come to Nepal for vacations as tourists and spend a few thousand dollars. But to invest billions of dollars, investors will look into various aspects and see how attractive Nepal is compared to other countries as an investment destination.
It’s All About Partnership
When it comes to investment, it’s all about partnership.
Government agencies need to make sure that every prospective investor has the best information and is satisfied. Unfortunately, this is what we lack in Nepal.
What actually the ‘best information’ is? In the case of large-scale infrastructure projects, efforts should be made to make sure that the people living in the project areas know exactly what they’re getting into. What benefit they will get? What will be the compensation? How will their lives become better with the development of the projects? With the three-tier government in place, provincial and municipal authorities need to be informed about the benefits of the projects. Also, making sure that investors will get returns on their investments is the other crucial aspect.
There are always a lot of risks associated with project development. Private investors cannot handle the risks that are beyond their control. Here, the government must come forward and assure them that it will work to minimize such risks. This can only be achieved if the government works hand-in-hand with the investors by adopting a partnership approach.
Preparation is the Key
I have always stressed the need for preparation. During my tenure as CEO of IBN, a lot of people used to visit me, from ministers to businesspersons, who often ask how much investment Nepal would get. My reply would be that investments will not come until we send the right signal to the international community that Nepal is ready for business.
While programs like the Nepal Investment Summit are important, only organizing such big events is not sufficient to attract investments. What is needed is a change in our mindset, but it is not going to happen overnight. The government has to prepare projects and create a strong foundation for investments.
Once the projects are investment-ready after strong preparatory works that include addressing environmental and local issues, and understanding what the investors are looking for, then only the projects should be showcased to international investors.
This will make investors compete for these projects which will allow the government to negotiate and get the best deals.
IBN has done justice for the purpose it was established. But I also believe it got lost in the way. IBN is supposed to be a very powerful body for the one-window mechanism for investments which reports directly to the Prime Minister of the country. Instead of becoming the one-window mechanism, it is now just an ‘extra window’. This is certainly not what investors are looking for.
Making Nepal Ready for Business
Nepal is ready for business in the sense that we have international investors in crucial infrastructure projects like the Arun-III Hydroelectric Project. If Arun-III is completed without any disturbances, it will send strong positive signals internationally.
But unfortunately, every now and then we get bogged down in things such as cancellation of licenses with the change of the government and delays in project approvals. There absence of continuity when it comes to institutional decisions as one government awards a project to a certain international developer not even understanding what Nepal will be getting from it and another government comes in and scraps the license and gives it to someone else. With this flip-flop, we’re not sending the right signal to international investors.
It is not that our laws and policies are bad. What is lacking is the will to get things done and get things implemented. On the implementation side, our political leadership is never responsible, and there is no mechanism to make bureaucracy accountable.
The controversy over the Millennium Challenge Corporation-Nepal Compact has sent a negative message. There is no answer to why MCC was delayed for three years. We lost millions of dollars in investment due to this delay. The project development costs have gone up in these three years. It was Nepal that asked the United States to assist in the construction of transmission lines and improvement of highways which the MCC Nepal Compact has undertaken.
It is unfortunate that big infrastructure projects in Nepal fall victim to politicization. The politicos need to be asked who has taken the lead in really making changes in the lives of ordinary Nepalis. It needs to be understood that excessive politicking will only smash the confidence of both domestic and foreign investors. The Nepali private sector may be used to it, but I don’t think businesspersons are happy with the country’s political leadership.
In the last few decades, Nepal has become a net importing country. Instead of only keeping on repeating import substitution as a priority, the government should offer incentives to set up industries and invest in infrastructure.
Now Nepal needs to market its projects abroad in meaningful ways. For large and important projects, high-level government teams should go to cities like Singapore, Hong Kong, and London to reach out to investors. The top ministers and officials should lead this high-level team and tell the investors that the government will do everything at its disposal to facilitate the investments.
Ethical standards and rule of law of a country are crucial factors for multinationals to enter any country. Any corruption issue can have a big impact on their overall operation and brand. So, they definitely don’t want to come here and impress a few politicians.
Besides, it just isn’t easy to do business in Nepal. The environment in the country has become such that everyone tries to stop and extract you.
I think Nepal has too many ‘experts’. But we don’t have “doers” who understand the situation and make things happen.
During my tenure at IBN, we carried out a study on the feasibility of establishing a fertilizer plant in Nepal which is receiving some traction now. If we want to develop a hotel property in and around Rara Lake, it takes two years to develop a plan considering environmental issues and conserving the lake. But none of our politicians care about developing long-term plans and moving ahead with the follow-ups.
Maintaining consistency in policy and decisions plays a crucial role in attracting investments. No matter who comes to the power, the initiatives taken by the previous government should be taken forward by the new government.
There needs to be a proper plan that clearly identifies the priority projects for the next 5, 10, and 20 years. Furthermore, a strong commitment to these projects at the political level is also necessary. There must be decisiveness on the part of the government. At a time when Nepal needs investments more than ever, we have to start becoming responsible, whether it is at the political level or bureaucratic level.
Pant is Chairman at VRock & Company.