As an entrepreneur, I believe opportunities are everywhere; what is needed is the will and a favourable environment for investors. I consider myself an optimist, always positive and focused on finding solutions, no matter how challenging the circumstances. My priority is to discuss how we can transform Nepal into a prosperous nation by harnessing its potential for growth.
The current government is a coalition of two major parties, a rare occurrence not only in Nepal but globally. This presents a unique opportunity for us to enact transformative policies and strategies that can propel the country forward.
I was particularly moved by Prime Minister KP Sharma Oli’s recent remarks at the Startup Summit organised by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI). Speaking from the heart, the Prime Minister said, “I have no personal interest in being Prime Minister at this stage of my life; I have held the position several times before. This time, my goal is to deliver results – ‘Prosperous Nepal, Happy Nepali’.” We were genuinely inspired by this statement.
We believe that government stability will be maintained, and if that stability is assured, the private sector will stand firmly behind the government to help drive economic growth. Economic activities are gradually picking up and confidence among the private sector, investors and consumers is being restored. In this context, we are optimistic about delivering tangible results in the short term.
The recent announcement by the Ministry of Finance to establish a High-level Economic Reform Commission is a positive step forward. FNCCI has long advocated for the creation of such a commission, which will thoroughly assess the challenges and propose solutions to stimulate the economy. The private sector, in close coordination with relevant stakeholders, will work to identify key issues and recommend the necessary measures to energise the private sector, attract foreign investment, and address the current obstacles.
FNCCI has previously highlighted the need for improved coordination among economic stakeholders, greater access for the private sector in policymaking, and the urgency of accelerating economic growth.
The tourism sector is rebounding after the severe impact of the COVID-19 pandemic. Additionally, remittance inflows reached an all-time high in the Fiscal Year 2023/24, and our foreign exchange reserves are sufficient to cover 15 months’ worth of merchandise imports, placing us in a favourable Balance of Payments (BoP) position. Banks are flush with liquidity, and Foreign Direct Investment (FDI) is expected to rise, especially as the government has initiated the sovereign credit rating process – something foreign investors have long awaited.
This is an opportunity that must be utilised to rise. Both the government and private sector should collaborate to attract foreign investment. The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has prioritised business climate reform and investment promotion and is willing to work with relevant agencies in the investment ecosystem.
FNCCI has organised investment promotion events such as business forums, investment conclaves, trade and investment meets, among others, in collaboration with private sector organizations in host countries, Nepali diplomatic missions, and various other agencies.
Additionally, FNCCI has established an FDI help desk at its headquarters to facilitate potential investors.
Eight investment-related laws were amended prior to the Nepal Investment Summit, 2024, to create an enabling environment for investors. The private sector was also involved throughout the discussions for these law amendments. Furthermore, the framework for a Bilateral Investment Agreement (BIA) has been endorsed by the Cabinet, paving the way to sign BIAs with different investment source countries.
Moreover, the stock market has continued to rally, and the real estate market is gradually growing after a prolonged depression in these two sectors. The upgrade of Tribhuvan International Airport and the operation of two international airports – Gautam Buddha International Airport and Pokhara Regional International Airport – are essential to attract more tourists.
The manufacturing and construction sectors experienced consecutive quarterly declines in growth during the last Fiscal Year 2023/24. Industry capacity utilisation was limited to just 40%. The adverse impact on the private sector, which contributes 81% to the economy and 86% to total employment generation, had significant repercussions on the economy, including jobs and government revenue mobilisation, over the past two consecutive fiscal years.
Policy stability is a fundamental prerequisite for manufacturing and tourism infrastructure development. Investment in the manufacturing sector will be profitable only if policy stability prevails. For example, incentives provided for the manufacturing sector should not be changed for at least 10 years. Electricity should be considered a raw material for the production sector, and the private sector should be allowed to purchase electricity directly by paying wheeling charges. Raw materials, intermediate goods, and final products must be treated differently, and incentives should be provided for raw materials and intermediate goods based on the level of value addition.
Furthermore, Small and Medium Enterprises (SMEs) are inherently vulnerable and require support from the government and other capable agencies. We are already behind in implementing project financing beyond traditional collateral-based financing, which could provide opportunities for more talented individuals with creative, innovative ideas and entrepreneurial skills to embrace entrepreneurship. The Federation of Nepalese Chambers of Commerce and Industry has submitted an empirical study on this topic to the Ministry of Finance and Nepal Rastra Bank.
Most importantly, Nepal is on track to graduate to the league of developing nations by 2026. We must work to minimise the potential impacts on foreign trade, exports and development cooperation. Simultaneously, we must identify opportunities and develop clear plans and programmes to capitalise on those opportunities.
Capital formation currently stands at approximately Rs 1,400 billion. If we aim to achieve economic growth comparable to Cambodia, Ethiopia and Rwanda, we must double capital formation. This requires increased investment from both the government and private sector. For every Re 1 the government spends, there is a multiplier effect on the private sector, which can invest Rs 5 in return. This demonstrates the government’s investment has a catalytic impact on the economy. For example, cement manufacturers have invested Rs 18 billion in response to government investment of one billion rupees. I have a similar experience of investing in infrastructure as a private sector investor, encouraged by the government’s facilitation and support.
To support startups, FNCCI has taken a proactive role in establishing the Nepal Development Company and plans to diversify investments in hydroelectric projects and make brownfield investments in the future. Therefore, the government should encourage and facilitate the private sector, recognising its role as the engine of economic growth. The government should steer the private sector with favourable policies, simplified processes and procedures, hassle-free administrative services, and a conducive investment climate.
Some recently presented Bills in parliament have raised concerns. The Commission for the Investigation of Abuse of Authority (CIAA) Bill, endorsed by the National Assembly, contains some inconsistent and irrelevant provisions. Fundamentally, this law is intended for the public sector, targeting those who hold authority and abuse it. It is not applicable to the private sector. There are dozens of regulators to oversee and regulate the private sector. The Prevention of Corruption Act (2002) and the Anti-Corruption (Abolition) Act 2002 also have similar provisions.
Additionally, there are discussions to incorporate Non-Resident Nepalis (NRNs) under the new Bill. I would like to reiterate that a lack of trust with the private sector will not create an enabling environment. If the private sector is humiliated and discouraged, this could lead the country towards failure.
The Bank and Financial Institution Act is another example where a provision is proposed to prevent individuals with more than a 1% stake in any bank or financial institution from availing credit. Such provisions hinder the expansion of the private sector. Foreign Direct Investment is merely 0.2% of the Gross Domestic Product (GDP), and domestic investors are barred from investing due to such provisions. Nepal’s banking sector is well-regulated and the regulator can issue various provisions to prevent the misuse of loans. However, we should not resort to extreme measures of prohibition and control.
Furthermore, the School Education Bill has discouraged private sector investment in education, instead of focusing on enhancing the quality of public schools. I urge the government to improve the quality of education in public schools and avoid portraying the private sector as solely profit-driven. The country has adopted liberal economic policies with principles of social justice. The private sector invests capital, technology, and skills, generating profits and paying taxes to the government. Companies cannot survive without profits. The government invests in infrastructure and the upliftment of deprived, excluded and disadvantaged communities using the taxes paid by the private sector, which can be considered social justice. Therefore, let us enable the private sector to operate by providing an enabling environment. The economy will thrive only if the private sector is allowed to work in a hassle-free environment.
