December 5: Uncertainty seen in the country’s economy has made majority of businessmen, entrepreneurs and industrialists to stay away from making new investment in Nepal.

A study carried out by the Confederation of Nepalese Industries (CNI) shows that as much as 69.44 per cent entrepreneurs are reluctant to make further investment in agriculture, cement, medicine, footwear, fast moving consumer goods (FMCG), and other productive sector. The study further discloses that not a single entrepreneur is ready to add further investment in footwear, drug industry, and automobiles. As per the study, both the demand and transaction amount have dwindled in the market, discouraging entrepreneurs to inject new investment.

According to the CNI, a total of 108 industrialists and businessmen from eighteen sectors and their sub-sectors were involved in the recently-conducted survey. The survey found that market demand and letter of credit (LC) had slumped and the tendency to back track from injecting new investment had risen sharply.

At a time when the government is urging the investors and entrepreneurs to increase investment in projects and industries, entrepreneurs and industrialists seem to have abandoned their new plan for investment.  According to the CNI survey, the average total demand of all sectors has shrunk by 28.28 per cent. Likewise, the average drop in transaction amount of all sector stands at 24.94 per cent.

Among the participants involved in the survey, 69.44 per cent responded that they had ditched the idea of injecting new investment. Investors fear to invest in automobile, drug industry and footwear the most. As per the CNI survey, literally no investors are willing to add investment in the existing projects or invest in new projects in these sectors. Demand in these sectors has slumped the most.

The study shows that demand in automobile industry dropped by 78.1 per cent. Similarly, demand of footwear and medicine declined by 45.3 and 18.8 per cent respectively. Unsurprisingly, transactions dwindled in the same ratio in these sectors.

Industrialists and entrepreneurs are also hesitating to make fresh investment in agriculture, cement, construction companies, and information technology sector.

Demand for construction materials such as cement, rods, steels has diminished due to various reasons including rainfalls, festivals and November 20 polls in the first few months of the current fiscal year.

As per the CNI, transaction in automobile sector has dropped by 71 per cent while transaction in footwear has fallen by 51 per cent. Likewise, transactions of engineering/construction and cement industries have contracted by 43.7 and 39 per cent respectively.

The ban imposed on the import of luxury goods to increase foreign currency reserves has reduced letter of credit (LC) as well, according to the survey. The LC amount has dropped by 22.3 per cent. The LC in automobile industry has declined the most by 89 per cent. The government has banned the import of vans, jeeps and cars barring ambulances and hearse vehicles for the past eight months.