July 3: The government has held two major investment conferences since revising the existing policy rules to fund foreign direct investment (FDI) in the country. Investors seem to be focused on the minimum limit (threshold) of foreign investment set by the government.

The government has been revising this threshold time and again. Due to this, the data of the department shows that foreign investors are more focused on getting investment approved in projects with minimum limit.

The government last reduced the foreign investment threshold to Rs 20 million in mid-September to mid-October last 2022. Prior to this, the minimum threshold was fixed at Rs 50 million in mid-May to mid-June 2019. Before that, the minimum limit for foreign investment was Rs 5 million.

Looking at the statistics of the Department of Industry, it seems that foreign investors are focusing on proposing projects and getting them approved within this limit. They are more interested in investing in projects of Rs 20 million rather than big or medium-sized projects. The data for 11 months of the current fiscal year (FY) 2022/23 also validates this fact.

During this period, 274 project proposals for foreign investment have been approved. Majority of those 247 projects are small-scale industries. According to the data released by the department a few days ago, foreign investment has been approved for 5 big and 22 medium-sized projects.

Foreign investors have expressed their commitment to invest a total of Rs 34.58 billion in Nepal as of the 11th month of the current fiscal year. Half of that commitment has come to small-scale industries. The department said that Rs 17.32 billion investment commitments have been received in 247 small-scale projects. 

Shankar Singh Dhami, director of the foreign investment and technology transfer branch of the department, said that investors have poured investment into small-scale industries and projects after the investment cap was reduced.

He said that the proposals and commitments coming on a small scale are in the fields of services, hotels, restaurants, cargo handling, and construction. Projects with a fixed capital of Rs 20 million to Rs 150 million are approved and registered with the Department of Industries.

Officials of the department share that investment commitment is positive, but they doubt whether the projects are coming only for visa approval, or to genuinely support the economy in Nepal.

Former Industry Secretary Krishna Gyawali opined that investors may find it difficult to invest in large and medium projects because it requires more investment and preparation.

"On the other hand, investors may also fear that there will be problems in investment due to policy changes," he said.

Since small investments do not contribute much to the economy and are more troublesome, there have been repeated attempts to increase the minimum investment threshold.