KATHMANDU: While Nepal is making efforts to attract foreign investment, the corresponding returns have not materialized. Despite receiving significant foreign investment commitments, actual investment inflows have lagged.

A recent report, "Foreign Investment in Nepal-2024," published by the Department of Industry, highlights the disparity between foreign investment commitments and actual investments. Over the past 13 years, Nepal has received foreign investment commitments totaling Rs 425.72 billion. However, only Rs  148.87 billion has been realized, which is just one-third of the committed amount.

The report details the gap between commitments and actual investments from FY 2068/69 to FY 2080/81. Stakeholders attribute the shortfall to an unfavorable investment environment in Nepal, citing political instability, policy inconsistency, bureaucratic red tape, and corruption as primary obstacles.

An investor involved in supporting foreign investment in Nepal expressed frustration over bureaucratic delays. He noted that despite the implementation of a one-point service by the Investment Board and the Department of Industry, investors still need to engage with multiple government agencies. "All the documents must be resubmitted again and again, making the process cumbersome," he said, requesting anonymity.

The government introduced a one-door in 2019. However, the representative offices of all relevant government agencies were not established in time at the Department of Industry’s service center, forcing investors to approach various agencies individually. The third investment summit held in late April this year introduced an automated investment system. While the country received investment commitments through this new system, actual investments have not materialized.

Investors also face complex procedures when seeking additional capital for expanding existing projects. "After initial capital approval, raising more capital requires another application to the Investment Board, followed by another round of study and board meeting for approval," the investor explained. "The board meeting, chaired by the prime minister, can be delayed, causing significant delays."

Political instability exacerbates the unpredictability of government policies, deterring foreign investors. In the past 18 months, Nepal has seen three different governments under Prime Minister Pushpa Kamal Dahal, supported by CPN (UML) and the Nepali Congress. The recent collapse of Dahal's government, replaced by UML president KP Sharma Oli's administration, has only added to the instability. Such political flux makes foreign investors hesitant.

"Investors seek assurance that policies and laws will remain stable after their investments," said former secretary Krishna Gyawali. "They also assess the state of governance in the country." Nepal, ranked 108th out of 180 countries in terms of corruption, scores just 35 points in the Transparency International's Corruption Perceptions Index, where a score below 50 indicates high levels of corruption.

"Investors are concerned about the efficiency, transparency, and integrity of government offices," Gyawali said. The difficulty in securing investment commitments at the third investment summit underscores the challenges in attracting foreign investment. The Investment Board of Nepal extended the deadline twice for investors to submit letters of intent for 12 government-presented projects, indicating lukewarm interest.

Former Secretary Gyawali noted that while government agencies were active during the investment summit, they failed to follow up regularly with investors, further hindering the investment process.