What is your take on the scale of the intent to invest made at the recently concluded Investment Summit 2017?
The undertaking was aimed at informing potential foreign investors about the recent reforms at the policy level and conveying the message that Nepal is a suitable destination for doing business. On this, the participants signed letters of intent (LoIs) to invest in potential sectors. 

Besides the LoIs worth USD 13.52 billion signed during the summit, we have received additional LoIs across various sectors totaling USD 22 billion till date.  It is a clear indication that investors from across the globe are willing to invest here if we are able to create an environment conducive to doing business. 

However, official data shows that only 20-25 percent of the total FDI commitments made in a year enter the country annually.  Regarding this, what percentage of the intents do you think will come as actual investments?
 The investors have only shown interest in investing and are yet to give any kind of commitment. It is very important for us to turn them into actual commitments and investments. It is very difficult to exactly tell what percentage of the amount mentioned in the LoIs will enter the country as FDIs. There are investors who are willing to invest in mega projects like the railway, hydropower, metro system, and much more. 

This will depend on time. Some projects might take less time while others might even take upto 14-15 years to finish. That is why it will take time for the country to receive actual investments even when the projects are awarded.  In terms of commitment, I think we can convert at least 20 percent of the LoIs into commitments in the next 2-3 years. 

Both the government and the private sector are seen as being successful in grabbing the attention of investors by organising two major summits within a period of two weeks. Do these initiatives indicate that the environment for investment is actually improving in Nepal?
To be honest, it depends on us. We have openly announced that we are now an investment friendly country catching the attention of many foreign investors. The ball is in our court right now. So it is upto us to know how to grab this opportunity by quickly clearing the existing bottlenecks improving our policies. We need to facilitate the investors at the optimum level. Any negative remarks about us will quickly spread like wildfire across 10 investors if an investor facesany hardship while trying to establish a business here. We should not be miserly while providing facilities and services to the investors. We should also try to resolve their grievances effectively as well. Equally important is our ability to track potential investors who are willing to invest.

The primary thing is we need to change our mindset towards development. Although we are working very hard to address the existing bottlenecks, we have not been able achieve the intended results. We have not been able to implement and adopt a set of plans and policies to facilitate investors. 

Follow-up committees have been formed immediately after the summit aiming to realize the intents. How are the committees working?
The High-level Committee on Investment is under the coordination of the industry minister which comprises of various ministers, secretaries, Governor of NRB, member of National Planning Commission, CEO of IBN and presidents of all three private sector organisations (FNCCI, CNI and NCC). Similarly, the Policy Coordination Sub-committee for Foreign Investment led by the NPC, Investment Promotion Sub-committee under the coordination of energy secretary and Foreign Investment Projects Sub-committee coordinated by the IBN CEO have been formed. The committee and sub committees are in the process to formulate work procedures and set certain responsibilities to start the work. The sub committees will analyse and sort the LoIs as per the work procedures. 

It is likely that there might be some investors who might not invest later despite showing interest in certain projects. Regardless of this, the projects should be made available to every prospective investor. Investment will come according to the volume of the projects. So it is up to us to make the projects attractive to the foreign investors.  We have also come up with an additional 123 project concepts and are consulting with concerned ministries regarding these ideas. We will also discuss the projects in the committees. We have sensed that the number of projects must be increased given the increase in LoIs we have been receiving after the summit. IBN has also been preparing documents for three to four big projects for this fiscal year. 

How interested do you think are domestic investors? 
Nepali investors are themselves taking initiatives to bring foreign investment into the country. During the summit, we conducted meetings with the industrialists which were very fruitful. We are receiving LoIs via emails everyday and we hope to receive more. We are also looking to connect the local investors with their foreign peers according to their interests.  

It is important to engage domestic investors in bringing foreign investments. The level of trust of foreign investors will increase when local businessmen are with us. Likewise, projects will move along smoothly if investors both domestic and foreign are interested in the same projects. 

Concerned ministries are working on policy reforms in order to attract FDI in large scale. What is the role of IBN in this regard?
Compared to the areas of work of the Ministry of Industry and the Industrial Promotion Board, the main role of IBN is to facilitate mega-projects in the country. For instance, we facilitate projects worth over Rs 10 billion, hydropower projects over 500 MW capacity and hotels with more than 300 beds etc. We have a clear mechanism in terms of coordination and corporation. We have assigned certain officials at concerned ministries. The officials regularly coordinate with the ministries including the Ministry of Forest, Ministry of Environment and Ministry of Land Reform to ease the problems seen during project development. We arrange regular meetings to assist the government in its policy reform undertakings and help resolve project related issues. Sometimes we also hold meetings with the Chief Secretary. 

What areas do you think are comparatively easier for investment?
Looking at our current situation, unsolicited projects in which there is no need for the government to announce a tender process are easier to invest in. Such types of projects will help fast track investment. Investing and developing projects that come from the private sector are easier than those through the government. For example, investing in the hotel industry is easier as investors can directly cooperate with the private sector. Such projects will be processed immediately and investors don’t have to face much hassle.  

However, development processes are long in connectivity and large hydropower projects. Such projects have to go through lengthy processes as per the existing laws, rules and regulations that are time consuming. 

Six years have passed since the formation of IBN. But there are complaints that the board has not been able to work as expected. What are your remarks on this?
I have a mixed response towards this question. Whether six years for an institution is long or short depends upon the individuals. Whatever projects we have undertaken over the past six years are the projects awarded to developers which the different ministries have progressed to a certain stage. We have not handled the projects from the start.  In this respect, our institutional and structural arrangements, processes and work standards are yet to be developed fully.  We are still in the ‘draft phase’.  We don’t have the standard processes and templates to move ahead with new projects.  For instance, we finalised the PDA of a hydropower project in 2014 which was awarded to a developer by the Energy Department in 2008. Another example is the Kathmandu Valley Integrated Solid Waste Management Project which has recently moved forward. The Ministry of Federal Affairs and Local Development awarded the project in 2010. However, projects in the cement sector came to us directly for approval. 

Out of the investment commitments amounting to Rs 600 billion pledged at the IBN, only one percent has entered Nepal.  99 percent of the pledged amount is yet to come. It takes proper policies, systems and arrangements for the additional investment to come. We need the institutional development of IBN for this. Institutional development means building an organisation brick-by-brick. To move along institutionally is more important than achieving a particular target.  

What factors have hindered IBN’s institutional development?
It is not that there is no progress at IBN. A lot of things have been done in the recent years. The concept of a project bank has come.  We have also drafted the Standard Operating Procedure (SOP) to determine the work procedures for different projects according to their type and nature. We have in the past, for instance, worked on a proposal for a project to generate wind power. We commissioned a feasibility study of the proposed project spending money and resources on it. Later we concluded that the project is not feasible. We found out that the individual who filed the proposal was not the kind of investor who could finance the project. A lot of similar things are going on frequently even now. Our approach will be effective if we are able to screen such proposals in time. We have drafted the SOP keeping this in mind. The SOP will incorporate all procedures for proper screening of the proposals. It will enable us to determine if the projects are worthy or not saving valuable time and resources.  

The timeframe should not be the constraining factor while developing large projects.  There was an instance in Brazil where a mega-project took eight years to finish instead of the expected three years.  Nevertheless, the return from the project was significant adding tremendous value to the Brazilian economy.  Mega-projects take time to develop and the costs are also likely to get over-budgeted.   However, these create a great impact on the economy when compared to the small projects. Due to this, one big project requires a lot of resources.  For example, if we consider projects such as the 900MW Arun III, one project would fulfill the energy demand of the whole Nepal.  

How is the project bank working? 
We have kept eight projects in the list of approved projects. The feasibility studies of the projects have already been done. The projects will progress with the start of the tender process.  Most of the approved ones are of infrastructure sector. Projects including the Kathmandu Metro Rail, Second International Airport, Kathmandu-Kulekhani-Hetauda Tunnel Highway, 650MW Tamakoshi III Hydropower Project, East-West Railway Link, Kathmandu-Pokhara Railway and Chemical Fertilizer Plant are in the list.  These are mega-projects that will be overseen by us though the concerned ministries have been working on the projects. All these projects come under the project bank. 

Altogether, there are 127 projects listed in the bank. Eight are in the approved list and 119 in the idea phase. The projects in the idea phase have been partially studied. The ideas will be developed as projects through studies and research in the future.  We have kept them there because we want the concerned ministries to see if the ideas can work out or not. There were no ideas before. However, many areas are being explored at present. So, it is not just a project bank. It is also an ideas bank.  

IBN has been handling large HEPs such as Upper Tamakoshi, Upper Karnali, Upper Marsyangdi and West Seti. How are these projects progressing?
The PDAs of Upper Karnali and Arun III have already concluded.  Both projects have to finalise their financial closures by September end.  The Indian government has already approved the budget and programme for the project. Construction work on Arun III is expected to start soon as the project’s developer is the Indian government-owned entity. 

Meanwhile, the Upper Karnali Project has been searching for suitable partners and has concluded an agreement on electricity consumption. We are optimistic about the future of the two projects given the progress made at present.  

In the case of the West Seti Hydropower Project, the joint venture agreement (JVA) between Nepal Electricity Authority (NEA) and China Three Gorges International (CTGI) has been done. The JVA which has been approved by the NEA board needs approval from the board of CTGI to come into effect. We will move ahead with the PDA preparations for the project after this. We hope that the PDA will be signed by the next fiscal year if all things go smoothly. We have been readying alternative arrangements to move the project forward in case the PDA is not finalised.  

Similarly, IBN has forwarded the modality of Tamakoshi III to the Ministry of Energy for feedback. If the government supports it, the project can be moved forward soon. Meanwhile, there are some issues to be resolved such as the negotiation fee raised by the Upper Marsyangdi’s developer GMR before the project undergoes the PDA. We also want this project’s PDA to conclude by the next fiscal year.

Questions have been raised about GMR’s ability to develop large infrastructure projects given the company’s financial health. Won’t this hamper projects? 
GMR is an Indian multi-national infrastructure company working in several countries.  It has developed various projects in India and elsewhere in areas such as energy, transportation, airports and urban infrastructures. I don’t think GMR is weak financially. However, the institutions may have ups and downs in their financial condition.  

I think the company will conclude the financial closure of Upper Karnali in the stipulated time. Normally, the portion of equity in the total financing of a project is not much. GMR has been spending a sufficient amount of money on studies and other works for the Upper Karnali project. Regarding the appointment of a strategic partner, there is already an understanding that IFC will be the 10 percent equity partner in the 900MW project. 

It’s been around two years since IBN approved four large foreign investment proposals in the cement sector. Nonetheless, only one of the projects is seen moving ahead notably at present. How are the other progressing?
The progress of Hongshi Shivam Cement project is encouraging. Construction work at the cement production plant and the mine site of the project led by the Hong Kong-based Hongshi Cement has sped up over the past few months. Another proposed project, which will be constructed by the Nigerian group Dangote, has not found limestone quarries as per its requirements. The Department of Mines and Geology has already opened a tender process to award the mining contract. Dangote will take part in the bidding process for the mining rights along with another Chinese company, Huaxin.  

Meanwhile, the case of the project proposed by Reliance Cement of India is different. The company’s ownership has changed and it is currently not in our contact. It’s being said that Reliance is thinking of not investing here. 

IBN is also on the high-level government committee looking at the feasibility studies for a metro rail in the Kathmandu Valley. How is the committee working?
The committee has been actively conducting meetings and studying proposals and previous reports about both metro and mono rail systems. We are hopeful that the report will come soon enabling us to start at least the bidding process of some lines. The committee has been looking at the various ways to finance it including the possibility of using viability gap funding (VGF). 

How is the PDA process of the Kathmandu Valley Solid Waste Management Project progressing? 
We are at the final stages of negotiations. The negotiations are going on quite aggressively. Our target is to seal the PDA deal by the end of the current fiscal year. Implementation of the project which has been delayed for many years seems much more possible after the waiver of the 0.2 percent upfront fee for the companies that are in the PDA negotiations with IBN for the project.