Surge in FDI Approval via Automatic Route

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Surge in FDI Approval via Automatic Route

Since the introduction of the automatic route for industry registration just one and a half months ago, its utilization has significantly increased. As of May, 90 projects totaling Rs 11.18 billion have been approved through this automatic route. Nepal has secured foreign investment commitments amounting to Rs 44.41 billion across 359 projects in the first 11 months of the fiscal year. Notably, 25% of these investments, totaling Rs 8.28 billion across 68 projects, were approved through the automatic system in the month of Jestha (mid-April and mid-May), highlighting its attractiveness to investors. Applicants using this route receive immediate foreign investment approval letters via email upon submission, with concurrent company registration. Under this system, Nepal allows registration of foreign investment companies up to Rs 500 million, with no minimum investment requirement for IT-based industries. The Department of Industry has implemented an electronic system for automatic approval of foreign investments, where investors log in, provide necessary details, and receive automatic approval if all information is correct. 

In addition to the automatic route, investments are also processed through the traditional system involving meetings and decisions. Shankar Singh Dhami, director of the Foreign Investment and Technology Transfer branch at the Department of Industry, attributes the popularity of the automatic route to its streamlined approval process. The majority of investment proposals through this route are focused on tourism (49%), followed by the service sector (31%), information technology (16%), and productive and agricultural industries. Comparing the fiscal years 2023/24 and 2022/23, Nepal has seen a 28.39% increase in foreign investment commitments. In the current fiscal year's first 11 months, commitments reached Rs 44.41 billion across 359 projects, up from Rs 34.58 billion across 274 projects in the same period last year. Dhami explains that this increase is due to legislative amendments facilitating foreign investment, the implementation of the automatic route, and positive outcomes from investment summits. For instance, between mid-April and mid-May alone, commitments for 90 projects amounted to Rs 11.18 billion, a significant rise from Rs 4.97 billion for 57 projects in the corresponding period the previous year.

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