Nepal’s Economic Transformation – Seizing Investment Opportunities

In the light of evolving economic and industry conditions , Frost & Sullivan’s Emerging Market Innovation team hosted an online briefing/webinar titled “Nepal’s Economic Transformation- Seizing Investment Opportunities”.A panel of experts provided commentary on  the country’s changing economic scenario,evolving policy conditions, and industry specific investment opportunities.

The expert panel of presenters for this briefing comprised of:

  • Prerna Mohan – Associate Director, Strategic Planning and Implementation, Emerging Market Innovation, Frost & Sullivan
  • DipendraNath Sharma – Secretary, Ministry of Urban Development
  • Shiba Raj Shrestha – Deputy Governor, Nepal Rastra Bank
  • Anuj Agrawal – Executive Director, Vishal Group; Vice President, Confederation of Nepalese Industries’

One of the key driver’s for Nepal’s growth trajectory is the government’s commitment to invest in large infrastructure projects providing opportunity for private sector to invest in large infrastructure projects including toll roads, hydropower and smart cities. Nepal is a signatory to China’s One Belt One Road project which connects 65 countries linking them through a network of transport infrastructure and industrial parks. Similarly Bangladesh, Bhutan, India and Nepal (BBIN)’s Motor Vehicle Agreement (MVA) will entail investment in integrated border check posts allowing member countries to seamlessly pass country borders through electronically tracked vehicles and permits issued online. This will provide larger market access to the industries.

When we talk about Urban Infrastructure in context of Nepal, our main weakness has been the lack of planning and poor execution of what all we had planned. Kathmandu valley and the small towns around our highway is an example of how inefficient organic growth can be. This is also a crucial lesson on the importance of planned growth. It is very difficult to undo what all has already been done, so the current focus is to ensure that we step into the future in a planned manner. In order to ensure that investments are made in the right projects that add value, the government needs to create a pipeline of bankable projects, which is the main intent of Ministry of Urban Development, initiating the development of an integrated plan. These projects can be taken up at the national level or by local level governments. There are a lot of opportunity for private investment, with one of the studies revealing that for every rupee of investment that the government makes on infrastructure, it attracts an average of Rs. 4 investment from private sector.

Our financial policies are directed towards creating real economic value, promoting sustainable development and contributing to long term growth. Our macroeconomic fundamentals are sound. This is reflected in a low inflation and balance of payments surplus. Legal reforms are underway in the areas of investment and exchange regulations. Amendment in the relevant Acts related to foreign investment and foreign exchange management will pave the ways for foreign investors in Nepal. Further, NRB has been facilitating foreign investors through flexible approaches in foreign exchange regulations. These reforms will be instrumental in promoting investment friendly environment in Nepal.

Policies have to be dynamic in the sense that it needs to accommodate the needs of the rapidly changing market. In terms of sector prioritization, the market would benefit tremendously from the introduction of domain experts. This need not necessarily be very large industries setting up shop in the country but small-medium size companies who are domain experts for instance a company in India which has specialized in a particular sector of agriculture and are a domain expert on that. We need to market ourselves better highlighting the feasibility and potential of our market. Things like our stable currency which is pegged against INR should be leveraged.

In Nepal, large FDI projects in the likes of Unilever, Dabur, Axiata, Standard Charter, SBI all have done really well. Overall, there is immense opportunity present in Nepal given the improved economic and political scenario. Things are looking up in terms of growth prospects at the broader economy level and sector specific level

Quotation

“Bouncing back from the lowest economic growth in the last decade, we believe Nepal is on the verge of economic transformation that will likely entail government and private sector investments in large infrastructure projects and commercial ventures. The recent policy amendments, which are mainly targeted at attracting foreign investments, hint at improved business environment that could potentially lead the country to a high growth phase”, said Prerna Mohan, Associate Director, Strategic Planning and Implementation, Emerging Market Innovation, Frost & Sullivan.

 

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