Opening and Concluding Remarks delivered as a Chair by Hon. Pradeep Kumar Gyawali, Minister for Foreign Affairs, at the first plenary session: Investment Opportunities in Nepal in “Nepal Investment Summit 2019”, Kathmandu 29 March 2019
Opening remarks by Chair
Honourable Chief Ministers
Excellencies the Ambassadors
I am pretty delighted to welcome you all in the first plenary session of Nepal Investment Summit 2019. At the outset, let me express my sincere appreciation for the opportunity to chair the session. I am highly encouraged by your overwhelming participation in the Summit. I wish your pleasant stay and successful business mission in Nepal.
It is certainly not my intention to reiterate what has been delivered about the subject in the inaugural session a short while ago by the Rt. Honorable Prime Minister KP Sharma Oli and also by the Honorable Finance Minister Dr Yuba Raj Khatiwada. However, I wish to highlight some of the important points that will set the context for our deliberations.
It is often said that this is an era of Asian century. With unprecedented economic dynamism, global development landscape is being changed and locus of global geo-economics is being shifted towards Asia. Our neighbours–China and India have already emerged as global economic powerhouse. With this development in the neighbourhood and Nepal’s strategic location between them have unleashed immense investment and business opportunities in Nepal.
In this context, the recent political developments in Nepal have also presented encouraging environment for that matter. Following the promulgation of new constitution and the conclusion of local, provincial and federal elections, the long-awaited political stability has been achieved in the country with the strong federal government of two-third majority. Political stability, in fact, brings in policy continuity and consistency. Favourable political milieu equally entails a conducive atmosphere for undertaking much-needed socio-economic transformation in the country. In line with this vision, the present Government has set its utmost priority to realize the motto of ‘Prosperous Nepal, Happy Nepali’. It essentially means leaving not a single Nepali behind and making the entire country rich. In that sense, political stability and economic prosperity complement each other in a virtuous cycle.
Our vision of socio-economic transformation embraces the targets to graduate from LDC status at an early date; to become Middle Income Country and achieve SDGs by 2030. These targets are being taken up by the upcoming five-year plan. The plan also aims to attain double-digit growth to meet these targets. Mobilization of domestic finance alone will not be adequate to achieve these ambitious development goals. Foreign direct investment is, therefore, must. is essential to meet our requirements.
Over the last three decades or so, the country has been pursuing liberal economic policies and competitive market regime. The new constitution has categorically espoused this spirit with the provision of welcoming foreign capital and technological investment in priority sectors. Almost all sectors have been open for foreign investment and the sensitive list for investment is kept very short. Hydropower, agriculture, manufacturing, tourism, infrastructure, ICTs, mines and minerals are some of the promising sectors for investment in Nepal. The labour cost in Nepal is competitive and low. Qualified and skilled workforce is available at reasonable cost.
With a view to creating an enabling environment for domestic and foreign investors in line with the constitutional spirit, the present Government has undertaken a number of policy, legal, institutional and procedural reforms.
On the policy and legal front, many new laws have been made consistent with the new constitution. Recently, the two key legislations, namely Foreign Investment and Technology Transfer Act (FITTA) and Public-Private Partnership and Investment Board Act (PPIBA) have been enacted. The FITTA ensures national treatment for any foreign investment and repatriation of return has been guaranteed. The introduction of automatic route system will facilitate foreign investment-related procedures in a simple and predictable manner. The PPIBA provides one stop service for foreign investment exceeding 6 billion rupees or hydro project over 200 MW capacity.
Governance and rule of law plays an important role in creating environment for making investment and doing business in the country. Needless to say, good governance is a sin qua non for the expansion of economic activities as well as for the attainment of economic prosperity. We have accelerated our crusade against corruption with absolute zero-tolerance policy on it. The introduction of social security system for workers will promote congenial industrial relations and thereby contribute to conducive investment climate.
Nepal offers an attractive tax and export incentive structure to investors. Procedures for land acquisition, company registration, environmental assessment and infrastructure development have been simplified. Online registration and payment system has been put in place.
Connectivity remains critical in making investment decisions and also for smooth business operations. Reliable infrastructure network reduces the cost of doing business. It is the policy of Government to build critical infrastructure. Electricity supply for industries has been made almost 24/7. Major power projects are on the verge of completion. We will soon become power surplus country. Road networks within and beyond border have witnessed much progress. Construction of Kathmandu-Terai Fast Track is moving ahead. One SEZ is in operation and some others are in the pipeline. Digital connectivity also remains under our priority and is under expansion.
Sound management of macroeconomic fundamentals have made investment in Nepal risk-free. Conclusion of BIPPA with friendly countries ensures protection of investment and that of avoidance of double taxation provides investment incentives. The upcoming policy and legal reform in the intellectual property sector will offer more benefits under various multilateral instruments.
We understand that reform is a continuous process. We are committed to it. We will do it with the private sector on board. We will undertake necessary measures to sustain an investment and business-friendly atmosphere in the country.
As I said earlier, Nepal is located between the world’s two largest markets—China and India. Nepal enjoys preferential market access to both with duty-free export facilities for most of its products. Nepal as an LDC enjoys similar preferential arrangements with many developed and developing countries including EU and USA. With rising middle-class population, even the domestic market is expanding. For prospective investors in Nepal, market will not be the problem.
Connectivity tops the agenda in our engagements with neighbours. Port facilities in India have improved. New transit route through inland waterway is being developed. Transit procedures are being simplified through the use of modern technology. Transport Transit arrangement with China will provide us another transit corridor for international trade.
The prospect of regional electricity market is growing. Policy and regulatory framework for power trade is being developed. Cross-border transmission lines are being constructed. The conclusion of MoU on BIMSTEC Grid Interconnection has enlarged the prospect of regional power trade. The MoU on Power Trade between Nepal and Bangladesh has further expanded the power market.
I am glad to share with you that Nepal is resource-rich country with abundant water resources, population dividend, biodiversity, and wonderful landscapes together with trainable workforce and hospitable people. It is a virgin land for lucrative investment. Business profile of multinationals operating in Nepal reveals that none of them have gone bankrupt. They have made handsome return and have contributed huge amount to our treasury.
In a nutshell, investment in Nepal is a profitable venture. Political climate is favorable. Policy, legal and institutional framework is enabling and encouraging. Regional ambience is equally promising. In this context, we call upon and welcome investors to think about investing in industrial venture and business operations in Nepal. This will turn out to a win-win situation for both investors and Nepal.
Globally, foreign direct investment accounted for two fifths of total foreign financial flows to LDCs in 2018. This is a huge portion of money that matters to our economic development. Therefore, I assure you that our commitments to attract and facilitate foreign direct investment in the best possible business climate will stay the course for decades to come. That is, we will adopt more and more foreign investment friendly policies in the days ahead.
Perhaps I underline that regional business climate is improving both under bilateral and regional frameworks. Thus investing in this country also opens the way for integrating into regional value chains thereby gaining efficiency and sustainable growth of businesses.
As a matter of fact, the scale of foreign investments to date is scanty. But the growth in FDI is impressive as it stands at 26 percent per annum in the last five years. I think this alone is a pointer that business climate in Nepal is improving steadily.
In my capacity as the Foreign Minister of this country, I wish to share you that concluding bilateral investment promotion and protection agreements, double taxation avoidance agreements and participation in regional investment agreements are our top priority. We have already concluded half a dozen BIPPAs, nearly a dozen DTAAs and negotiating regional investment agreements in BIMSTEC and SAARC. I am confident that this will further ameliorate business environment in the days ahead.
Furthermore, I am delighted to inform you that large-scale connectivity projects with neighboring countries India and China including BRI projects are already underway and accordingly we have focused on massive infrastructure developments within the country as well. Thus I believe that investments in these projects will be profitable and completion of these projects further open up new business opportunities and help existing businesses to flourish further.
Currently, we are working on Country-Specific FDI Facilitation Strategies in order to ensure matching potential foreign investors of a particular country and priority investment sectors in Nepal. We are also planning to catalyze building close relationships between research and training institutions in investment sectors. I think this will facilitate win-win investment partnership between host and source countries.
Likewise, we are well-poised to mobilize all our missions across the globe to facilitate foreign investment through essential services to investors: they include quick responding to inquiry and information seekers, solving problems, facilitation of first-time country visits for investment purposes and after-care services throughout investment cycle.
At this juncture, it is pertinent to realize the indispensable role of NRNs that have been a succor in almost every sphere of national life since some decades. I fondly recall the NRN Global Knowledge Conference held last year, which provided us with inputs on how to best utilize their knowledge, skills, capital and experiences. I appeal NRNs to come forward more vehemently.
It is true that foreign investors sometimes roll back or retract their decisions due to some uncertain local factors. But, we have the greatest resources to our rescue. Nepali Disapora abroad, which is around 5 million, has their steering committee in about 80 countries. I would like to sincerely recommend all foreign investors not to flinch back but find an NRN partner who aids you to cut across any hurdle at local level. So, I appeal both NRNs and foreign investors to come forward in partnership or separately whichever way suits you best.
I hope this summit helps you in tapping the best business opportunities in Nepal and it will be a huge success for us and for you all equally. Do believe that we highly value your insightful and pragmatic comments and suggestions to chart our future course.
Finally, I want to commit before you that we will also hold bilateral investment meetings through our embassies as and when necessary. I am confident that we will have continuous engagements in the coming days.
Once again, I heartily thank you all for your active participation, keen attention, and invaluable contributions to this plenary session.