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FOREIGN DIRECT INVESTMENT (FDI): CHALLENGES AND PROSPECTS.

I participated in the interactive program held in Nepal Academy on the impacts of FDI: Its challenges and prospects. Dr Gobinda Nepal, an economist presented the paper on which Dr Babu Ram Bhattarai, former PM of Nepal, Dr Khanal, Dr Maskey and Dr Hari Rokka commented and presented their views. It was very informative, analytical and timely interaction event keeping in view of Nepal government’s preparation for investment board’s summit meeting in the near future to attract and invite foreign investment. Dr Babu Ram’s comments and view points were noteworthy as he pointed out the constraints imposed by the geopolitics, the political economy and the policy and bureaucratic hurdles not conducive for FDI. Political instability, government changes and the changes in government’s priorities further complicate the investment environment in the country. I also commented and presented my views on the paper and commentators’ views. Some major take home points from this interaction were following:


1. A national consensus among major political parties of Nepal on setting priority areas to attract FDI. Identify and prioritize the potential areas.


2. Formulation of investment friendly policy and laws and their effective implementation


3. Political pragmatism especially taking into account of Nepal’s geopolitical reality and big market economy on both sides of Nepal (India and China).


4. Focus on Water, Energy and Food Security and the comparative advantage of Nepal in Agriculture and herbal medicinal and pharmaceutical industries


5. Linking agriculture products to agro-based industries and market assurance.


6. Establishment of Land Bank to bring all fallow lands and public lands that are suitable for agriculture and motivating youths through intensive training in agriculture farming, processing and engaging them in agriculture production process through cooperative with heavy government subsidies.


7. Encourage domestic production especially in import substitution and export oriented production in the items of comparative advantages.


8. Focus on developing and connecting Nepali products that have high export potentials such as tea, coffee, cardamom and herbal medicines to value chain nexus of India, China and other emerging markets in Asia.


9. Increase tariffs on highly subsidized agricultural products from India because Nepal’s Agri-products cannot compete in the market with Indian subsidized products because Nepal’s farmers don’t get subsidies. Nepal’s farmers can’t sale their produce in the market and that is the biggest bottleneck discouraging them in agriculture farming.











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