Nepali Times Asian Paints
My Two Paisa
Dirty business


I have a business proposition for you. I need you to invest your money, but without guarantee of returns. I cannot promise you security of your investment or save you from labour problems. Be ready with a fat wallet to fill pockets of greedy government officials to even move your business file from one table to another. Will you be interested?

Any sane businessman will say: "Go away." However, these are the parameters under which foreign investors work in Nepal. Let's face it. If you had money you would go elsewhere. There isn't much attracting investors to Nepal.

The CEO of a multinational investor admitted that the biggest time consuming part of his job here is to extend his visa every four months. You have to pay Rs 5,000- 500,000 to expedite the process, or you will be left out in the cold for months. And this is someone who has invested US $100 million in Nepal.

The case of Cairn Energy is another case in point. If Cairn finds oil and gas in the Tarai, the whole country will benefit but if unsuccessful it will lose the millions it has spent so far. The Scottish company is taking a calculated risk, but we have made it inordinately riskier with our political fluidity, corruption and tedious bureaucracy.

According to the United Nation's body on trade, investment and development issues, UNCTAD's latest World Investment Report, Nepal is in the bottom of the heap with Afghanistan, North Korea and Bhutan when it comes to attracting foreign direct investment. As per Department of Industry statistics, FDI commitment declined by 48.35 per cent in 2010-11. FDI increased by 30 per cent during the same period in Bangladesh.

The list of investor woes is long: power cuts, shutdowns, militant labour, extortion, local opposition, tedious paperwork, corruption, low productivity and skill of the workforce.

"It is embarrassing," the Nepali in-charge at the Kathmandu office of a multinational company confessed to us this week. "As a Nepali, it is embarrassing to explain to our head office what those in power demand to get work done here. These are foreign companies, they don't pay without a receipt."

Most investors we talked to said the last four months of the present government have been the worst they have ever seen in terms of corruption and extortion. It is no surprise that the maximum FDI we have is from India. Other than geographical and cultural proximity, the reason may be that they do not have to worry about extending visas.

This is an open market and if Nepal wants investors, foreign or local, it will have to clean up its act. We have a terrible reputation, and the new Nepal Investment Board needs to do a lot of catching up in the investment year 2012-13.
The legal and practical problems faced by investors have to be resolved so that they have hassle-free experiences. We aren't offering the best deals, so there has to be incentive to invest. The bureaucracy is slow, and the political will is absent.

But Nepal does have some unique selling points. We are strategically placed with access to two of the biggest markets in China, and India. Energy, among other sectors, offers a lucrative business opportunity. Goods produced here are granted preference by the European Union.

But these advantages are far outweighed by the chronic political instability and the lawlessness of the land.

Read also:
Cairn still in wait-and-see mode, MARK WILLIAMSON in EDINBURGH
Oil company says it won't drill in Nepal until the investment climate improves

More My Two Paisa

1. Bikas Pradhan

What is the crime in killing criminals that have looted and plundered and killed innocent people . None. Its the Maoist leaders like Dahal and Bhattarai and other goons in the Maoist Party that started paying back in blood what they owe to Nepal and Nepalis.  India should take the blame as well for using the Maoist as pawns. Its time to teach the Indians in Lainchaur and Delhi a lesson that they will not foregt. Its disgusting that Nepali politicians have to lick the boots of their Brown Indian Sahibs. Is there not one Nepali in Nepal who can take charge. Are all Nepalis so helpless and in the clutches of the Indians. Its time we Nepalis started to take pride in being a Nepali. Its time for another revolution, led only by the Nepalis, for the benefit of Nepalis. Its time for a Nepali Spring.     

2. Bhupendra
Paavan, You have touched some very serious points. It is time for us to do a comprehensive study of business environment vis-a-vis investment friendly nations like Singapore and Sri Lanka, and push government towards it.

Security and rule of law is something very important and I am sure PM Bhattarai and his aides are working closely to make it happen. Lets not be too pessimistic about Nepal.

(11 JAN 2013 - 17 JAN 2013)