WHY SMALL-SCALE FOREIGN INVESTORS WARY TO INVEST IN NEPAL

Government policies do not encourage small scale entrepreneurs in Nepal. Photo: test.handicraftnepal.org

Rhetoric like making the country investment-friendly is not enough; the government has to address the concerns of the foreign investors because litigation procedures are too cumbersome in Nepal like many other countries. If the complainant files a suit, the law of the land would then take its laborious course, and both parties involved would probably come to the end of their physical existence long before the case does. Besides, how long a small-scale investor can sustain in an alien land in such a scenario? Hence, it is vital to make faster mechanism to settle industrial disputes by setting up separate fast-track courts.

By G. K. Pakavath

THE decade-long insurgency in Nepal has held back the industrial development a good deal. Besides, the general feeling of people about the official procedure is that it is also a big reason preventing the government from moving on with the times, creating unnecessary roadblocks, which hamper our economic development.

Like other developing economies, Nepal too needs capital inflow from abroad for industrial development. A foreign investor will also have apprehensions while making investment in a landlocked country. As Nepal does not have sea access and railroad facility for cost-effective cargo movement, it is imprudent to expect investments from foreigners on heavy industries except for a few industries like hydropower etc. In the era of globalization, any investor will prefer countries that have excellent communication facilities for smooth cargo movements.

As heavy industries are less viable, it is better to focus on making the country a center of technology-based industries, small-scale industries and service sectors. Small businesses are the backbone of any country’s economy. An estimated 26 million small businesses in America employ more than half of the country’s private workforce, create three of every four new jobs and generate a majority of American innovations.

Sources in the industrial department say the small-scale industries sector could be the thrust area for investments. However, foreign direct investment in small-scale industries have not been given due importance in the investment policy. It is unwise to expect investments from global majors in small-scale industries. As Nepal is famed for its flora that offers different varieties, there are plenty of investment opportunities to attract foreign investment to set up units for herbal processing, Ayurvedic pharmaceutical industries etc. 

Given the nightmarish experience of a foreign investor in the Balaju-based small-scale joint venture, Cosmic Herbal Remedies P Ltd that licensed to manufacture a unique herbal formulation (memory enhancer), it is hard to expect smooth flow of capital from abroad. Despite being ready for production for the last three years, lack of proportional investments from the domestic promoters have virtually reduced the run further.

The situation is not beyond their means. The promoters have assets running into crores of rupees. The three promoters have already thriving business establishments, villas and several landholdings either in their name or in benami across the country.

It is a pity that a few of the promoters resorted to remain evasive! Of late, under pressure, the foreign investor is forced to call the project off after getting his time (nearly seven years), expertise and resources exploited, which is highly deplorable. We should not provide any opportunity to such anti-social elements who want to build their castles on the blood of innocents as the ultimate casualty is the image of the country as safe investment destination.  

Despite being brought to the notice of concerned departments including the Department of Industry, Balaju industrial district management several times about the evil designs of the promoters, the administrators continue to prefer giving a deaf ear much to the embarrassment of the beleaguered foreign investor, who has been running pillar to post for the past couple of years seeking justice.

If the investors were not given relative insulation from a few unscrupulous elements of these sorts, FDI inflow into the country would be a difficult proposition. Such anti-nationals should not be allowed to play havoc with the image of the country. It is high time to create a database of such anti-nationals to safeguard the innocent investors.

Rhetoric like making the country investment-friendly is not enough; the government has to address the concerns of the foreign investors because litigation procedures are too cumbersome in Nepal like many other countries. If the complainant files a suit, the law of the land would then take its laborious course, and both parties involved would probably come to the end of their physical existence long before the case does. Besides, how long a small-scale investor can sustain in an alien land in such a scenario? Hence, it is vital to make a faster mechanism to settle industrial disputes by setting up separate fast-track courts.  

Moreover, to attract foreign direct investment, the government should revamp the industrial policy giving priority to small-scale industry. Views of different economists and chambers of commerce should also be considered to make the policy more attractive.

Thank you very much for reading this article. I hope you liked this article. I will be glad if you take a little time and make a comment about this article. Your comment is highly appreciated.

 About the author

GK Pakavath is a Kerala-based freelance writer and entrepreneur. He lived in Kathmandu for several years and worked as a freelance writer and entrepreneur. 

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