Foreign Direct Investment In Nepal

Ankit Lohia Madhu Sudan Koirala Nilesh Pradhan Sushmita Nepal

FDI Introduction
FDI is investment directly into production in a country by a company located in another country.

FDI

Greenfield

M&As

FDI originates from the decision of a transnational corporation (TNC) to locate or relocate part of its activities in a selected host country.

Historical Perspective
FDI used to be viewed as unhelpful, negative and bringing inappropriate technology to developing countries. More than four decades on, a radically different view from the beginning of the period has emerged. FDI is now seen as beneficial and nearly all countries try to provide a welcoming climate for investment.

Historical Perspective
Like trade, FDI has occurred throughout history: Merchants of Sumer of around 2500 BCE East India Company in the 17th century In 1970 global FDI : US$13.3 billion. In 2007: nearly trillion. 150 times higher , US$1.9

Most indicators signal that FDI will be higher in 2012 than in 2011.

Historical Perspective
In 1913, 2/3rd of world FDI was flowing to developing countries

Now most FDI is amongst developed countries, and only a 1/4th of FDI is going to developing countries. FDI is not a zero sum gain Investment into one country will spur further investments throughout the region over time. E.g: Singapore

Home Country and Host country

For host country
Employment creation Capital accumulation Transfer of technology

Increased competition Management techniques Market access

Infrastructure

Largest and most stable source of private capital for developing countries and for economies in transition LDCs have greater expectation from FDI.

Home Country and Host country

For home country
Acquire skills, knowledge, technologies Internationalize business Reduce debts Access to foreign resources

FDI In Nepal-Current Status

Receiving FDI but insignificant Renowned companies
British American Tobaco(BAT) Unilever Coca-cola Standard Charter Hyatt

FDI In Nepal-Current Status

Major sources of FDI in Nepal
India (about 40%) United States China The British Virgin Islands Norway Japan Korea Hongkong

FDI In Nepal-Current Status

Major areas for FDI
Manufacturing Service, in particular tourism sector Specifically, Manufacturing products to export to India like vegetable, soap, Paste, Ayurbedics Ready made garments to oversees Hotels Recently On Hydropower

FDI Trend In Nepal

FDI inflow in 1990-US $5.94 million Almost nil till 1995 In 1996- $19.96 million Fluctuation till 2000 with negative $0.48 million Fluctuation continued till 2006 Increasing from 2007

Table:FDI trend In Nepal

Year FDI Inflows Year FDI Inflows Year FDI Inflows
1972 1973 1974 1976 1978 1979 1980 $30,000.00 ($10,000.00) $250,000.00 ($40,000.00) $410,000.00 $300,000.00 $300,000.00 1985 1986 1987 1988 1989 1990 1991 $650,000.00 $1,170,000.00 $1,390,000.00 $680,000.00 $420,000.00 $5,940,000.00 $2,220,000.00 2000 2001 2002 2003 2004 2005 2006 ($484,827.00) $20,850,000.00 ($5,952,541.00) $14,778,090.00 ($417,346.40) $2,451,785.00 ($6,647,984.00)

1981
1982 1983 1984

($230,000.00)
($30,000.00) ($600,000.00) $950,000.00

1996
1997 1998 1999

$19,160,170.00
$23,056,470.00 $12,024,660.00 $4,350,000.00

2007
2008 2009 2010

$5,741,706.00
$995,123.90 $38,176,180.00 $87,799,640.00

Graphical Representation

7/29/2012

Free template from www.brainybetty.com

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Comparison to south Asian countries

FDI inflows to Nepal-2nd lowest in 2012 i.e $87 million India $24 Billion-Highest recipient Bhutan $11.69 million Total FDI inflows in world- $124.37B LDC- $573.57B South Asia-$31.95B

Contd..
Nepal received 0.12% of FDI inflows to south Asia(2010) 0.15% of FDI inflows to LDC 0.17% of FDI inflows to Landlocked countries In 1990-2.79;1.04 and 0.98% In 2000-0.02;0.02 and 0.04%

Total FDI Inflows

Total FDI Inflows
FDI inflows million) (US$ 1990-1995 1996-2000 2001-2005 2006-2010 2009

Nepal

8.16

89.80

31.70

77.89

38.56

Total FDI inflows

FDI inflows billion) (US$ 1990-1995 1996-2000 2001-2005 2006-2010 2009

South Asia

7.53

72.40

51.56

188.43

42.46

Least developed countries (LDCs) 8.40

79.49

56.34

132.93

26.54

Landlocked developing countries 7.81

65.02

42.29

102.30

26.19

Improving Situation
Abhiyan Daily dated 3rd march 2012 On magh 2068, 15 companies Registered with the investment of 76 crores 82lakhs 10 by foreign investors
Scope of Growth