Political instability, labor unrest pull down FDI by 30 percent

The deepening political instability and frequent labor unrest has dragged down the inflows of foreign direct investment (FDI) to Nepal by around 30 percent during the fiscal year 2011/12 compared to the figure a year earlier.
The whopping decline in FDI inflows has resulted in 17 percent fall in employment generation with creation of only 9,050 new jobs in the country.
The decline in FDI inflows was witnessed in crucial sectors of the national economy such as manufacturing and agriculture.
The statistics compiled by the Department of Industry (DoI) showed the number of new jobs created in the market had fallen despite a rise in the number of industries approved under FDI across the country.
The number of firms approved by the DoI increased to 227, up by 18 compared to the figure recorded earlier year. However, the flow of investment fell to Rs 7.14 billion, down from Rs 10.05 billion a year ago.
“We didn´t get much investment in areas such as manufacturing and agriculture which took away a significant chunk of FDI inflows in to the country,” Bipin Rajbhandari, director at the DoI told Republica on Sunday.
Statistics further showed that agro-based industries saw a decline in FDI by staggering 56 percent falling to just Rs 162 million and creating 840 fewer jobs in the market compared to earlier year.
Likewise, the FDI inflow in the manufacturing sector also dropped by 84 percent to Rs 988 million. The fall in FDI in this sector also led to fewer job creation.
The FDI, however, in the sectors such as energy and service industries went up during the fiscal year 2011/12. “However, these areas do not create more jobs in the market,” Rajbhandari added. The country could see zero investment in the construction sector during the year. The construction sector had received Rs 150 million as the FDI during the fiscal year 2010/11 generating 90 new job opportunities in the market.
On the back of slowing FDI, the government is stepping up the process to endorse the new Special Economic Zone (SEZs) bill, Industrial Enterprises Act (IEA), Foreign Direct Investment and One Window Policy to lure more investment from foreign as well as domestic investors.
The government is establishing SEZs in 10 different places including Bhairawa, Biratnagar, Bara and Siraha in a bid to create conducive industrial environment.
Despite the increase in the number of industries registered during the year, the number of large and medium scale industries - key generator of jobs opportunities - fell in the fiscal year 2011/12.
According to the statistics, 10 large scale industries were approved by the DoI during the review year. The figure was 15 during the previous fiscal year. Likewise, the number of medium scale industries has fallen from 17 to 14. Large scale industries comprise more than two-third of total FDI inflow in to the country.
However, the number of small scale industries increased marginally from 177 to 203 in the fiscal year 2011/12.