NIB trudges on through high expectations and enormous challenges

Expectations are high and challenges are enormous, as Nepal Investment Board (NIB) has found out in the more than a year that it has been working to attract investment in big projects.
The NIB, a high level state body founded in late 2011 to facilitate foreign investment for mega projects in the country, is also the focal agency to implement Nepal Investment Year 2012/13, a campaign to lure big investment by creating an investment friendly climate in the country.
While announcing the campaign in July 2011, the government had declared that it would bring in US$ 1 billion in the first six months of the investment year. Then in May 2012, the government handed over 14 mega projects - which included 5 hydropower projects -- to the NIB to deal with foreign investors and implement them on a fast-track basis.
Despite its efforts, the NIB couldn´t live up to the expectations of injecting fresh investment and ultimately creating new job opportunities.
More than a year has gone by since NIB was formed, but not a single mega project has materialized. The template for the Project Development Agreement (PDA) for big projects itself is also yet to be finalized by NIB.
The NIB officials, though, say they are doing their best not to break the promises they made. “We are working seriously to kick-start at least one project that is significant for the country´s development,” Radesh Pant, chief executive officer of the NIB, told Republica.
Despite the deepening political imbroglio and inconsistent government policies, some foreign investors are still vying to grab investment prospects in Nepal.
It is, however, a good sign that investors from countries such as South Korea, France, Germany, Turkey, Brazil, China, India and the USA have shown interest in injecting fresh investment, especially in infrastructure projects like transportation, cement industries, road construction and hydro power.
“We have been able to create some interest among potential investors,” said Pant.
As an underdeveloped nation, Nepal needs foreign direct investment (FDI) in almost every sector of economy to oil the engine of economic growth.
However, Nepal´s current investment climate is not conducive to attracting investment from abroad, or even from domestic sources.
The task of providing instant and smooth services to investors is still not that much impressive despite some efforts to facilitate more investment.
The decade-long Maoist conflict that badly paralyzed the overall development of the country is over. But the situation is still not rosy for investment prospects.
Domestic investors, who are well aware of the economic situation and investment climate of the country, are still not convinced to invest more.
"Most of the investors are in ´wait-and-see´ mood," Pashupati Murarka, vice-president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) said.
The NIB has been carrying out the task of implementing projects such as West Seti (950 megawatts), Arun III (900 MW), Tamakoshi III (650 MW), Upper Karnali (900 MW) and Upper Marsyangdi (600 MW), management and upgradation of Tribhuvan International Airport (TIA) project, Waste Management Project and developing the PDA.
The PDA template, which is still to see its finishing touches, is specifically for hydropower projects (above 500 MW). The template -- a base document to negotiate with mega investors -- will prove to be significant for the development of mega hydropower projects in the country.
NIB is in consultation with power developers like Indian giants Sutlej Jal Vidyut Nigam and GMR, and SN Power of Norway, seeking their inputs while developing the template.
NIB is in close communication with a Chinese firm -- Three Gorges -- to take forward the West Seti project that they are conducting technical and financial assessments for.
The country and its prospects are shrouded in political and economic uncertainty, but still the situation can be improved enough to draw new investment. Political stability and policy consistency of the government, local business people say, will create a favorable environment for investment.
“There is no doubt that we will see a flood of investment if the government walks the talk and goes beyond rhetoric and lip service for creating investment climate in the country,” added Murarka.
´Political consensus key for investment´
Nepal Investment Board (NIB) came into existence more than a year ago with the job of luring foreign investment for mega projects into the country amid a worsening investment climate. One year down the line, people´s expectations have been dashed as no substantial progress has been made toward securing even a single mega project. Radesh Pant, CEO of NIB since December 2011, talked with Republica about challenges and prospects of new investments in Nepal. Excerpts
What initiatives have you taken as the NIB CEO to promote investment in Nepal?
Definitely progress has been slow to fulfill the expectations that people had from us. However, we are working on establishing a system and framing policies that are crucial for facilitating foreign investors in our country. The Project Development Agreement (PDA) template that is needed before starting negotiations with developers of mega hydro projects is almost at its final stages.
How are investors (both foreign and domestic) responding to our invitation for investment, given the situation of the country?
After over a year in office as NIB CEO, I have found impressive response from investors who are showing interest in investing in Nepal if policy consistency and investment security is guaranteed.
How do you assess the future for investment in Nepal? Are you satisfied with what has been done so far by NIB?
Though there are many things to do to secure investment for mega projects in Nepal, I am satisfied with what has been achieved so far. We are still optimistic about increased flow of investment in the future given the positive responses from those investors that we have so far approached. However, we have to identify which among them are genuine investors to ensure timely implementation of the projects.
What do you think we need the most to bring in more foreign investment?
Political parties should build consensus among themselves to restore the confidence of investors. I have a long held conviction that there should be agreement amongst political parties to at least create an environment for investment in the projects that are crucial for economic development. There should also be a consistency in the state´s policies towards the economy and investment.