Investment Year over before it began

With political imbroglio deepening amid government trying to enact a new law to clear way for elections without political understanding, both the government officials and private sector has lost hope of implementation of much-touted Investment Year, which the government announced last year with an ambitious plan to bring US$ 1 billion foreign investment within the first half of 2012/13.
In fact, top government officials as well as leaders of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) said the program was ´dead´ even before it came into being.
A few months ago Investment Board (IB), which is entrusted to implement the program, had informally announced that the program has been postponed for six months - meaning it planned to launch it from January 2013 - to keep the hope alive. But the status of the government, lack of parliament and the latest confusion over holding elections on November 22 has made even late implementation of the program doubtful.
“Worse part is that the government itself does not seem serious toward the Investment Year. Had it been, it would have taken steps to enact laws and policies that it promised to the investors, instead of elections bill,” said an IB official.
The private sector that was excited to work with the government to lure foreign investment expressed similar doubt. “We were hopeful the government would bring oppositions on board and clear the way for the Investment Year. But latest widening of differences has made us realize the Investment Year is over even before it has begun,” said Pashupati Murarka, vice-president of FNCCI.
The idea of Investment Year was conceived and floated by the FNCCI in 2011 and Finance Minister Barsha Man Pun readily adopted it. Prime Minister Baburam Bhattarai instantly announced that the government would mark 2012/13 as the investment year. He even committed numerous policy and legal reforms to attract FDI.
“No foreign investor can think of coming here to invest where even domestic investors are losing confidence,” said Murarka.
The government did hand over 14 mega projects such as West Seti Hydro Project and Kathmandu-Terai Fast Track to the IB for roping in foreign investors on May 26. But the situation suddenly turned unfavorable when the Constitution Assembly (CA) was dissolved on May 27.
“The dissolution of the CA was the first setback for the Investment Year,” an official at the Prime Minister´s Office said. Political differences have only deepened doubt over the implementation of the program.
The government has not taken a single initiative that demonstrates its willingness to welcome foreign investors, said Keshav Acharya, former senior economic advisor of the Ministry of Finance (MoF). “This indicates the government´s priorities have changed now. The investment year mission is over.”
IB officials do not completely agree with Acharya, but what they admit is the prime minister has neither held any meeting nor taken briefing from the board. “This has left us utterly confused whether we should continue with our ground works,” said the senior IB official.
As a result of this confusion, the board has slowed its works to identify the 50 seleable projects. It is also uncertain whether it should work out schedules and start preparations for the road show meant for promoting Nepal for investment.
“We have identified seven areas to offer to the investors. But the progress on short-listing the projects has remained slow,” the official said.

Investment Year in trouble post CA demise

Much-touted Investment Year 2012/13 has landed in trouble after the country´s failure to formulate new constitution badly eroded country´s prospect as an attractive investment destination.

While launching the Investment Year, Prime Minister Dr Baburam Bhattarai had said the government would bring in foreign investment worth US$ 1 billion within the first six months of 2012/13, and to achieve the target the government would formulate necessary policies and laws.

“The program is doomed now. Who will put his/her money in a country that does not have a full-fledged constitution and political uncertainties loom large,” said Binod Chaudhary, president of Confederation of Nepalese Industries (CNI).

Under its pledge, the government had said it would provide flexible labor regime to the investors. It had also promised to introduce laws like Industrial Enterprise Act, Special Economic Zone Act, formulate a new Foreign Direct Investment (FDI) policy and enact more investment-friendly FDI Act, among other things.

“The government can still formulate the policies. But the dissolution of CA and legislative-parliament has disabled it from enacting much-needed investment-friendly laws,” said Bhaskar Raj Rajkarnikar, senior vice president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

The government had launched the Investment Year after it formed the Investment Board (IB) and on the basis of calculations that the country would have concluded the peace process and constitution writing by now.

"But that hope has been shattered,” said Rajkarnikar, adding that as the new chaos has turned even the domestic investors nervous, forget foreign investors.

Officials disclosed that foreign investors who were holding talks with the IB to invest in some of projects have already started showing sign of ´waning confidence´ after the new political turn of events.

“South Korean investors, who were looking forward to invest in the hydroelectricity sector, have expressed fear to move forward,” disclosed a source. "They (Korean investors) were excited, but now they are saying that they do not feel comfortable to continue with the proposed projects," said the source.

The announcement of Investment Year had excited both the private and public sectors, and top business bodies like FNCCI and CNI have been actively supporting IB to come up with numerous business projects.

The government too had handed over 14 large-scale development projects such as West Seti (750 MV), Upper Karnali (900 MW), Kathmandu-Tarai Fast Track and Second International Airport in Nijgad among others to the IB to award them to the promising investors under fast-track mode.

“Sadly, this sudden political mess has sharply curtailed the chances of those projects drawing international investors,” said the source.

Radesh Pant, CEO of the IB expressed hope that situation will not be as bad as the business community and some officials think. "Investors will still be interested in those projects if we are able to guarantee protection for their investment," he said.