FDI inflow up by 10%

Nepal´s ranking in the global foreign direct investment (FDI) index has improved compared to last year, as the inflow of FDI went up by 10 percent, the World Investment Report 2012 published by the United Nation Conference on Trade and Development (UNCTAD) has revealed.

Nepal currently stands in 175th position out of 182 countries included in the index. The ranking, which is on the basis market attractiveness, availability of low-cost labor and skills, enabling infrastructure, presence of natural resources, was the same in 2007 as well. Nepal had secured 178th position the previous year. 

The report published by UNCTAD shows that the FDI inflow increased by 10 percent to US$95 million in 2011. However, the total inflow of FDI in 2011 contributed only 2.5 percent to gross fixed capital formation (GFCF), which is far below the South Asian average of 6.4 percent. 

The flow of the amount of total FDI has been continuously increasing since 2006, when the decade long armed conflict ended following the signing of the comprehensive peace accord. The report says, FDI had reached $5.89 million in 2007, up from the negative flow in 2006.

Focus on getting assistance for trade and production: UN

At a time when Nepal has been expressing concerns over developed countries not fulfilling their pledge of supporting trade growth, experts from United Nation Conference on Trade and Development (UNCTAD) Tuesday suggested the government to utilize more overseas aid for the development of industry and trade.
Presently, foreign assistance makes around 26 percent of the government´s annual expenditure and officials at the Ministry of Commerce and Supplies complain that only a nominal portion of that is being used to support meaningful projects on trade growth.
Interestingly, statistics of Organization for Economic Co-operation and Development (OECD) says one third of total international assistance comes in Nepal as aid for trade.
Despite such contradiction, experts said Nepal must make efforts to win more assistance and use them more aggressively for the development of exportable products, industrial infrastructures and trade facilitating logistics services if the country is to leverage its share in the international trade.
But as such flow of resources in a particular sector is unlikely to happen unless it is given due priority and included in the National Development Strategy (NDS), UNCTAD representative Maneula Tortora urged the government to integrate trade as a central component of the strategy.
“No plans and strategies can generate effective growth and poverty reduction if they ignore trade that has served as engine of growth and development worldwide,” said Tortora.
Tortora said this while addressing the three-day long regional workshop on ´Integrating the Trade Dimension in the UN Development Assistance Framework´ that kicked off on Tuesday in Kathmandu.
Although OECD data shows high flow of aid for trade in Nepal, officials said the assistance pledged so far have come in the form of technical assistance to carry out various studies and those have largely failed to transform the trade´s reality.
“Aid for trade is important, but it must come in meaningful amount and for projects that make contribution on ground,” said Lal Mani Joshi, secretary of the Ministry of Commerce and Supply (MoCS).
He said the government has been attempting to mainstream trade since last few years, referring that Nepal Trade Integration Strategy (NTIS) formulated in 2010 was the first step toward that path.
The NTIS has identified 19 goods and services that can boost country´s exports in a sustainable manner. “NTIS has given us a ground to take steps for advancing trade and gain more share in the regional and international trade,” said Joshi, adding that government was working together with the development partners aiming to tap potentials of those products and achieve NTIS goals.
Other speakers stressed the need to garner more international assistance to create long-term growth and jobs in the domestic market. They urged the government to play a proactive role and asked the private sector to be more innovative in tapping global market potentials.