KATHMANDU: Investment commitments by domestic companies more than halved in last fiscal year 2014-15, while foreign direct investment (FDI) pledges more than tripled, according to the Department of Industry (DoI).
According to the DoI, domestic investment commitments last fiscal year slumped to Rs132.91 billion from Rs289 billion in 2013-14. The number of industries registered, however, was up.
Government officials attributed the fall in domestic investment commitments to the April 25 earthquake. DoI Director General Maheshwor Neupane said the earthquake had the biggest impact on industry registrations.
Considering the impact of the earthquake on industrial production, the Central Bureau of Statistics (CBS) lowered the industrial growth forecast for the last fiscal year to 2.35 percent from 4.55 percent.
Although the earth did not have a big impact on industries in main industrial areas in the Tarai, they faced problems such as reduced demand and shortage of workers as economic activity slowed.
Commercial banks’ lending pattern also suggest that economic and trade activities slowed after the disaster. The banks have lent jut Rs20 billion since the earthquake until August 7, their while deposit mobilisation over the period stood at Rs111 billion, according to the Nepal Bankers’ Association. Beside the earthquake, industrialists blame the unfavourable business climate for the fall in the investment commitments.
Federation of Nepalese Chambers of Commerce and Industry (FNCCI) President Pashupati Murarka said political instability, confusion about the new constitution and energy crisis were the major reasons for the slump in domestic investment commitments. “Business environment has worsened as industries have continued to remain closed due to month-long strikes in Tarai,” he said.
According to the DoI, energy-based industries attracted Rs83 billion in commitments although the number of industries registered under the category fell. Tourism got the second highest investment commitment (Rs21.38 billion), followed by production-based industries (Rs17.39 billion).
There has been a sharp rise in number of industries related to tourism last fiscal year, with 135 new registrations, compared to the previous fiscal’s 83. In the last fiscal, a total of 92 big industries, 79 medium-scale industries and 291 small-scale industries were registered with the DoI.
As far as the foreign direct investment is concerned, the commitments more than tripled in the last fiscal year to Rs67.42 billion, with energy-based industries once again topping the charts. FDI commitments in the previous fiscal was Rs20 billion. Although the of number of registrations of energy-based industries halved to five, the investment pledges stood at Rs54.28 billion. Service-based industries and the tourism sector followed.
Despite the high FDI pledges, only a fraction of them are translated into actual funding, according to the Nepal Rastra Bank. The actual investment amounted to Rs6.16 billion last fiscal year, while the pledges stood at Rs67.42 billion. Murarka said the commitments were not being translated into investment due to unfavourable investment climate.
