Monday, August 1, 2011

FDI inflows to Nepal, 1990-2010

FDI inflows to Nepal was the second lowest in South Asia in 2010. It received approximately US$39 million last year. The highest recipient was India with US$ 24 billion and the lowest Bhutan with US$ 11.69 million. The total FDI inflows in the world was US$ 124.37 billion, to developing countries US$ 573.57 billion, and to South Asia US$ 31.95 billion (South Asia excluding India received US$ 7.3 billion of which approx 30 percent went to Pakistan).

FDI inflows to Nepal was US$ 5.94 million in 1990. It then decreased to almost nil up until 1995. In 1996, FDI inflows was US$ 19.16 million and fluctuated quite a bit until 2000, when FDI inflows was negative US$ 0.48 million. In the last two years FDI inflows have been stable at around US$ 39 million.



Nepal received 0.12 percent of total FDI inflows to South Asia in 2010. Similarly, it received 0.15 percent and 0.17 percent of FDI inflows to LDCs and landlocked developing countries in 2010. The corresponding figures in 1990 to these destinations, respectively, were 2.79 percent, 1.04 percent, and 0.98 percent. In 2005, they were 0.02 percent, 0.02 percent and 0.04 percent.




Persistent labor problems, power outages, political instability, cumbersome regulations and tax regime (leading to high transaction costs), corruption, and lack of adequate infrastructure (leading to high transportation costs), among others factors, are impacting FDI inflows to Nepal. Here is a blog post I wrote in 2009 about FDI policy and investment climate in Nepal. According to Enterprise Survey 2009, 62 percent of enterprises think instability is the biggest constraint. Here is a report on FDI investment opportunities in Nepal. There are plenty of opportunities for FDI in agriculture and agro-based industries, flowers and flowering plants, Pashmina, garments, tourism, health, education, IT, nursing homes, construction, hydropower and alternative energy sources, and manufacturing, among other sectors.

Total FDI inflows
FDI inflows (US$ million) 1990-1995 1996-2000 2001-2005 2006-2010 2009 2010
Afghanistan -0.01 571.81 566.38 1041.65 185.00 75.65
Bangladesh 125.85 4608.81 2338.69 4158.61 700.16 913.30
Bhutan 2.25 18.93 17.18 138.28 14.68 11.69
India 4220.69 43360.95 28827.96 148512.08 35648.78 24639.92
Maldives 41.57 249.65 182.86 565.43 112.34 163.82
Nepal 8.16 89.80 31.70 77.89 38.56 38.99
Pakistan 2591.56 7556.31 5059.00 19655.00 2338.00 2016.00
Sri Lanka 658.88 2191.96 1102.01 2717.20 404.00 477.60
Total FDI inflows
FDI inflows (US$ billion) 1990-1995 1996-2000 2001-2005 2006-2010 2009 2010
World 1349.12 7825.63 3750.82 7605.60 1185.03 1243.67
Developing economies 423.78 2214.48 1199.64 2744.64 510.58 573.57
South Asia 7.53 72.40 51.56 188.43 42.46 31.95
Least developed countries (LDCs) 8.40 79.49 56.34 132.93 26.54 26.39
Landlocked developing countries 7.81 65.02 42.29 102.30 26.19 23.02

[All data are sourced from the latest UNTCAD’s World Investment Report 2011. Here is a WIR’s FDI profile of Nepal].