NEPAL > A Synopsis of Brewing Investment Interests in Nepal by Its Neighbors
2014 was a great year for international business and investments in Nepal with an increase in the number of projects , investments and commitments. The year ended with a positive note as both its neighbors – India and China – showed immense support to further investments, improve bilateral trade and other business opportunities. 2015 is expected to further build on this momentum as many commitments are converted into actions and as more global investors see budding opportunities in this Himalayan nation. Additionally, any positive news on the long awaited promulgation of Constitution is expected to magnify such interests as the major concern for foreign investors and businesses has been the country’s political instability.
With that in mind, I thought our readers would be interested in a quick summary of the major initiatives that Nepal’s neighbors – the big emerging economies – have proposed or initiated in 2014.
China
-China’s investment doubled in Nepal between 2007 and 2011 in sectors including transport, infrastructure, and hydroelectric power projects among others.
-China became the largest contributor of FDI at $174 million accounting for over 60 percent of the total FDI commitment from July – December of 2014.
-Chinese Foreign Minister Wang Yi visited Nepal in Dec 26, 2014 which is widely believed to be the precursor for President Xi Jinping visit planned for 2015. Minister Wang also declared more than 400% rise in annual aid to Nepal increasing it to $128 million, up from the current amount of $24 million.
-While a 60-megawatt power plant on the Trishuli River is under construction, Beijing has also committed to a $1.6 billion, 750-megawatt joint venture on the Seti River to be in operation by 2019.
-To further land trade, China is upgrading the road networks across the Himalayas by renovating the 71-mile Araniko Highway connecting Kathmandu to the Chinese border, as well as upgrading the track between Nepal’s Syaphrubesi and Kerung in Tibet costing around $20 million.
-Nepal and China is looking to ink currency swap deals – which means consumer and business transaction between the two countries would be seamless. Think about purchasing products for trade and signing investment deals with Chinese investors in Nepalese Rupees. This would open a whole world of opportunities for both countries ( more so for Nepal).
India
-Indian Prime Minister Mr. Modi announced soft loan of up to $1 billion to Nepal for infrastructure and energy projects.
-Mr. Modi’s visit also pushed towards revisiting of other opportunities – significant among them is the 5600 MW Pancheshwar multipurpose project on the Mahakali River, which was delayed for more than a decade.
-Signing of Power Transmission Agreement (PTA) and Power Development Agreement (PDA) with India. Notably, the PTA would allow foreign investors, other than from India, to develop Hydro projects in Nepal to export to India.
-The signing of deal between Investment Board of Nepal (IBN) and GMR (Infrastructure focused company in India) to develop the 900 MW Upper Karnali Hydro Project valued at more than US$ 1 Billion.
-PDA was signed between SJVN, an Indian organization, and the Government of Nepal for 900 MW Arun III Hydroelectric Project also valued over $1 Billion.
-Beyond working independently with India or with China, the idea of a possible Delhi-Beijing Economic Cooperation in Nepal has also been proposed, with China carving out a potential Trans-Himalayan zone of cooperation.
-With these, prospects for Nepal’s economic upliftment holds great potential in the upcoming years. Additionally, the Ministry of Industry (MoI) is planning to declare 2015-2016 as “FDI Year”. While these sound promising, a positive move towards constitution promulgation would be an icing on the cake for both Nepal and for investors interested in Nepal.
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