The role of private investment remains crucial for stimulation growth and employment of a country. Foreign Direct Investment (FDI) is regarded as an important source of external financing in recent years. FDI plays a key role in widening the sources of financing and crowding in domestic investment in countries like Nepal that have financing constraints. Nepal has introduced legal, institutional and regulatory reforms in recent years to attract FDI inflows.
Nepal Rastra Bank (NRB) has conducted a survey to analyze the trend of FDI inflows and existing FDI stock in Nepal. The survey updates and compiles FDI stock by counterpart economies and economic activities. The survey provides comprehensive information on face value of foreign liabilities of Nepalese companies arising on account of FDI. The statistics provided by the survey are used as inpurts in the compilation of Balance of Payment (BoP) and international Investment Position (IIP) of Nepal.
The survey covers 197 firms out of 604 companies that have taken FDI approvals from NRB at the end of 2020/21. The survey shows stock of FDI in Nepal increased by 14.8 percent to Rs. 227.9 billion at the end of 2020/21. Paid-up capital is the major component in FDI stock as it accounts for 53.9 percent of total FDI stock whereas the reserves and loans in total FDI stock accounts for 31.6 percent and 14.5 percent respectively.
The survey says Nepal has received foreign investment from 55 different countries as of mid-July 2021. In terms of total FDI stock, India ranks top position with Rs. 75.8 billion followed by China (Rs. 33.0 billion), Ireland (Rs. 16.5 billion), Singapore (Rs. 15.5 billion) and Saint Kitts and Nevis (Rs. 14.5 billion).
Industrial sector accounts for about 60.5 percent of total FDI stock. Electricity, gas, stem and air conditioning sector constitutes 30.8 percent out of the industrial sector. Similarly, manufacturing sector constitutes 29.5 percent and service sector constitutes 26.9 percent. According to the survey, hydropower sector has been preferred sector for FDI in recent years. 30.8 percent of FDI stock and 40 percent of total paid-up capital is in this sector.
The survey report presents the latest data of FDI stock in Nepal and provides the estimates of inward direct investment position or the FDI stock at book value and country-wise as well as sector-wise distribution of FDI stock at the end of 2021/21.