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Peaceful Transformation in Nepal: Consequences for foreign investments

You may already be aware of the fact that a few years ago, the government of Nepal announced that it wants to cooperate with all kinds of private businesses, including foreign enterprises. Therefore, the laws of the country and the political dispensation itself have become more accommodating to foreign investment and investment. With the parliamentary crisis, the state’s potential, including its capacity for mobility, namely rapid progressive change, has become noticeable. With this in mind, Nepal can now be seen as one of the most promising and potentially lucrative destinations for long-term investment.

In the contents of this article, you can find a detailed breakdown of Nepal’s political situation as well as the country’s economy revealed. We will also consider here the impact of external and internal circumstances on the economic and financial development of the state.  The article also presents objectively composed factors that have a direct impact on Nepal’s economic future, its potential as a source for foreign investment, and possible negative and positive outcomes of events. Throughout the article, the most profitable sectors of the state’s economy that can be rationally utilized through foreign direct investment are discussed, and the main positive aspects of telecommunications development in the country are also highlighted here.

Social and Political Changes in Nepal

Just a few years before the parliamentary crisis, the level of FDI in Nepal was very low. As a consequence, the government itself was not so friendly to private enterprise and business in general. All activities with finance and any monetary turnover were strictly controlled by the state as a major factor in the planned economy. The strategic component of the economy was, for the most part, based on five-year plans, which were adhered to until recently.

Obviously, the situation is now changing considerably for the better. Now the conditions and laws for entrepreneurial activity in the country are much less stringent, and opportunities for starting a business have become available to almost everyone. Now attracting foreign direct investment is no longer an ‘insurmountable problem’ for the government, as cash flows are flowing into fertile ground. And the Nepalese government itself is much more willing to accept cash aid from abroad. Just in 2019, the country’s minimum FDI threshold has risen to $415,000, while in 2006 it was around -$7 million. Fortunately for Nepal, the contract with the JPO was finally signed, but it was only in 2017 and fetched $0.5 billion.

At the moment, the Nepalese government is already openly saying that it is ready to cooperate with foreign enterprises, businessmen and investors on the most serious grounds. They, in turn, can only reciprocate willingly. According to the latest reports from the World Bank, Nepal now ranks third in South Asia in terms of FDI. Domestic entrepreneurs also enjoy a friendlier attitude of the state, expressed in tax incentives and additional instructions from the government, but not always promises are fulfilled in practice and words do not match with deeds.

Reasons for Investing in Nepal

Compared with other Asian countries, the economic and geographical position of Nepal has advantages. This is not due to a single factor, but to a combination of factors, which we are now going to examine. The sections below explain in detail the key factors of Nepal’s economic and geographical position that help it maintain its status as a lucrative source for foreign investors.

Geographic Location

The two mighty eastern dragons, India and China, almost swallowed up the small state of Nepal. There is no doubt that this South Asian country has already learned how to derive huge benefits and advantages for itself. If we consider the possibility that Nepal may completely open its borders to foreign business, this place will become a real fusion center for the largest Asian economies. India and China will be able to comfortably meet right here and cooperate, make deals and provide strong support to the Nepali government, which, of course, will instantly affect the living standards of Nepalis and the overall well-being of the country.

Opportunities for cooperation that would benefit both sides are already emerging, as not long ago the Indian state openly showed its support for imported products from Nepal, and consequently for the entire Nepali industrial economy. All this has already helped to outline the boundaries for further interaction between the two countries. The reason why Nepali goods produced for export have been so willingly accepted is that the country aims to provide maximum quality-price ratio as well as comfortable transportation. Underlying China’s interest in Nepal is a potential Beijing asset, which is what Nepal is to them. This is part of the multi-billion-dollar Belt and Road initiative that has paid off.

Staff Resources

The country has a population of about 30 million people, while almost half of them have unemployment status. Unemployment in Nepal is one issue that is literally ‘crying out’ to be solved as soon as possible. After all, all those unemployed people are potential workers with excellent intellectual abilities, only there is no one to hire them. In other words, Nepal has a wealth of human resources, so it is a country with an untapped labor force. If we attract at least 30% more people to work, the profits from the enterprises will jump up dramatically and will increase tenfold. It’s worth noting that we’re not talking about blue-collar workers who find themselves out of work because they can’t stay in the market for long.

This may seem like a great contradiction to you, but the level of education in Nepali cities is paradoxically high. And in the absence of available jobs, all highly skilled professionals – from doctors to IT specialists to construction workers – are forced to seek lucrative employment and self-fulfillment in foreign countries. The so-called ‘brain drain’ is actively taking place in the direction of other Asian countries, as well as Australia, Oceania and the Persian Gulf countries.

Apart from the above socioeconomic trends, the Nepalese economy is experiencing rapid growth and expansion in the potential areas of science and other professional activities already available. This means that in the near future there will be no shortage of manpower and vacancies, regardless of which area of the economy will see more investment.

Natural Resources

The country’s natural resources and minerals are used extensively in hydropower and agriculture, so they are of particular value and importance to these sectors. There are more than 40,000 megawatts of electricity generated by water, enough for the entire country. This is possible because there are several thousand rivers in Nepal that have a rapid flow of nature. The climatic conditions and the country’s geographical position itself play into the hands of the agricultural sector, as its resources are thus unlimited almost all year round.

Telecommunications Industry in Nepal

Among other things, Nepal has some less important but fast-growing and potentially lucrative sectors of the economy, such as telecommunications. The demand for these is literally growing exponentially, in proportion to the demand for telecommunications around the world. Nepal is home to some of the most lucrative opportunities in the entire world for telecommunications business development, as evidenced by the experience of Abdo Romeo Abdo, a seasoned businessman and master of his craft.

Born in beautiful Lebanon, Abdo quickly made his way into successful circles and is now one of the co-founders of Ncell, an international company that is now the leading provider of cell phones and cell phones in Nepal. Very soon, Abdo Romeo Abdo plans to enter the Nepali market with two more IT projects. There is no doubt that the demand for telecommunications in the South Asian country will continue its growth and development.

Potential Barriers to Future Development

Apparently, Nepal can be classified as a country with a hybrid political regime, that is, with an incomplete transition from authoritarian to democratic power. Unfortunately, this is not a reason not to worry. Whereas a few years ago there was popular excitement for all the transformation processes to proceed as peacefully and comfortably as possible, many now believe that it is worth considering whether there will be any change at all.

A notable fact is what the government has undertaken in the last few years. For example, in order to keep the country’s economy in one centralized place, state authorities have sort of taken several steps backward. In doing so, they have taken over the steering wheel and clung tightly to it, completely controlling the country’s economic and financial situation. However, there are no objective reasons for concern at the moment. As far as international investments are concerned, all the loyalty laws that have been passed are still in force. And the Nepalese government continues to encourage the interest of foreign investors in its economy, as well as doing its best to bring them into mutually beneficial cooperation.

As strange as it may seem that Nepal has always been interested in attracting foreign capital and businesses, and in opening its borders to international cooperation, the fact remains. However, there has been a time when officials have literally ‘tied’ their own hands by doing just the opposite – slowing down the country’s economy, its development and expansion. Judging by the current state in which Nepal has been in for a long time, the government has decided to learn from its own mistakes and not to make the same mistakes again. This time, the economic development of the country is taking a very different path, which is suggested by completely new political plans for the further development of the state of Nepal.

Conclusion

As we have already seen, Nepal has so many opportunities to invest in a variety of sectors. Each of them will be profitable in its own way and will pay off in the future. The hybrid regime does not currently affect the government’s attitude towards foreign enterprises, because it is very similar to China’s ‘golden mean’. Although, as we have seen, agriculture, IT and hydropower are still leaders in Nepal’s economy, particularly in the capital, Kathmandu, the emerging telecom sector is an equally valuable source of long-term foreign investment. The payback growth of the sectors is expected to be proportional to the ever-increasing demand for the respective goods and services.

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