Pardafas Reporter
Nepal received a foreign direct investment of over Rs 227 billion from 55 countries as of mid-July.
According to a survey report on foreign direct investment (FDI) issued by the Nepal Rastra Bank today, the stock of FDI in Nepal increased by 14.8 percent to reach Rs 227.9 billion at the end of the fiscal year 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 account for 31.6 percent and 14.5 percent respectively, the report shows.
Similarly, 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 (Rs14.5 billion).
As said by the Economic Research Department, Central Bank, FDI is an important source of financing for many countries including Nepal as it facilitates the transfer of financial resources, technology, and other intangible assets including technological know-how, managerial and organizational skills, and access to foreign markets which help to increase production and productivity in the host economy.
The survey covers 197 firms out of 604 companies that have taken FDI approvals from Nepal Rastra Bank at the end of 2020/21. The details on FDI stock are obtained from the financial statements of the surveyed companies as well as from the standard questionnaire.
The FDI stock is valued using the company's value appearing in the statement of financial position as shareholder's equity and debt from foreign direct investors. The industrial sector accounts for about 60.5 percent of total FDI stock. Of which, the electricity, gas, steam, and air conditioning sector constitutes 30.8 percent and the manufacturing sector 29.5 percent of total FDI stock.
About 39.4 percent of total FDI stock is in the service sector. Of which, the financial and insurance services sector constitutes 26.9 percent, the accommodation and food services sector 5.7 percent, and the information and communication sector 4.8 percent of the total FDI stock.
The electricity, gas, steam, and air conditioning sectors, particularly the hydropower sector, in Nepal have been a preferred sector for FDI in recent years. The latest survey shows that 30.8 percent of FDI stock and 40.0 percent of total paid-up capital is in this sector.
Moreover, the hydropower sector has also attracted other sources of external financing such as foreign loans in addition to FDI; the electricity, gas, steam, and air conditioning sector accounts for 50.1 percent of outstanding foreign loans at the end of 2020/21.
The capacity utilization of FDI-based manufacturing companies stands at 64.9 percent, while the profitability of FDI companies remains at 14.7 percent in the review year.
