China overtakes India in project numbers

• The southern neighbour is still the largest FDI contributor with Rs 37.6b so far

KATHMANDU, NOV 01 -

 

Although India is still the largest foreign investor in Nepal, China has overtaken the southern neighbour in terms of the number of projects.

Until the last fiscal year, 575 Chinese companies have acquired approval from the Department of Industry (DoI) for foreign direct investment ( FDI ), compared to 566 from India. 

In the last fiscal year alone, 97 Chinese companies acquired the approval from the DoI for starting new businesses in Nepal, while the number of Indian firms taking the approval stood at 41.

Despite increasing Chinese investment in Nepal, India is still the largestFDI contributor. Until the last fiscal year, FDI from India stood at Rs 37.6 billion, compared to Rs 10.6 billion fireign direct investment coming from the northern neighbour.

However, China surpassed India in terms of the investment commitment in the last fiscal year. It was the first time that investment commitments from China surpassed those from India. Until then, it was India which used to top the FDI commitment chart.

In 2012-13 alone, Nepal attracted FDI worth Rs 2.62 billion from mainland China, while there was Rs 3.07 billion investment commitment from Hong Kong.

In the year, investment from India increased marginally to Rs 2.50 billion from Rs 2.29 billion in the previous year.Started with investment in small industries, Chinese investors are expanding their presence in hospitals, hotels, construction, airports and hydropower sectors in the country. Especially, Nepal’s hydropower, tourism and agriculture sectors are on their investment radar. 

However, most of the Chinese investment has so far been concentrated on small and medium scale industries. 

“Most of the Chinese investment is coming in sectors like hotels and restaurants,” said Bipin Raj Bhandary, head of the FDI section at the DoI. 

Of late, Chinese companies are emerging as major players in the country’s hydropower sector, with the China Three Gorges International Corporation developing the 750-MW West Seti Project. 

And, Chinese telecom equipment vendors—Huawei and ZTE—almost enjoy a monopoly in the telecommunications infrastructure sector.

The number of Chinese FDI projects in Nepal has consistently increased in the last four years. 

Increased interest of Chinese investors in Nepal is evident with the fact that a rising number of Chinese business delegations are visiting Nepal of late. 

In November alone, three such delegations are coming to Kathmandu.

“There has been a surge in the arrival of business delegations from China for the last two years,” said Suraj Vaidya, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI). 

“Business delegations from Chengdu, Kunming, and Beijing are arriving in Kathmandu in November,” he added.

Vaidya, however, said Nepal has yet to cash in on the Chinese government’s policy of investing in this region. “We’ve not received Chinese investment as much as other countries like Bangladesh, Sri Lanka and Myanmar have got,” he said.

According to Vaidya, political stability is a must to attract big Chinese companies and big investment. “Nepal could attract a huge investment from China if the country gets political stability. Chinese investors are eyeing sectors such as hydropower and real estate, among others,” Vaidya said.

A member of the Nepal-China Executive Council said big Chinese companies were yet to enter Nepal.

“Chinese are yet to learn the process of doing business in Nepal due to cultural and language differences,” he said. “Chinese investors are ready to invest in the infrastructure sector under the build, own, operate and transfer (BOOT) model if the FDI process is simplified.”

With consistent growth in the number of Chinese tourists, tourism is another possible area where Nepal can attract a significant Chinese investment.

In the last fiscal year alone, Nepal received investment proposals for 24 hotels from China. An increasing number of Chinese tourists to Nepal is another factor motivating investors from the northern neighbour to invest in Nepal’s tourism sector.