Foreign Direct Investment (FDI) are a prerequisite for a growing economy like Nepal.

Realizing
this notion, Nepal opted for liberal investment policy to attract FDI since early 1990s. Leaping
and crawling into making appropriate changes in its laws, regulations and operating bodies,
Government of Nepal has now established one-window system at highest level under Nepal
Investment Board to facilitate potential investors at each step that might encounter during FDI
influxes. Adding to this, other government institution like Nepal Rastra Bank and even
parliamentary bodies Notwithstanding, Nepal stills lacks substantial FDI investment in the
country. In recent years, Nepal's ambition of attracting more FDI was deterred due to COVID-19
pandemic with a decline of around 35 percent in 2020. This decline is presumed to be more
severe than Global Financial Crisis of 2009.

Talking of recent reforms related to FDI investment in the country, Government of Nepal has
initiated number of institutional and legal reforms to attract FDI which will be vital to
complement resource gap that exists in our country's capital formation. Some major documents
relating to this are:

a. Foreign Investment Policy, 2015

b. Foreign Investment and Transfer of Technology Act, 2019
c. Public-Private Partnership and Investment Act, 2019
d. Industrial Enterprises Act, 2020

Besides above acts Government has positively intervened the scenario with major institutional
reforms:

a. Establishment of One Stop Service Center to facilitate foreign investment

b. Nepal Rastra Bank Foreign Investment and Foreign Loan Management by-law, 2021

However, despite all policies reformations and institutional interventions from the government,
influx of FDI in the country seems modicum and dispiriting. Primarily, this is due to issues like
turbid inter-governmental systems and national neglect in a large sense. Reasons of poor FDI in
the country can be analyzed under light of Dabur Nepal Private Limited, FDI manufacturing
industry which was established through FDI investment in year 1989 and started commercial
production in year 1992 A.D. It has started its operation with 10 crores of FDI investment in the
manufacturing setup. Dabur has a long history whose foundation was laid by late S K Burman in
year 1884 A.D. It has been a pioneer in manufacturing ayurveda and natural health care company
in global arena.

Dabur Nepal is a well-known name for Nepalese and Indian consumers. It has redefined
ayurvedic market in the global arena and its commodities are exported to India and other
countries and has been the significant contributor to national economy. It has been involved in
manufacturing of commodities related to health care, personal care, food products, home care
and other segments of consumer health products. Currently, Dabur Nepal employs over 1000
people and over 30,000 are indirectly associated with Dabur Nepal for sustenance and a living.

Dabur Nepal has been felicitated with number of awards like Best Exporter Award of Export
Promotion Board in 2000 and other certifications like Certificate of Hazard Analysis an Critical
Control Point (HACCP).

However, amid all these positive influences Dabur Nepal has brought about in the country, it has
been facing numerous challenges and obstacles which reflects hindrances and deterrents every
FDI investors ought to face in the country. Labor issues, stringent policies from government
institutions to thwart business growth, unfavorable circumstances for business expansion, acute
shortage of electricity, obstacles from other independent institutions like media are some primary
reasons which is constraining the smooth operation of Dabur Nepal.

Instances of the deterrence are evident in different newspaper articles and bulletins at different
times. One example of this is the malicious campaigns by Nepalese media houses in year 2013
A.D. Though the actual reasons are still covert, it was presumably the dispute of financing and
advertising in different medias which caused this campaign. Government was largely unable to
cater proper attention to the situation result of which Dabur Nepal's lost its brand value and
social image which it garnered through persistent effort over years. Another instance is a month
or long labor strike in year 2008 which was largely fueled by political sister concerns existing in
manufacturing labor market. Company shut down its production unit after the Maoist-affiliated
workers locked up its main factory at Birgunj in Parsa district. It jeopardized the whole
production system for a year or so which caused in the halt of FDI earlier decided by the
promotors in India. These are few instances which are in fact a representative image of issues
that FDI investors face often in the country. Failure to address such image badly tarnish the
image of the country making investors more suspicious for their investment.
Reference:

Nepal Rastra Bank, Economic Research Department, September 2021