Analysis

Foreign investment for sustainable development

Jivesh Jha

Nepal-Invest-Summit

Foreign investment plays a creative and constructive role in development or generating employment for a country. Developing countries have made fortunes by inviting foreign investment.

Foreign investors are sources of capital, foreign exchange and technical know-how. They create job opportunities for the national population and contribute to infrastructure development which can spur further strategic economic partnerships and activities.

However, there is a dire need of ensuring compliance of laws, rules or regulations to facilitate and regulate foreign business companies. There may be the requirement of a new legislation or a fresh policy of the government to deal with the equations of the foreign investments.

Investors have the capital and they have shown interest in investing in Nepal for economic and strategic reasons. Now, Nepal is shouldered with the responsibility to translate the commitments into actions and provide the investors a favourable atmosphere for investments. If we succeed, Nepal may become an international market like China or India for exporting goods or services that may have possibility to lower down dependencies over international markets.

Conversely, the issues like business environment, taxation or low-purchasing power of consumers may come in the way of investments (despite government’s effort to further enhance Nepal’s standing as a promising investment destination). The ever-changing custom duties, exchange rates or the bulk presence middlemen mafias may adversely affect the business transactions.

Above all this, there is the issue of inconsistencies in policies. National priorities or policies often get changed or modified with the change of government here. It should be borne in mind that investors want to see a strong policy framework which could stand tall for at least two to three decades.

On top of these, foreign investors need protection. The state should ensure that their business would not be affected with strikes or other forms of political or non-political complexities. After all, capital inflows should be perceived as economic rather than political fortunes.

Nepal may appear to be a tough market for investment but it has a lot of potential. It could emerge as a bright spot in world’s economy. The taxation or e-commerce reforms may convert Nepal into an integrated market. The country should adopt liberal laws and policies for e-commerce that could play a pivotal role in attracting big foreign-controlled online retailers like Amazon and Flipkart.

In this regard, Kathmandu University School of Law (KUSL), Dhulikhel has decided to propose a legal framework that could suggest ways to spearhead legal and policy reforms for ensuring positive vibes for the investors investing in the Himalayan Republic. KUSL will take interest in critical comments of the delegates on the law and institutions of Nepal.

Apart from the conducive legal environment, the investors are concerned about political stability, restriction on transfer or conversion of currencies; and dealing with the instrumentalities of the state that often lack transparency. Lack of policy consistency and unwillingness to widen the avenues of inflows of foreign investment could also be the reasons for the reduction of investments.

The government should also set its sight on infrastructural developments, especially, roads, railways, energy or ports, to attract the investors. There could be a concrete plan of tax holidays for foreign investors. The Republic could have plans in place to give special treatment to foreign companies to entice capital inflows. Special status could be given to investors from non-Asian region.

Despite this, the state should not allow any development or economic or business activities that could welcome environmental or health hazards. As Nepal is one of the early states in expressing commitments to abide by the international obligations on environment and sustainable development, the effort should be made to disallow any business that may have an adverse impact on ecology. While thinking about development measures, the need of the present and the ability of the future to meet its own need and requirements should be carefully taken into account. So, the state is under an obligation to strike a balance between environmental laws and principles and development policies.

The 1987 World Commission on Environment and Development (often called Brundtland Commission) defines sustainable development as the development that meets the needs of the present without compromising the ability of the future generations to meet their own needs.

It means development must ensure both economic and ecological sustainability. So, the imperative goal of the Himalayan Republic should also be to defend and improve environment for present and future generations.

As the state embarks on the path of prosperity, foreign investments can play a vital role in reaching that goal. But there should be a reason to believe that it will reap benefits for common people, curb workforce migration and in so doing, help the state to meet the development goals in a sustainable manner.

The political dispensation should offer a stable and predictable regulatory regime for enticing massive amount of foreign investments. Arguably, healthy growth in foreign investment helps maintain national economy and value of national currency. Over and above all this, Nepal and foreign investors could enjoy strategic partnerships and the states could have bilateral or multi-lateral relationships anchored by an economic friendship and solidarity.

The writer is a Lecturer of Law at Kathmandu University School of Law, Dhulikhel, Nepal.

Published on 29 March 2019  

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