KATHMANDU, Sept 20: Deepening political uncertainty compounded with persisting labor problems have dragged down fresh investment commitment in the industrial sector by almost 7 percent during the fiscal year 2011/12 compared to a year earlier.
Crucial sectors of economy such as tourism, services, energy and agro-based industries suffered the decline in new commitment for investment.
Statistics compiled by the Department of Industry (DoI) shows that total new investment including foreign and domestic, reached just Rs 84.42 billion during the fiscal year 2011/12.
The country witnessed a fall in the investment commitment despite the rise in the number of firms registered with the government across the country during the review year.
The government reported an increment of commitment for new firms to 279 during the fiscal year 2011/12 up from the 242 firms registered in previous fiscal year.
Entrepreneurs attributed the decline mainly to political instability, irresponsible behaviour of industrial workers and persisting power shortage.
“Given the worsening investment climate, local industrialists are switching to trading business to avoid tension dealing with labor unrest and power shortage which has eventually pushed up cost of production,” said Pashupati Murarka, vice president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).
According to the the statistics, the fresh investment in the energy based industries has dropped by around 18 percent to Rs 55.01 billion during the fiscal year 2011/12 compared to a year earlier.
Similarly, the commitment for new investment has fallen by around 19 percent in service sector to Rs 9.59 billion during the fiscal year 2011/12. Likewise, farm-based industries also suffered a loss in the fresh investment to alarming 69 percent to Rs 161 million.
“The investors are gradually losing faith on the government´s ability to protect them from multiple problems plaguing the industrial sector such as labor and power shortage. It is a huge challenge for us to compete with the foreign products in domestic market amid soaring cost of production," added Murarka.
The tourism, a highly prioritized and potential sector for investment, also saw a sharp fall in new investment commitment during the review year. The fresh commitment in the sector for investment went down by whopping 34 percent, receiving just Rs 1.81 billion fresh commitment.
However, a reason to be optimistic is that the number of employment opportunities increased to 16,960 in the year from 13,727 of previous year.
On the back of slowing investment, the government is trying to get the new Special Economic Zone (SEZs) bill, Industrial Enterprises Act (IEA), Foreign Direct Investment and One Window Policy endorsed to lure more investment from foreign as well as domestic investors.