Sunil K.C. Vice President of Nepal-India Chamber of Commerce and Industry (NICCI) and Advisor for International Investment Promotion at Federation of Nepalese Chambers of Commerce and Industry (FNCCI) told ET
Dipanjan Roy Chaudhury on the eve of PM Sher Bahadur Deuba’s historic trip to India from Friday
What is the current status of bilateral relations between Nepal and India?
Nepal and India, being very different in terms of country size, population, economy as well as level of technological development, have a multi-faceted relationship. The two countries are natural partners and there is enormous potential to further develop the relationship. We can further deepen cooperation in trade, investment, energy, tourism and infrastructure.
What are the main objectives of the Nepal-India Chamber of Commerce and Industry (NICCI)?
The main objective of NICCI is to promote investment in Indian joint ventures and economic relations between Nepal and India through the strong bilateral relations and cooperation existing between the two countries. NICCI is a forum to address the challenges faced by member organizations, and it also represents them to relevant authorities to work on industry-related issues. NICCI is the only organization established in Nepal which works for the promotion of Indian investments.
The organization works in close coordination with the relevant ministries of the government of Nepal and the diplomatic missions of the two countries. Our motto is to make Nepal a solid destination for foreign investment, especially from India, to alleviate bilateral trade and transit issues and promote bilateral tourism. NICCI also assists Indian investors to find trading and manufacturing partners in Nepal.
Can you detail the existing economic partnership between the two countries?
Prior to 1996, Nepal’s trade with India accounted for 1/3 of Nepal’s total international trade. Export to India was less than INR 5 billion and export from India to Nepal was less than INR 15 billion. Therefore, Nepal’s import to export ratio was 3:1. The main objective of the trade treaty which took place in 1996 under the “Gujral Doctrine” was to support Nepal for an industrial base with duty free access for the products of Nepal to the Indian market, for which there was a lot of work from home among FNCCI, CII and NICCI. The treaty has been widely appreciated by the business fraternity in Nepal and India as a “landmark” and has created strong vivacity among the business community in Nepal and India as well as abroad for investment in Nepal. The first term of the treaty for 7 years functioned as “golden years” in the field of FDI in line with the purpose of the treaty for industrialization in Nepal.
Boosted by the spirit of the trade treaty, the composition of Nepal’s international trade has increased to two-thirds of trade with India, continuing the ratio for more than 15 years of Nepal’s international trade with over 150 countries. Here I want to mention that most often India is considered as the “biggest trading partner” of Nepal, but I see that India should also be considered as the “biggest export partner” of Nepal . This is evident due to the exclusive relationship between the people of our two countries as mentioned above, as well as the 1800 km porous open border for movement, trade and economic exchange through 22 land customs points. between the two countries supported by trade and transit treaties and a rail service agreement. as well as several other treaties and agreements.
Nepal has recently crossed the ‘trillion mark’ in the history of Nepalese exports to India. Due to the same bilateral arrangements, Nepal has also been one of India’s most profitable markets. Despite the pandemic, it has been notable to witness a 50% increase in exports from Nepal to India in the last financial year 2020/21 and exports from India to Nepal worth 6,000 billion INR, obtained by 32% compared to the previous year. From now on, our efforts are aimed at ensuring a significant continuity of export growth, preferably with products with higher added value.
You mentioned that this was a “golden phase” in the history of FDI in Nepal after the 1996 trade treaty. Can you mention some of these Indian companies that invested during this period?
Many Indian and foreign companies made the 1990s exciting in Nepal. Among them, despite 10 years of insurgency in Nepal, they have remained major contributors to the state treasury of Nepal and also remained a blue chip company in capital market terminology. To name a few, Dabur Nepal, Unilever Nepal Ltd, Surya Nepal (sister company of ITC India), Asian Paints Nepal, Berger Jenson and Nicolson Nepal, Kansai Paints Nepal, Aarti Strips, Ashok Steel Industries, Gorkha Lahari, Pro-biotech Industries, Gorkha Brewery, Highland Distillery, Nepal Distillery, Sungold Brewery Nepal, United Breweries, United Breweries Nepal, United Spirits Nepal, Varun Beverages Nepal, Hotel Everest International, Hotel Hyatt Regency, Nepal SBI Bank Ltd, Everest Bank Ltd, (sister company of Punjab National Bank), Standard Chartered Bank Nepal Ltd, Reliance Spinning Mills, Life Insurance Company (LIC) Nepal, Asia Pacific Communication Associates Nepal, Thompson Nepal, etc. Oriental Insurance Company Nepal Ltd and National Insurance Company Ltd are in Nepal.
Can you expect additional FDI in Nepal from India?
Exactly that is my main concern. India remained number one in Nepal in terms of annual FDI commitments to Nepal until five or six years ago, but in terms of cumulative FDI to Nepal so far, India still ranks the first place. From the perspective of fulfilling FDI commitments, we believe that India’s commitments are firm as Indian investors do not need passports or visas to come and invest in Nepal. But this does not mean that Nepal has received optimal investments from India. We have received no more than 0.005% of the total Indian investment outflows to the world. Data from our Industries Department, FDI Division, indicates that Nepal has received less than NR 1 trillion from India so far in the last financial year 2020/21, while the same source shows commitments from Chinese investments in recent years and that it was almost NR 1.5 trillion. until last year.
The government and private sector in Nepal welcome new Indian companies that are well established after the 1990s in Nepal. For this, we at NICCI have planned an India-focused “Nepal-India Partnership Summit” physically in Nepal in association with the Nepal Investment Council, Mission-supported Ministry and Department of Industry diplomatic relations of the two countries, for which we had discussions with the partner organizations.
What could be potential investment areas in Nepal for Indian investors?
Nepal is a country with a great diversity of investment potential. According to one of the technical reports, it is considered to have a potential of almost around 0.2 million megawatts of hydropower generation, but no Indian private sector except GMR has come to use it. this mass potential as India urgently needs abundant energy for further industrialization and domestic needs. The Government of Nepal has further awarded SJVN the 679 megawatt lower Arun hydropower project as the Arun 3 cascade project. Bangladesh is also approaching the construction of the 1110 MW Sunkoshi II and Sunkoshi III projects. of 550MW for building their needs targeting plans to purchase 9000MW of power from Nepal by 2040. There are thousands of such projects in Nepal and Nepal cannot consume all this power. In addition, the government of Nepal is developing new guidelines for exporting from Nepal with transmissions and network plans where developers can offer a proposal for direct export to India or a third country after construction. Thus, the potential of the hydropower sector is abundant in Nepal.
We have abundant herbs and formulas, but we need mass production technology for cost-effective production and marketing of quality Ayurvedic medicines locally, regionally and globally.
Likewise, due to the same biodiversity, Nepal is also considered an excellent destination to invest in the tourism sector.
Since we are talking about FDI and technology transfer, we also have potentials for construction and infrastructure such as roads, tunnels, bridges, construction of new airports and modernization of existing airports, construction and transport. operation of ICD and ICP, export processing zones in the seven provinces. , the construction and operation of railways like the East-West Railway and the Birgunj Kathmandu Railway, collaborations for quality hospitals in seven provinces in the health sector, collaborations in the management and information technology for quality education as well as collaborations in running IT companies because, labor cost in Nepal is comparatively cheap with bright young minds. Apparel sector and other manufacturing sectors, for which dedicated EPZs may also be considered for Indian investors.
NICCI in association with the Embassy of India in Kathmandu has also prepared and updated a manual for investing in Nepal specially dedicated to Indian investors.