Energy sector receives highest investment commitment: Report

KATHMANDU, Sept 6:

The Asian Development Bank (ADB)´s new macro economic update- 2014 has said that Nepal is awash with financial resources because of the huge inflow of remittances, budget surplus and increasing foreign direct investment.

The country has received remittances worth Rs 543.29 billion in 2013/14. The government´s slow capital spending also responsible for the excess liquidity in the banking sector as well, according to ADB report, “The government´s capital spending stood at 3.2 percent of the gross domestic product (GDP) last year and credit growth to GDP ratio also stood relatively low.”

Domestic investment commitment also increased as a result. Domestic capital investment commitment increased by 142 percent in 2013/14, up from 42 percent in 2012/13.

Energy sector received the highest investment commitment last year, which increased by 158 percent to Rs 223.39 billion in 2013/14 followed by construction sector (Rs 34.96 billion) and manufacturing sector (Rs 18.2 billion).

Likewise, tourism sector received investment commitment of Rs 5.78 billion. ADB said investment commitment increased due to rising investor confidence. It has appreciated the strong commitment of the new coalition government to introduce investor-friendly reforms in a range of sectors, including energy.

Foreign Direct Investment (FDI) commitment in 2013/14 stood at Rs 20.1 billion, marginally up from Rs 19.8 billion in 2012/13.

Similarly, energy sector is the largest receiver of foreign investment as well.

The report said FDI commitment in energy sector recorded impressive growth, whereas investment commitment in manufacturing, mineral, service and tourism sectors decreased, the energy sector saw an impressive growth of 306 percent, according to the report. “FDI mostly coming from India and China together accounted for 91 percent of the total energy FDI commitment.” Country-wise FDI commitment shows that China surpassed India as the top FDI source country with a 36.4 percent share in total FDI commitment in 2013/14.

Other major FDI source countries are South Korea, Cook Islands, USA,
Japan, British Virgin Islands, and Singapore together account for about 20 percent of total FDI commitment, said the recent report of ADB. “Despite the increase in FDI commitment, actual FDI inflow, as per the balance of payments, significantly decreased from Rs 9.1 billion in 2012/13 (0.5 percent of GDP) to Rs 3.2 billion in FY2013/14 (0.2% of GDP).”

Source: Republica