Here is a good news. The latest data from UNCTAD shows that total FDI inflows to Nepal in 2011 were US$95.49 million, up from US$86.74 million in 2010 and US$38.56 million in 2009. FDI inflows as a share of gross fixed capital formation (GFCF) have also increased to 2.5 percent in 2011 from 2.2 percent in 2010.
In Nepal, the growth rate of FDI inflows between 2011 and 2010 were 10 percent (it were 125 percent the previous year). South Asia saw a 23.8 percent increase in FDI inflows, including 30.6 percent in India. In terms of total FDI inflows to South Asia (US$34.79 billion), India’s share was 90.69 percent (US$31.54 billion) and Nepal’s was 0.27 percent (lower than its share in 2010, when FDI inflows to Nepal was 0.30 percent of total FDI inflows to South Asia).
|FDI inflows to South Asia in 2011|
|Country||US$ million||Growth rate, 2011-2010||% of SAR inflows||% of GFCF||Ranking (out of 182)|
The inward FDI attraction index ranking in 2011 was 175 out of 182 countries. The Inward FDI Attraction Index ranking is based on the average of a country’s percentile rankings in FDI inflows and in FDI inflows as a share of GDP.
Furthermore, the inward FDI potential index ranking in 2011 was 150 out of 182 countries. The Inward FDI Potential Index ranking is based on the simple average of a country's percentile rank in each of the economic determinants areas (market attractiveness, availability of low cost labor and skills, enabling infrastructure, presence of natural resources). A country's ranking within each group of determinants is based on the simple average of the country's percentile rank of each variable included in the group.
Determinants of FDI potential:
- Market attractiveness (GDP, Per capita GDP, Real GDP growth)
- Availability of low cost labor and skills (labor force in manufacturing, unit labor cost in manufacturing)
- Enabling infrastructure (electric power consumption, road density, paved roads, rail lines, linear shipping connectivity index, telephone lines, mobile cellular subscription, fixed broadband internet subscribers)
- Presence of natural resources (arable land, exports of fuels, exports of ores and metals)
|Country rankings by Inward FDI Potential Index (out of 182), 2011|
|Economy||Market attractiveness||Availability of low-cost labor and skills||Enabling infrastructure||Presence of natural resources||Overall rank|
The table above shows that Nepal has the lowest FDI potential in South Asia. In market attractiveness it is tied with Afghanistan, our neighbors have more availability of low-cost labor and skills, enable infrastructure is second worst in South Asia, and presence of natural resources is also not that great. Now, in the latter one note that it has nothing to do with hydropower potential; its more related to ores and metals.
Globally FDI flows in 2011 surpassed the pre-crisis average – reaching US$1.5 trillion, but it still remained more than 20 percent below their 2007 peak. The report projects a moderate but steady rise, with global FDI reaching US$1.8 trillion in 2013 and US$1.9 trillion in 2014, barring any macro-economic shocks.
FDI inflows in 2011 increased across all major economic regions. Flows to developing countries reached a record US$684 billion, up by 11 percent. However, FDI recession continued in Africa and LDCs.