By amending the prohibited list incorporated in the Foreign Investment and Technology Transfer Act (FITTA)-2019 of Nepal, the government of Nepal has decided to now allow foreign direct investment (FDI) in the agricultural sector of the country.
Issuing a notice in the Nepal Gazette on January 4, the Ministry of Industry, Commerce and Supplies (MoICS) of Nepal stated that FDI is now permitted for primary agricultural sectors including livestock farming, fisheries, bee farming, vegetables and fruit farming, oil, pulses, and the dairy industry. The FITTA of Nepal had previously banned FDI in these sectors and this decision now allows large industries to operate on the condition that at least 75% of their products should be exported.
Stakeholders in Nepal have condemned this decision by the government. In a joint press conference on January 5, organizations including the Central Dairy Cooperative Association Nepal, the Federation of Central Livestock Cooperative Organizations, the Dairy Industries Association (DIA), the Nepal Dairy Association (NDA), and the Fisheries Association of Nepal voiced their serious concerns about the government’s decision.
Stating that the government of Nepal had introduced the policy in favor of multinational companies, Rajkumar Dahal, Chairperson of DIA. said, “The government is conspiring against domestic industries to serve the vested interest of certain multinational companies.” He argued that with the country being self-sufficient in dairy products, fisheries, and bee keeping, it made no sense to allow FDI in these industries.
Commenting that the government introduced this policy despite strong objections from stakeholders, Radha Krishna Sapkota, Chairperson of NDA, said, “This policy will do nothing but negatively affect agro-industries and farmers in Nepal.”
- As per the Department of Customs of Nepal, the country imported agricultural products valued at US$2.13 billion while Nepal’s export of all goods was US$834 million in the fiscal year 2019-2020.
- The Economic Survey (2019-2020) carried out by the Ministry of Finance of Nepal found that the gross added values of the agriculture and non-agriculture sectors in the fiscal year 2019/20 were 2.6% and 2.3%, respectively.
- This survey shows that the contribution of the agricultural sector to the GDP is decreasing whereas the non-agricultural sector’s is increasing.
- In 2019/20, the contribution of the agricultural sector to the country’s GDP was 27.6%, and the non-agriculture sector, 72.4%.
- The Economic Survey (2016-17) shows that Nepal’s vegetable output grew by 9% to 4.16 million tons in the last fiscal year. The study revealed that the country produces 13.73 tons of vegetables per hectare.
- A Survey Report on FDI in Nepal carried out by Nepal Rastra Bank (2018) states that the service sector in Nepal received the major share of FDI followed by the industrial and agricultural sectors.
- Foreign investors from more than 39 countries, who invested in 252 firms in Nepal, had shown more interest in the service sector.
- 70.2% of the total FDI was in the service sector whereas 29.5% was in the industrial sector which was the second preferred sector.
- The agricultural sector remained the least preferred sector.
- As of 2016, FDI in the agriculture sector was only 0.3%, attracting very little investment.
- The FDI in agriculture included coffee plantations and herbs processing businesses.
Highlighting that the current move to allow FDI in agriculture is targeted at creating an environment conducive to export trade, Narayan Prasad Regmi, Joint-Secretary at MoICS responded, “This will help to increase agricultural production by enhancing productivity and adopting the latest technology in Nepal’s agriculture.”
In September last year, the MoICS formed a task force led by Joint Secretary Regmi to amend the existing laws to promote foreign investment. The task force assessed the existing laws, including FITTA, an environmental impact assessment for the industry with foreign investment, the profit return process of companies, and land acquisition laws.
