Time to elevate Roti-Beti ties to wider investment partnership, says NICCI Vice Prez

Roti-Beti partnership between India and Nepal need to elevated to the next level with the Himalayan State presenting huge opportunities for the Indian investors across sectors from energy to infra to tourism, Sunil KC the Vice President at Nepal-India Chamber of Commerce & Industry (NICCI) & Advisor for International Investment Promotion at Federation of Nepalese Chambers of Commerce & Industries (FNCCI) told ET’s Dipanjan Roy Chaudhury on the eve of PM Sher Bahadur Deuba’s landmark India trip from Friday
What is the current state of bilateral ties between Nepal and India?
Nepal and India, being quite different in the size of country, population, economy as well as level of development in technology, have a multi-faceted relationship. The two countries are natural partners and there is tremendous potential to further develop ties. We can further deepen cooperation in the field of trade, investment, energy, tourism and infrastructure.

What are primary objectives of Nepal-India Chamber of Commerce & Industry (NICCI)?
The primary objective of NICCI is to promote Indian Joint Venture Investment and economic relations between Nepal and India through the strong bilateral relations and co-operation existing between the two countries. NICCI is a forum to address challenges faced by the member organizations, and it also represents them to appropriate authorities to work on industry-related issues. NICCI is the only body established in Nepal which works for Indian investment promotion.

The organization has been working in close coordination with the concerned ministries of the government of Nepal and the diplomatic missions of both the countries. Our motto is to develop Nepal as a solid destination for foreign investment, especially from India, to help mitigate bilateral trade and transit issues & promote bilateral tourism. NICCI also helps Indian investors to find partners for trade and manufacture in Nepal.

Can you elaborate on existing economic partnership between the two countries?
Before 1996, Nepal’s trade with India was 1/3 of total international trade of Nepal. Export to India was less than INR 5 Billion and Export of India to Nepal was less than INR 15 Billion. Hence, export import ratio of Nepal was 3:1. The main objective of the Trade Treaty that took place in 1996 under “Gujral Doctrine” was to support Nepal for industrial base with duty-free access for the products of Nepal into Indian market, for which there was a lot of home work among FNCCI, CII and NICCI. The treaty was widely appreciated by the business fraternity in Nepal and India as “landmark”, and created a strong vive among the business community in Nepal and India as well as abroad for investment in Nepal. The first tenure of the treaty for 7 years worked as “golden years” in the field of FDI in tune with the objective of the treaty for industrialization in Nepal.

Boosted by the spirit of the trade treaty, the international trade composition of Nepal flipped to two third trade with India continuing the ratio for the last more than 15 years out of Nepal’s International trade with 150+ countries. Here, I want to mention that most often India is regarded as the “single largest trading partner” of Nepal, but I see, India should also be regarded as the “single largest export partner” of Nepal. This is obvious because of exclusive people to people relationship of our two countries as mentioned above along with 1800 KM porous open border for movements, trading and economic exchanges through 22 land customs points between the two countries supported by trade and transit treaties and rail service agreement as well as several other treaties and agreements.

Nepal has recently crossed the benchmark of “trillion” in the history of Nepal’s export to India. Because of the same bilateral provisions, Nepal also has been India‘s one of the rewarding market. Despite pandemic, it was notable to witness an increase in export of Nepal to India in the last FY 2020/21 by 50 percent and India’s export to Nepal worth INR 6 Trillion, elicited by 32% compared to previous year. Now, our effort is towards meaningful continuity in growth of export preferably with more value-added products.

You mentioned that it was a “golden phase” in the history of FDI in Nepal after 1996 Trade Treaty. Can you mention some of such Indian companies who invested during that time?
There were number of companies from India as well as abroad who made the 1990s exciting in Nepal. Among them, despite 10 years of insurgency in Nepal, they have remained major contributors in the national exchequer of Nepal and also remained “blue chip” company in capital market terminology. To name a few, Dabur Nepal, Unilever Nepal Ltd, Surya Nepal (sister concern 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, and the like. The Oriental Insurance Company Nepal Ltd, and National Insurance Company Ltd are in Nepal.. Recently Dabur Nepal got permission for further expansion investment of NRs 9 billion from Investment Board of Nepal.

Can you expect additional FDI in Nepal from India?
Exactly this is my main concern. India remained number one position in Nepal in terms of annual FDI commitments in Nepal till five to six years back, but in terms of cumulative FDI into Nepal so far, India is still in topmost position. From the point of view of realization of FDI commitments, we believe that commitments from India are firm, because, Indian Investors do not need any passport or visa to come and invest in Nepal. But it doesn’t mean that Nepal has received optimum investment from India. We have received not more than 0.005% of total outflow of Indian Investment globally. The data of our Department of Industries, FDI Division says Nepal has received less than one trillion NR so far from India in the last FY 2020/21, whereas the same source shows commitments from Chinese Investments in recent years and it was nearly 1.5 Trillion NRs till last year.

The government and the private sector in Nepal, would like to welcome India’s well established new companies after 1990s to Nepal. For this, we at NICCI has planned an India focused ‘Nepal-India Partnership Summit” physically in Nepal in association with the Investment Board of Nepal, Ministry and Department of Industry supported by diplomatic missions of both the countries, for which we have had preliminary discussion with the partnering agencies.

What could be the potential areas of investment in Nepal for Indian investors?
Nepal is a country with vast diversity of potentials for investment. As per one of the technical reports, it is considered to have potential of near about 0.2 million megawatts of hydro-power generation, but none of the Indian private sector except GMR has come up to utilise this mass potential whereas India is in dire need of abundant energy for further industrialization and domestic needs. Government of Nepal has further granted lower Arun hydroelectric project of 679 megawatt as cascade project of Arun 3 to SJVN. Bangladesh is also approaching for construction of 1110 MW Sunkoshi II and 550 MW Sunkoshi III project for construction for their need targeting 9000 MW power purchase plans from Nepal by 2040. There are thousands of such projects in Nepal and Nepal cannot consume all these power. Further, the government of Nepal is formulating new guidelines for export of Nepal with transmissions and grid plans where, the developers can come up with the proposal of direct export to India or third country after construction. So, the potential in hydro sector is abundant in Nepal.

We have abundant herbs and formula, but we need mass production technology for cost effective production and marketing of quality Ayurveda medicine locally, regionally and globally.

Likewise, due to the same bio-diversity, Nepal is also regarded as excellent destination for investing in tourism sector.

Since we are talking about FDI and technology transfer, we have also potentials for construction and infrastructures like roads, tunnels, bridges, construction of new airports and upgradation of existing airports, construction and running of ICDs and ICPs, Export Processing Zones in all seven provinces, construction and running of railways like East-west railways and Birgunj Kathmandu railway, collaborations for quality hospitals in seven provinces in health sector, collaborations in management and information technology for quality education as well as collaborations in running of IT Companies, because, labour cost in Nepal is relatively cheap with brilliant minds of youngsters. Garment sector and other manufacturing sectors, for which dedicated EPZs can also be considered for Indian investors.

NICCI in association with the Embassy of India in Kathmandu has also prepared and updated the a handbook for investing in Nepal specially dedicated to Indian Investors.