» 06/04/2012 14:02 NEPAL Foreign investment down by 39%. Nepal on the brink of economic collapse by Kalpit Parajuli Political instability, poor security and the ongoing strikes by trade unions among the main obstacles to economic development. From July 2011 to May 2012, investment fell from 715 million to just over 400.
Kathmandu (AsiaNews) - Foreign investment in Nepal has plummeted a huge 39%. This is shown by a study of the Ministry of Industry, which examined the economics of the country from July 2011 to May 2012. According to analysts, the government's initiative to proclaim Bhattarai 2012 "Year of the investment" has failed to give confidence to business and society. They fear the climate of instability in the country, left without a real government after the dissolution of the Constituent Assembly on May 27 last and the likely resignation of Prime Minister Bhattarai.
Nepal is among the poorest and least developed countries of the world. About a quarter of the population lives below the poverty line and agriculture, the main source of income for about three quarters of the Nepalese, represents one third of GDP.
The Golchha Organization, a leading investment company in the country, active in local and foreign markets, says that among the causes of the decline of the economy are the excessive politicization of labour, lack of infrastructure and energy. Since the Maoists came to power in 2008, the Nepalese entrepreneurs have faced thousands of strikes in their companies, organized by unions linked to the Maoist party. This has discouraged the opening of new industries. Between July 2011 and May 2012, foreign companies have invested about 48 billion rupees (435 million) by opening 206 new businesses. Between 2010 and 2011 the figure amounted to 79 billion rupees (715 million euros), with news 220 industries.
Diwakar Golchha, deputy director of the organization, explains that the social instability and the great power of the Maoist unions threaten economic development and alienate investors. They prefer to support the services sector such as tourism, which has fewer risks than manufacturing or energy. In 2012, the service companies invested in 80 new projects worth 8 billion rupees (90 million). However, the energy sector, especially hydropower still attracts large capital and represents 47% of investments made in July 2011 and May 2012, but experts say the costs outweigh the potential gains in the short term. Although hydropower is the only energy source in Nepal, the state offers incentives to companies. To date, five dam projects are waiting to be completed.
According to K Kosshi Kush, President of Federation of Nepalese Chamber of Commerce (Fncci), "future political scenarios will determine the country's development." If leaders fail to find a solution to the impasse and provide security for companies and society, we will have serious concerns". Fearing a collapse of the economy in the coming months, even China and India, the main partners in trade with Kathmandu, use the tactic of '"wait and see."
On May 27, the Constituent Assembly elected in 2008 was dissolved over a dispute between parties regarding the writing of the new Constitution, which still remains only a draft. For several days hundreds of protesters have been stationed in front of the palaces of the institutions to protest against the political class, accused of looking only to their own interests and not those of the population. Authorities fear new attacks on people and buildings linked to political power. To avoid riots and protests, the authorities have deployed thousands of police and soldiers in major cities across the country.