According to Nepal Department of Industry (DoI) statistics, foreign investments in Nepal decreased significantly by 63 percent in the first eight months (review period) of FY 2018-19 compared to the same period, last year.

The country recorded NPR 34.9 billion in investments between mid-July and mid-February of FY 2017-18, while this year the investments dropped to NPR 11.25 billion.

However, FDI commitment in terms of numbers of projects increased drastically during the current review period compared to last year.

The Himalayan nation received investments for 194 projects in the first eight months of 2017-18, whereas it registered investments for 224 projects during the same period, this year.

Reasons for Decline in Foreign Investment for Nepal

• Energy Sector 2018: As per the DoI, Nepal did not receive any investments in the energy sector this year, whereas it had received an investment of NPR 22 billion during the same period last year.
• Agriculture and forestry sector: Nepal received foreign investments worth NPR 1.8 billion between mid-July and mid-February last year, while it recorded only NPR 88 million during the same period this year.
• The country also experienced a drop in investments for its information & technology and mineral sectors this year.

Private sector leaders explained that both domestic and foreign investors were reluctant to invest in Nepal because of the rising production costs.

“Though the government has been creating a favorable policy environment for business and investment, it is crucial that production cost is brought down through necessary measures to bring in investment,” said Shekhar Golchha, Senior Vice President, Federation of Nepalese Chambers of Commerce and Industry.

Let’s see how Nepal will mobilize the Investment Summit to improve the FDI inflow in the country for the remainder of the current fiscal.

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In a delegation-level meeting with the Deputy Director of the International Affairs of Agriculture and Forests Ministry of Japan Takami Nakada, Pun urged Japanese Government to increase its investment in Nepali energy and hydropower sector.

Highlighting Japan-Nepal ties, Pun thanked Japan for its technical and financial support to various Nepali projects and overall contribution to Nepal development.

Minister Pun informed the Japanese delegation about the ongoing irrigation-related developments in Nepali agriculture sector such as Bheri Babai and Rani Jamara.

Nepal Minister Pun discussion with Japan Minister Takami Nakada

In response, Takami expressed Japanese Government’s readiness to support Nepal in the near future.

“We have come here to carry out study and research about possibilities in Nepal. Japan’s private sector is willing to invest in Nepal,” reads a statement by the Deputy Directo.

Japanese Ambassador to Nepal Masamichi Saigo was among the key officials present at the meeting.

Earlier in this month, Japan and Nepal had discussed on enhancement of labor cooperation.

“I believe that the authorities of both the nations will finalize the modality of supplying workers and other legal issues, and also hold discussions on the sectors that Nepali workers will be employed in,”  said one of the sources associated with the process.

The latest developments indicate a notable growth in Japan-Nepal ties. What more to come?

Also Read:

• Nepal, Japan Sign New MoUs, Discuss Other Bilateral Issues

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The ADB fund will be used for two projects including a USD 130 million concessional loan for Urban Water Supply and Sanitation Project and USD 20 million additional loan financing for SASEC Power System Expansion Project.

Urban Water Supply and Sanitation Project
This project will improve water supply and sanitation infrastructure for increased access to the aforementioned resources in 20 municipalities.

SASEC Power System Expansion Project

On the other hand, the SASEC Power System Expansion Project seeks to address Nepal’s electricity sector concerns by:

• Raising Nepal’s power transmission capacity
• Improving its distribution network
• Increasing mini-grid renewable energy systems in off-grid areas
• Enhancing Nepal Electricity Authority (NEA) and Alternative Energy Promotion Center’s (AEPC) capacity
• Developing a utility-scale photovoltaic project

Nepal Finance Ministry Secretary Dr. Rajan Khanal and Nepal Resident Mission Country Director Mukhtor Khamudkhanov signed the agreement on behalf of the Nepal Government & ADB, respectively.

Girl-Friendly Toilets
Meanwhile, Nepal is already beginning to witness a revolution in the form of ‘girl-friendly’ sanitation infrastructure. Lately, a lot of schools are becoming particular about maintaining proper hygiene and sanitation during menstruation informed Bardevi Basic School Teacher Debaki Timalsina Dotel.

“When we were sharing the toilet with boys, we had to stay in queue for long time for our turn. It used to be troublesome especially during periods. “Going home was the only option for changing pads and cleaning ourselves,” said Binita Regmi, Niranjana Secondary School 11th Grader.

But ever since the school constructed gender-friendly toilets, girls don’t have to skip classes during periods. Furthermore, the mental stress is also reduced. 

“We have been provided with the sanitary pads from the school and there is a proper place for disposal also,” Regmi added.

Bardevi Basic School set such example back in 2017. “In lack of proper toilet, we earlier had to defecate in the open. We were always in fear of being caught, but now we feel safe,” said Asmita Gajurel, Bardevi Basic School Eight Grader. This has also benefited female teachers.

“Sanitary pads are not easily available in rural areas. That is why we have arranged pads for the students in the school. We have also trained the students on making sanitary pads at home,” Dotel added.

BBS Principal Kedarnath Dotel informed that the facilities have been constructed with support from Korea International Cooperation Agency (KOICA), Good Neighbors International and District Public Health Office (DPHO).

Girls have become regular to school from the time separate toilets were constructed.

Read More:

• Asian Development Bank (ADB) Funds Nepal’s Big ‘Road’ Project
• FY 2018-19: Nepal Poised for Healthy, But Slow Economic Growth

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According to a recent update, both the countries have agreed upon to hold a two-day secretary-level bilateral meeting in the month of November 2018.

Towards this end, the Ministry of Energy Water Resources and Irrigation (MEWRI) of Nepal forwarded the proposal to Bangladeshi authorities to conduct a meeting of Joint Steering Committee (JSC), supported by the Energy Secretaries of both countries and a Joint Working Group (JWG) under the Joint Secretary of the Energy Ministries of both nations.

While the meeting during November 15-16, 2018 is yet to fix its agenda, a Nepal Electricity Authority (NEA) official has reportedly informed that the discussion will be around two key agendas: Trading in energy sector between the two countries and Bangladeshi investment in Nepal’s hydropower sector.

“Once we hear back from the Bangladeshi authorities, we will finalize the agenda to be discussed in the meeting,” informed Dinesh Kumar Ghimire, Joint Secretary of MEWRI.

NEA is planning on export of power generated from Nepali hydropower projects to Bangladesh through the infrastructure support in the Indian territory.

On the other side, Bangladesh has also been keen on investing in Nepal energy sector, especially the hydropower sector.

Background
The two sides formed new mechanisms in this regard last month after signing MoU on energy cooperation in August 2018. In the same meeting, the two countries decided to form a JWG and a JSC to track the progress of discussions and provide relevant direction, which finally resulted in a scheduled meeting.

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The World Bank and International Monetary Fund (IMF) agreed to provide related monetary assistance to Nepal, during the WB annual meeting held at Bali, Indonesia.

Nepal Finance Ministry International Economic Cooperation Coordination (IECCD) Chief Shree Krishna Nepal and World Bank Nepal Country Director Qimiao Fan signed the agreement on October 10, 2018.

Nepal Finance Minister Dr Yubaraj Khatiwada and World Bank South Asia Region Vice Chairperson Hartwig Schafer were also present at the occasion.

Speaking at the occasion Nepal Finance Minister Dr Yubaraj Khatiwada appreciated WB’s support for the growth of various sectors such as infrastructure development, tourism development, education and health while hoping that WB would increase its support to Nepal in the future too.

World Bank South Asia Region Vice Chairperson Hartwig Schafer was also present at the occasion.

World Bank Aid for Nepal Aid
Recently, the World Bank approved a whooping Rs 100 million loan for the country’s energy sector. The grant aimed to support the energy sector for effective implementation of related policies and institutional measures. Additionally, it plays an important role in strengthening the financial viability of the Nepal Electrical Authority (NEA).

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The grant under the Nepal Energy Sector Development Policy Credit program intends to support the country’s energy sector in effective implementation of related regulatory, policies and institutional measures. 

The fund is going to play a key role in strengthening financial viability of the Nepal Electricity Authority (NEA) through the establishment of a regulatory framework that eases electricity trade and restructures NEA encouraging the private sector participation.

“The proposed credit aims to support the restructuring and market reform of the electricity sector to improve governance and performance of electricity institutions, eventually enhancing quality and efficiency in services,” World Bank Country Manager for Nepal Faris Hadad-Zervos said in a statement.

The World Bank’s move gains significance in view of the fact that Nepal is heavily dependent on electricity imports despite its high hydropower potential, to address the power shortage domestically.

This situation persists owing to the large number of yet-to-be-materialized hydropower projects in the country.

“The new credit aims to implement policy and institutional measures to overcome these challenges and help bring about structural reforms in the energy sector, to ensure affordable electricity services and encourage predictability for sustainable investment,” the World Bank release informed.

The World Bank is currently supporting 22 active investment projects in Nepal with USD 2.5 billion assured in commitment from the International Development Association.

With the first credit assistance in 1969 for a telecom project, the World Bank has so far offered
USD 4.75 billion in assistance to Nepal, with USD 3.48 billion in credits and USD 1.27 billion in grants.

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Towards this end, the officials are preparing a final a draft of Memorandum of Understanding (MoU) for energy cooperation and power trade agreement between the two countries.

According to Dinesh Kumar Ghimire, Joint Secretary at the Nepal Ministry of Energy, Water Resources and Irrigation (MoEWRI), Nepal Government has already given its nod for the deals and is awaiting the response from the Government of Bangladesh.

We are currently holding discussions with the Bangladeshi Government to finalize the MoU, says Ghimire.

Ghimire further informed that Nepal has proposed a new energy mechanism for power trade and investment in its finalized draft.

Post signing the agreement, Nepal plans to set up a joint examining and working committees for bilateral energy cooperation and also hold trilateral discussions with Bangladesh and India for a feasible solution to address all the pending issues pertaining to transmission lines.

The latest update comes in the backdrop of earlier talks, where the Bangladeshi Government had promised to build a large hydropower project in Nepal and also received nod from the opposite side for related investment. However, things did not materialize then.

“Power trade between Nepal and Bangladesh is complex because the transmission lines would have to traverse India,” explains Ghimire.

The proposed project framework is based on SAARC Framework Agreement for Energy Cooperation signed among SAARC member countries in 2014.

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As a unique geography with around 6000 small and big rivers, and other natural resources like wind, solar, biofuel, among others, Nepal holds a strong energy potential that can power the local and global energy requirements in the future.

Despite its size, the country holds such a strong portfolio contributing to almost 3 percent of the world’s electricity generation through its hydropower.

Besides, the country also hosts a diverse biodiversity profile that helps it contribute to the development of the global ecosystem.

Continuing its journey from the past, Nepal has made major strides towards establishing its image as the country for clean energy solutions. As part of these efforts, the country underwent rapid developments and has taken active measures.

Good Bye Coal!

Coal consumption has always been a major topic of discussion when it comes to achieving full-fledged energy revolution.

And, Nepal stands at its best in this regard!

While its close neighbor India ranks among the top countries in terms of coal production and dependence on coal for electricity generation, Nepal claims to have been maintaining zero percent coal consumption for power generation.

This adds to Nepal’s strong energy portfolio at the global level.

Tapping Hydropower Potential

Out of Nepal’s 84000 MW hydropower potential, around 43000 MW is economically viable.

Taking ahead Nepal’s strong energy potential, the Government of Nepal has taken various initiatives over the period.

As a key measure in the process, the Nepal Government declared 2016-26 as the ‘national energy crisis reduction and electricity development decade’.

Experts feel that Nepal’s hydropower generation will reach record heights in the years to go.

The government envisages to take the country’s hydropower production capacity to 10,000-25,000 MW in the next 10-20 years period.

Progressing as planned, the country has seen major addition to its hydropower portfolio in 2017.

While the actual hydropower production was just 753 MW in 2015, the Nepal’s hydropower production capacity grew almost three-fold in 2017 alone.

With an addition of 50 MW to the national grid, the country’s energy sector saw its hydropower potential growing to 150 MW with the addition of 16 new hydropower projects with a total installed capacity of 100 MW, by the end of 2017.

Meanwhile, in the recently-held Himalayan Hydro Expo (HHE) 2018, the President of Nepal Bidya Devi Bhandari urged the global investors to invest in Nepal’s hydropower sector, which reiterates Nepal’s strong commitment to the development of hydropower sector.

“We have huge potential in hydropower development and if properly tapped, this sector will be able to change the fate of the entire nation. The country is importing huge quantum of electricity annually and this practice should be ended. The government and private sector should join hands and come together for hydropower development,” said the President in her address at the three-day HHE 2018.

Event Nepali industry experts felt that this conference would act as a major platform to draw investment into the country’s hydropower sector.

According to Vijaya Sagar Pradhan, Managing Director of Expo and Event Management Private Limited, this expo was aimed at achieving the key objective of generating 17,000 MW hydropower capacity over the next seven years.

The second edition of the three-day Nepal Power Investment Summit 2018, held during January 27-29, 2018, also saw Nepal’s special attention on hydropower sector, wherein, the President said the government will accord top priority to foreign investment and technology for the sector’s development.

It is noteworthy that Bangladesh has recently expressed its interest to invest in Nepal’s hydropower projects. “In order to meet the growing demand, we are considering Nepal a big market that can fulfil our needs,” Bangladeshi Ambassador to Nepal Mashfee Binte Shams said in a recent statement.

In another major announcement, the Government of Nepal has also announced the 1200-MW Budhi Gandaki Hydropower Project following Nepali Cabinet’s decision in this regard on November 24, 2017. This project to be built with domestic resources is being termed as a ‘national-pride project.

Solar and Wind, The Most Abundant

As a country surrounded by large mountains and natural habitat, Nepal holds a strong potential for solar and wind energy.

Considering the rate of wind blows at an average of 18 hours per day, APEC estimates Nepal’s wind energy potential can generate 3000 MW power with two remote districts Manang and Mustang alone holding 2500 MW potential.

Adding to the already-installed ones, Nepal is expected to ramp up the establishment of more wind power stations in the future.

When it comes to solar energy, Nepal find its true solar energy utilization across the hilly areas of the country with scattered settlements and no power access.

The population in such remote parts of the country are relying on solar energy for their energy needs. 

With the average solar radiation varying between 3.6-6.2 Kwh/m2/day and the sunshine of about 300 days in a year, AEPC estimates Nepal’s solar energy production potential at 2100 MW.

While Nepal had 185,017 solar powers installed across the country as of 2010 prior to the earthquake disaster, the number of installations went on to rise post the April 2015 earthquake and has substituted the hydropower requirements at large across the affected hilly areas.

It is noteworthy here that Nepal’s largest wind-solar hybrid power system, supported by the Asian Development Bank (ADB), is also already under operation.

The USD 16.2 million worth project, powered by 20-KW capacitive wind turbines and 15-kW capacitive solar PV panels, accounts to 110 units of energy generation per day and is currently catering to 83 rural households in the Hariharpurgadi village of Sindhuli district.

Green or Electric Vehicles (EV) Adoption

Nepal has been clear on its energy policies that have been in line with the eco-friendly requirements, over the period.

Taking a leap ahead, Nepal has already started looking for alternative energy solutions that are on high priority across the globe.

In a move controlling vehicle emissions and ensuring clean energy policies, Nepal is gearing up for the adoption of Electric Vehicles (EV) or green vehicles, at a pace expected to be faster than that of the neighboring Asian giant India, says Nepal’s former Finance Secretary Rameshore Khanal.

“When there is disincentive to buy petrol-fueled cars, people will readily buy EVs. Whereas, in Nepal, there has been a voluntary adoption of EVs even when enough incentives are not in place. EVs will provide a measure of energy security for Nepal,” says Khanal.

However, lack of strong government policies recommending the same are yet to happen across the country, he adds.

Khanal pitches for the official disincentivization of the fossil fuel car usage and declaration of rural areas recently connected with the national road network and other areas like Singh Durbar as
‘EV-only zones’.

With the right policies in place, Nepal’s complete transition to EVs can become a reality in a span of 10 years, says Khanal.

Biogas, an Eco-friendly Solution

As part of measures to protect its abundant natural resource and an eco-friendly environment, Nepal is also gearing up for the implementation of biogas plants across the country.

With the government’s subsidiary-level support, biogas plants of various sizes have already started coming up across different parts of the country.

According to Nepal’s Alternative Energy Promotion Centre (APEC), the existing 320,000 biogas plants across the country are saving about 400,000 trees, annually, which equals to minimizing Green House Gas (GHG) emissions by more than one million tons annually.

In addition, the existing animal population can result in 14.9 million tons of animal dung, which upon conversion to biogas can meet up to 40 percent of Nepal’s overall energy power requirements.

Besides animal waste, around 670 metric tons of waste generated from the country’s 58 municipalities also offer scope for the high-potential biogas production.

The Last Word

With such a strong energy potential, Nepal can be of a major advantage for the global energy sector.

Besides, this high-range energy portfolio would also be of major need for the country in its developmental path towards meeting the global Sustainable Development Goals (SDGs).

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The second edition of the three-day Nepal Power Investment Summit 2018, held during January 27-29, 2018, saw the participation of renowned personalities from international bodies such as SAARC, BIMSTEC and ASEAN, global leaders and investors, ambassadors, bankers, ministers and businessmen, among various other key delegates from different parts of the world.

A total of 350 delegates from 24 countries including China, Korea, Europe and the United States, around 100 participants representing 30 international companies and around 400 participants from Nepal including policymakers and private sector players took part in the summit.

As part of the summit, various government and industry experts expressed their views on Nepal’s energy sector and its potential.

President Calls for Energy Investment

Inaugurating the summit on January 27, 2018, President Bidya Devi Bhandari called on the global and local investors to tap the untapped hydropower potential of Nepal.

“We need capital and technology for the implementation of large scale hydropower projects and the government will accord top priority to attract foreign investment and technology. The investors will also benefit from the growing demand for electricity in Nepal as well as South Asia,” said the President in her inaugural address.

In this regard, she promised an investor-friendly environment in line with their interests and needs to all the players coming forward.

Need to Act Fast, says Ambassador

Highlighting Nepal’s strong energy potential, Indian Ambassador to Nepal Manjeev Singh Puri said the country should act fast in implementing the hydropower projects considering the inclination towards renewable energy projects at the global-level.

“In the backdrop where solar power is getting cheaper day by day, hydropower will lose its competitive advantage to solar energy soon. Therefore, Nepal should act fast in developing the hydropower projects,” said Puri in his keynote address.

He went on to say that Nepal should start mega energy projects for both employment generation and economic development and to stay ahead in competition.

“Nepal should immediately start developing large projects to provide energy at competitive rates,” he added.

Industry Experts Seek Faster Implementation

Though Nepal’s energy policies for foreign investors look promising, the government agencies working in the process need to pace up the rate at which they implement the projects, say the energy industry experts.

“We are the private sector who looks maximized return within short period of time, but here in Nepal we have to invest more than five years doing basic things, getting approvals and clearances,” said a Vietnam-based businessman who participated in the summit.

The experts also lauded the Government of Nepal’s power purchasing policies in USD term, ease in removal of land ceiling for big hydro projects and management of technical human resources as some of the notable developments required for attracting foreign investment.

Innovation in Investment

Speaking at a panel discussion on ‘FDI in Nepal’s Power Sector’ held as part of the summit, various energy industry experts and investors called for innovative ways of financing in the Nepali hydropower sector.

“Since hydropower projects are capital intensive and have longer gestation period, innovative financing solutions like equity financing is the need of time,” says a Nepal-based private industry player.

The panel speakers also pitched for independent regulatory body to check the demand and supply along with fixing energy tariff in the country.

Towards Energy Development and Expansion

According to the summit organizer, Energy Development Council (EDC), this summit is aimed at creating a platform to ensure one-step business and business expansion in the energy sector while matching the interests of industry players.

The summit was hosted a participant-investor platform allowing participants to meet investors for a debt financing of around
USD 5-20 billion for various power projects including solar, wind and hydro energy.

Speaking on the occasion, EDC Chairperson Sujit Acharya highlighted that Nepal holds a 40,000MW electricity generation potential over the next 10 years.

“The resources needed for harnessing hydropower to that level could be available from the international financing institutions under Engineering, Procurement, Construction and Financing modality,” he added.

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The country’s hydropower potential is estimated at 85,000 MW with 43,000 MW being economically-viable.

The country is currently having a installed hydropower capacity of 752 MW and rivers are the only source of the plants operating in the country.

The electricity demand in the country is growing at an annual rate of 28%. 92 percent of the country’s energy needs are met by the hydropower sector.

Interestingly, 2001 alone saw over 100 hydropower project proposals in Nepal. Nepal’s first hydro power plant was built in Pharping with the support of the United Kingdom.

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