Nepal’s hydro sector, an assured return for investors, finance minister says

 The proposed long-term power trade agreement which Nepal plans to sign with India later this month will be a potential game changer for Nepal, experts said on Monday.

                                          photo: TKP

Nepal and India are set to sign the agreement initiated during Prime Minister Pushpa Kamal Dahal’s May-June visit to New Delhi.

Once signed, the 25-year agreement is expected to pave the way for trading of power under medium- and long-term sales agreements between the two sides.

Indian Prime Minister Narendra Modi had announced during a joint press meet with Dahal on June 2 that the southern neighbour would buy 10,000 MW of electricity in 10 years from Nepal under the long-term power trade agreement.

“Nepal’s hydropower sector is an assured return for investors,” Finance Minister Prakash Sharan Mahat said on Monday. He was speaking at the opening ceremony of the 37th Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI).

The two-day conference in Kathmandu has been organised under the theme—Chambers of Commerce, Helping Businesses Get Set for the Future. It has focused on three important aspects—sustainability, entrepreneurship and trade.

CACCI is a regional non-governmental association composed of the national chambers or associations of commerce and industry in Asia and the Western Pacific.

The confederation has membership from 26 countries.

The finance minister said that the World Bank and Asia Development Bank are pumping investment in Nepal’s renewable energy sector. “This initiative will also build the confidence of Nepal’s private sector to invest,” Mahat said.

Chandra Prasad Dhakal, president of the Federation of Nepalese Chambers of Commerce and Industry, said India's decision to include imported hydroelectricity from Nepal under its renewable energy count would further increase the market in India.

With abundant hydroelectricity potential, Nepal is well positioned to utilize clean and renewable energy for its sustainable economic development, he said.

Dhakal invited the private sector of Asia-Pacific to explore the potential that Nepal possesses, including the energy sector.

The speakers highlighted that Nepal has huge investment prospects in sectors like hydropower, tourism, manufacturing, agro-processing and IT.

“We have robust foreign exchange reserves and a positive balance of payments. Our banking sector has sufficient liquidity to lend to the private sector,” Dhakal said.

Highlighting Nepal as a popular destination for international tourists, Dhakal said that there are opportunities to invest in cable cars, luxury hotels resorts and theme parks.

“Those who have invested in Nepal have done pretty well. None of the companies have incurred losses here,” said Mahat.

President Ram Chandra Paudel said that the trade growth would not only make the economy vibrant, but strengthen cross-border relationships too.

“Nepal’s growing middle class has pent-up consumer market demand and this provides opportunities for wholesale, consumable goods and services,” Paudel said.

Baburam Bhattarai, the former prime minister, said that Nepal missed the industrialisation growth phase. As a result, Nepal’s agriculture sector was linked directly to the service sector.

“It was because of remittance-driven consumption,” he added.

“We were not able to utilise the remittance to the productive sector. This is where the government, private sector and think tanks should assess and work together,” said Bhattarai.

Bhattarai said Nepal may fall into the “remittance republic trap” and the low-level equilibrium trap if it fails to invest in the productive sectors.

“We are already late catching up with the trajectory of neighbouring economies.”

Bhattarai said focusing on production and industrialisation can drive economic growth. “We need to be serious to develop entrepreneurship.”

Minister Mahat said that tourism is getting better and the government is working on building robust infrastructure, an important task for Nepal’s growth.

The government is focused on building infrastructure like airports, roads, cable cars and other critical infrastructure to draw more tourists, said Mahat.

“As we have a huge opportunity in the IT sector exporting software and output to companies. So, through the budget of the current fiscal year, we have announced that those who invest in the IT sector will get a 50 percent rebate in income tax,” Mahat said.