1. Foreign Direct Investment among South Asian Countries: Concerns and Opportunities By Ms. Kushum Shakya

2. Table 1.1: South Asian GDP per Capita Growth Rates SAARC Countries Growth Rate of GDP Per Capita 1960s 1 1970s 1 1980s 1 1990s 1 2000-04 2 Pakistan4.292.113.821.474.1 India1.520.753.703.716.2 Bangladesh1.40-0.521.983.155.1 Maldivesna 4.92- Bhutanna 5.363.40- Nepal0.48-0.321.492.252.6 Sri Lanka2.152.632.843.983.8 Source: 1.World Development Indicators (2002), and 2. World Development Report (2005).

3. SAARC Countries 199319992000200120022003Difference between 1993-2003 FOREIGN DIRECT INVESTMENT (US $ Millions) Bangladesh14.10179.728017465102623.40 Bhutan0.001002- India550.021702320390021504369694.36 Maldives7.011.51312 - Nepal6.04.4 01015150.00 Pakistan306.047247032248553474.51 Sri Lanka195.0176.4172.917223522917.44

4. SAARC Countries 199319992000200120022003Difference between 1993-2003 FOREIGN DIRECT INVESTMENT AS % of GDP Bangladesh0.040.400.620.380.140.18350.00 Bhutan0.000.230.00 0.340.00 India0.200.50 0.900.500.63215.00 Maldives2.22.002.101.900.00 -100.00 Nepal0.20.10 0.000.200.2210.00 Pakistan0.68.00 6.008.000.56-6.67 Sri Lanka1.91.10 1.41.14-40.00 Source: SHRD, 2005.

5. Table 1.4: Top Ten Investors in South Asia Investors Countries Bangladesh IndiaNepalPakistanSri Lanka Top Ten Investor USA1 (29.5)1 (22.1)7 (4.4)1 (41.6) Japan3 ( (7.6)5 (4.4)6 (6.1)3 (15.0)4 (11.6) Germany8 (1.9)6 (3.8) 4 (6.2)5 (7.0) UK2 (13.9)3 (7.6)5 (6.2)2 (22.7)9 (1.47) France 9 (2.5) 5 (2.2) Korea, Rep6 (2.8)4 (4.5) 8 (1.6)1 (32.7) Hong Kong4 (7.5) 10 (2.1) 3 (11.9) Singapore5 (5.9) 6 (6.4) Malaysia-8 (2.75) Australia-7 (3.0) 2 (15.0)

6. Investors Countries Bangladesh IndiaNepalPakistanSri Lanka Intra-SAARC Investors Bangladeshna(0.03)na Na Bhutanna (0.1)naNa India7 (2.4)na1(37.2)na10 (1.22) Maldivesna Na Nepalna (0.6) Pakistan(0.7)na(0.3)naNa Sri Lanka10 (0.8)(0.01)na Na SAARC Share 3.90.0437.6na2.1 Source: FDI and Economic Integration in the SAAARC Region, Institute of Policy Studies (2000).

7. Table 1.5: Number of Industries Approved for FDI by Category up to 2005/06 (First nine months) (Rs. in million) CategoryNo. of Industries Total Project Cost Total Fixed Cost Foreign Investment FDI in Total Project Cost (%) Employment Agriculture15440.15385.20101.76 23.12 1023 Construction211145.56878.64653.92 57.08 1449 Energy Based1719572.3 0 17917.473271.15 16.71 4877 Manufacturin g 48637993.4 3 27521.7212424.72 32.70 62979 Mineral31153.141068.3245.98 3.99 1129 Service26516480.6 2 13869.297404.71 44.93 17513 Tourism26016045.4 8 15239.884675.60 29.14 15982 Total106792830.6 7 76880.5228577.84 30.78 104952 Source: Department of Industry, Industrial Statistics, 2005/06.

8. Major Constraints to Investment Low Growth Rate Shallow Credit Market Shallow Financial Market Acts and Regulations Rigid in rules and regulations. Poor Infrastructure Electricity Problems Corruption Political Instability High Age Dependency

9. Prioritized Sectors/Prospects/Opportunities Hydropower projects Tourism Education and Health Sector Manufacturing Transport and Communication Information Technology

10. Overview of FDI Potential by Terms for Nepal I. Short-Term (Less than 3 years) oTourism oManufacturing for regional and global markets oProduction if herbal products for medicines and cosmetics.

11. II. Medium Term (3+ years) oPower generation for the Indian market oOther agro-based industries oBasic ICT (Information, Communication and Technology) services oPrivatization related opportunities

12. III. Long Term (10-20 years) Business, professional and financial services for the region oLight manufacturing for the domestic and linked to exporters

13. Suggestions/Observations/Requirements 1.Harmonize investment policies, taking a common stand towards FDI and simplifying rules and regulations for FDI in the South Asian countries. 2.Harmonize and coordinate macroeconomic policies. 3.Integrate and interconnect the financial institutions (central banks and other related financial institutions). 4.Harmonize exchange rates, tax laws and custom laws. 5.Harmonize national standards and certification process to ensure quality.

14. Suggestions/Observations/Requirements… 6. Increase capacity building by providing technical assistance, financial resource mobilization, raw material’s mobilization, provide skill and development training among SAARC. 7. Strengthen the privates sectors like FNCCI. 8. Attract on joint venture from other South Asian countries like India (35% joint ventures from India to Nepal). 9. Update Acts and regulation. 10.Improve FDI and technology transfer Act 1992 in compatible with globalization and liberalization.

15. Thank You