‘Improve investment climate to prevent capital flight’

The government must reduce the cost of doing business in Nepal by creating investor-friendly policies and quality infrastructure to prevent capital flight, said economists and bankers.

Speaking at a program entitled “Capital Movement in the Nepalese Economy: Status and Consequences”, they said that, in a globally integrated and competitive environment, people would try to bring capital where they see better returns. Nepal Rastra Bank, Bankers' Training Center organized the event.

Acting governor of the central bank Krishna Bahadur Manandhar said that tracking capital movement from and to Nepal was difficult as capital accounts were not opened. “Presently, Nepalis are not allowed to invest in foreign lands. We need to move ahead with new timely laws in this connection,” he said.

He said that controlling capital flow was not an easy task in a country like Nepal which shares an open border with a fast growing, huge economy.

Nepal Bankers Association president Radhesh Pant said that instead of controlling capital, the government should look into what is more beneficial for the country.

“We have experienced capital flight. People are taking money across the border as the cost of doing business in Nepal is higher,” he said. Kush Kumar Joshi, president of the Federation of Nepalese Chambers of Commerce and Industry, said that investments in major sectors had not picked up notwithstanding the changed scenario in Nepal.

“Higher interest rates offered by Indian banks on deposits have lured Nepali capital to India,” he said. In order to protect local capital and woo foreign money, he said the government must make timely changes in the Industrial Policy.

He said that as the continued feeling of insecurity about doing business in Nepal has led to capital flight, a marked improvement in the investment scenario was quite essential.

Attracting foreign direct investment (FDI) will be just a dream until we raise the confidence level of domestic investors, he said.

Stating that the problem of capital flight was partly a product of political problems, Dr Raghab Dhoj Pant, a monetary economist, said the central bank could hardly address it.
Source: eKantipur