FDI in Nepal

Topics: Macroeconomics, Tax, Investment Pages: 2 (820 words) Published: March 10, 2010
Along with the economic characteristics of the host nation i.e. Nepal, analyzing the current trends of the FDI flow in the nations is also important. The FDI flow is around 6.6 million in the recent last periods. The Nepal economic freedom score is 53.3, making its economic the 133rd freest as of 2009 Index. Also its score is 0.9 point lower than last year, which indicates there is a decline in 10 economic freedoms. For any foreign investment should planning to invest in the host nation should analyze the economic freedoms of the host countries. Nepal is ranked in 29th out of 41 countries in the Asia-Pacific region. If we look into business freedom in Nepal, it scores 60. The freedom to conduct business is limited by the Nepal’s regulatory environment. For any investment to startup it takes around an average 31 days while the world average is of 225 days. Also trade freedom scores is 63.2 and the weighted average was 13.4 % in 2006. The government of Nepal continues to practice and improve the current policies regarding the trade policies. However the practice of import bans, service market access market barriers, import taxes, and non-transparent regulations, inadequate infrastructure and trade capacity add more cost to the trade. However on the Fiscal freedom, Nepal scores 86.3, which is higher as compared to other countries. Nepal has moderate tax rate, both the top income tax rate and corporate tax rate is 25%. Also other added taxes are value -added tax commonly known as VAT and property tax. The revenue collected from the tax contributes around 10.9% to the GDP in the recent years. Also Nepal Government size scores 91, compared to other countries. The total government expenditure which includes consumption and transfer payments is low. In the recent times government spending was at the par to the 17.3% of GDP. In Nepal the public expenditure system suffers from structural weakness and lack of transparency. Also Nepal monetary freedom scores 78.7 as...
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