CAN IBN BRIDGE THE GAP FROM INTENT TO INVESTMENT

SUSHIL BHATTA  
CEO, INVESTMENT BOARD NEPAL

The government is geared to host the third Nepal Investment Summit 2024 in Kathmandu on April 28-29. There has been ongoing debate in the public sphere on whether the summit will be a jamboree of pledges or will it garner investments. 

Business 360 caught up with Sushil Bhatta, Chief Executive Officer of Investment Board Nepal and Coordinator of Nepal Investment Summit Secretariat to learn about the preparations of the summit, the investment climate, the role of the Investment Board Nepal in pursuing large scale investments, and the management of public private partnership (PPP) projects. Excerpts:

The Office of the Investment Board, Nepal is in the centerstage of the investment ecosystem. You are leading the Secretariat of Nepal Investment Summit 2024; what will be the major focus of this summit? 

First allow me to shed light on the objective of Nepal Investment Summit 2024. This is a national event being hosted by the government to position Nepal as a promising investment destination. The fiscal budget 2023/24 announced to organise the summit and the cabinet meeting on November 9 last year decided to host the summit on April 20-21. However, due to conflicting schedule with other important international forums, the cabinet later in January rescheduled the event for April 28-29. 

The summit mainly aims to position Nepal as a promising investment destination in the global landscape. The government had hosted investment summits in the past as flagship events to pursue private investments – foreign, domestic and diaspora community. This is a platform to express government’s unwavering commitment to the protection of investments, eliminate obstructions and simplify investment process as well as provide required facilitation for the entire business cycle.

Simultaneously, this is a platform to present sectoral investment opportunities, credible and bankable projects along with policies where investors can lodge their interest. This is an opportunity for investors to witness Nepal’s investment climate, explore opportunities and interact with different stakeholders of the investment ecosystem. As far as the major focus of the summit is concerned, there will be two plenaries and various thematic breakout sessions, B2B, G2B and G2B meetings, project showcasing, sideline meetings, signing of Memoranda of Understanding and agreements, and networking opportunities among domestic and foreign private sector, Nepali diaspora community, development finance institutions (DFIs), and lenders. There will be an exclusive opportunity for serious, potential and capable investors to meet and interact with the prime minister. 

The summit is also an acknowledgement of the contribution of the private sector. We will celebrate the success of the private sector on the occasion. Participants will get the opportunity to listen to the experiences of existing foreign and domestic investors. I believe there will be more impact when potential investors are able to hear the success stories from the concerned persons themselves and potential investors will also have an opportunity to exchange ideas. 

We are convening this summit after five years of the Nepal Investment Summit 2019. Due to travel restrictions following the Covid 19 pandemic, we were previously not able to host such mega events for investment promotion. However, as things have normalised, we have continued with our investment promotion activities with roadshows, seminars, workshops and conferences and project market sounding, among others as the Office of the Investment Board, Nepal, is mandated to work as Investment Promotion Agency (IPA). 

In the last two years, we organised two notable events – the Sustainable Infrastructure Investment Forum (SIIF) and International Conference on Financing. What I want to stress is that such events are important for promoting investments and we are mandated by the law (Public-Private Partnership and Investment Act, 2019) to act as the IPA and national public-private partnership (PPP) agency. 

However, the Investment Summit is a national-level event and the entire government machinery has been mobilised for it. The Steering Committee chaired by the Finance Minister and comprising of ministers and secretaries of various ministries as well as leaders of the private sector umbrella bodies – FNCCI, CNI and NCC – is the supreme body to take decisions and instruct the concerned agencies to accomplish all groundwork required for the summit. The Steering Committee works on the direct guidance of the Prime Minister. The second-tier mechanism is the Implementation Committee which discusses, enriches and finalises the proposals that are required to be submitted to the Steering Committee. The Implementation Committee is chaired by the Chief Secretary and comprises of secretaries of different concerned ministries and leaders of the private sector. A task force for legal reforms led by Secretary of the Office of the Prime Minister was also formed and it has submitted the report to the Steering Committee recommending amendment to ten laws and two regulations to create a more conducive investment climate. Another mechanism formed for selecting projects to be showcased in the summit is the Technical Committee, chaired by the Secretary of the Ministry of Industry, Commerce and Supplies. Finally, the mechanism to look after all the preparations including concept note, designing programme, proposing the name of the invitees, developing promotional materials, coordinating pre-event seminars, coordinating with speakers, invitees, panelists, event venue management and everything related to convening the summit is the Nepal Investment Summit Secretariat which I am coordinating. Apart from that, ministries have provided projects from their repository to showcase in the summit. The Ministry of Foreign Affairs has been fully involved in coordinating with Nepali missions abroad to bring in dignitaries, keynote speakers, project marketing through our missions as well. On top of that, the diplomatic community in Nepal and development partners have been briefed regarding the Investment Summit. 

What is the role and responsibility of the private sector umbrella organisations represented in each committee formed to convene the summit? 

The Nepal Investment Summit is mainly for the private sector. The government has onboarded the private sector umbrella organisations as co-organisers of the summit. As the summit is organised to pursue private sector investments – foreign and domestic as well as from diaspora community – domestic private sector must be a part of the summit. The private sector has representation in each committee, which means they are involved in decision-making, including the amendment of laws. The private sector’s advice is crucial to create an investment-friendly environment. On the other hand, private sector umbrella organisations have been organising various pre-event seminars in the country and abroad, and approaching potential investors within their network to attract investments. Simultaneously, the private sector is going to showcase investment projects that have been studied/prepared by themselves as well as coordinate B2B and B2G meetings. Private sector umbrella organisations as co-organisers of the summit are equally responsible for the successful convening of the summit. 

It has been reported that some of the world’s famous investors have been invited. What is the status of those invitations? 

We have invited high-level dignitaries, policymakers, foreign and domestic investors, development partners (DPs) including multilateral development banks (MDBs), diplomatic community, development finance institutions and think tanks. There have been correspondences from the Nepal Investment Summit Secretariat, from the Nepali diplomatic missions abroad, from private sector umbrella organisations based on the network and relations to the invitees. We trust that there will be significant participation of potential investors, DPs, MDBs, diplomatic community, DFIs and BFIs as well as experts, think tanks, policy makers, domestic private sector and media fraternity, among others. The summit will set a landmark in the country’s attempt to pursue private investments in the form of Public-Private Partnership (PPP) and private equity investments in potential sectors. Most importantly, we have invited existing foreign investors/developers attributing their contribution, the trust they have demonstrated to us. They are our brand ambassadors. There will be an astounding presence of investors in the summit, and we believe that investors will capitalise on this opportunity to navigate the investment opportunities in Nepal. 

Could you tell us about the projects that have been prepared to showcase at the Nepal Investment Summit? 

A total of 148 projects will be showcased in the summit. Ministries of the federal, provincial and local level governments have proposed various projects, and the private sector has over 30 projects. Projects are not only from the government repository; Nepal’s private sector is equally capable in preparing/studying projects and they are also showcasing projects to seek resources/investments. Definitely, Investment Board Nepal also has some projects. These projects basically belong to a wide range of spectrum including energy, transport, ICT, tourism, urban development, health and education, agriculture, mines and minerals, among others. Projects that will be showcased are for solicitation and market sounding as well as for agreements. Some of the projects are in the ideation stage and we are showcasing them because investors can develop the project based on the idea following a certain level of study. Furthermore, we are presenting sectoral investment opportunities by presenting sector profiles that cover holistic sectoral prospects. 

Assuming that there are more projects signed under public-private partnership (PPP) framework, will the Investment Board Nepal as the national PPP agency be able to manage all the projects considering the lean and thin nature of its office? 

We have experience of executing PPP projects of above Rs 6 billion and in the energy sector we are implementing projects that are of 200 MW or more capacity. PPP itself is complex in nature but the concession that we sign is fundamental legal document to execute the PPP projects. The Office of the Investment Board, Nepal has been providing effective handholding to investors/developers for the entire project lifecycle. It is true that we are a lean and thin institution as we work with various concerned agencies of the government and the investment ecosystem. However, where sustainability and institutional capacity of the Office of the Investment Board, Nepal is concerned, the office is temporary in nature as staff are managed by the government and consultants provided by the development partners. Preserving institutional memory/institutional knowledge is challenging in this scenario. This is why this institution requires permanent staff of various fields – project development professionals (under various sectors), legal, finance, stakeholder and outreach, among others; which I like to call investment cadres like in revenue and in foreign affairs, among others. The institution will remain lean and thin, however, it should be given permanent staff as envisioned by the organisation and management (O&M) survey. Another critical aspect is financial autonomy. We have set up the IBN Fund, however the existing legal framework does not allow the Office of the Investment Board, Nepal to operate the fund. The institution itself should envision the avenues of revenue and headings of spending. In the amendment Bill of Public-Private Partnership and Investment Act, 2019, we have proposed these two critical aspects to be addressed – institutional sustainability through human resources and financial autonomy. Strengthening the Office of the Investment Board, Nepal is the need of the hour as the institution has been implementing projects worth Rs 525 billion. Two large-scale cement projects – Hongshi Shivam Cement and Huaxin Cement Narayani with 6,000 and 3,000 tonnes per day capacity, respectively – and venture to waste project (Dharan) are already in operation. We have streamlined energy projects with capacity of around 4,000 MW and a few other non-energy projects into a result-based framework. Further, as the national PPP agency, we envision developing the Office of the Investment Board, Nepal as the PPP Centre of Excellence by preserving knowledge, being aware of new dynamics of PPP by developing a strong network with PPP professional networks and PPP agencies as well as transfer knowledge in terms of managing PPP projects to the concerned agencies. Thus, we believe that the PPP culture will prevail in the country. PPP is the next window of opportunity to drive our development endeavours. 

The panel chaired by CEO of the Investment Board Nepal has submitted the amendment draft of the Public-Private Partnership and Investment Act, 2019, and your committee has also been reviewing the PPP Policy. What changes do you foresee in the PPP landscape? 

The 55th Board meeting of Investment Board Nepal formed a committee under my convenorship to prepare the amendment draft of the Public-Private Partnership and Investment Act, 2019. We have submitted the amendment draft following a thorough study by the team to the 57th Board and the Prime Minister-led Board has acknowledged and decided to take it forward. Further, we are reviewing PPP policy to make it compatible in the present context. As the country embarked on the journey to federalism, the Public-Private Partnership and Investment Act was introduced later in 2019 and various strategies of the PPP policy, which was issued back in 2015 contradicts with the Public Private Partnership and Investment Act, 2019. Considering the climate risks, we also have to pay attention to crafting a strategy for climate risk management in PPP infrastructure. PPP policies and strategies should also take care of the financing gap seen in achieving Sustainable Development Goals (SDGs), mobilising concessional financing and aspiration of being a middle-income country as envisioned by the 15th five-year plan. Moreover, we have to make the policy more contextual diving into the international best practices and our own lessons learned. The first meeting of the PPP Review Committee has been held and we have discussed emerging dynamics of PPP and appropriate pathways for Nepal. 

How confident are you of the investment pledges being realised in due course as there is always a huge gap in commitments and realisation? 

First, we have to look at the seriousness of the commitment and credibility of the development. The issue of credibility concerns us as well. The fundamental is that the country should offer a conducive investment climate and the Office of the Investment Board Nepal has been enhancing credibility by implementing large-scale projects. Project management is critical in implementing large-scale projects. We have low-hanging fruits like Arun-3 Hydroelectric Project, which has achieved 74% implementation progress so far. A total of 252-km-long cross-border 400 kV transmission line is an integral part of the project. Further, other FDI companies like Dabur Nepal, Unilever Nepal, Bottlers Nepal, among others are making sound profits in Nepal. Dabur Nepal is making Rs 9.68 billion reinvestment for capacity enhancement and product diversification. These are a few testimonies of Nepal’s conducive investment climate.  
We are inviting more investors to invest in Nepal and make lucrative returns. In this regard, we have to upscale efficiency of our investment ecosystem and when we do so investors will come happily to invest in Nepal. If we are able identify projects, execute, manage and facilitate, this will create a credible and trustworthy environment for investment. 

Implementation of more FDI projects in Nepal will simultaneously enhance our own capacity and we have to spread this understanding. We believe that the investment commitments received from serious, potential and capable investors will be realised in due course. We have to understand that the investment commitments will be realised during the construction and operation of the project besides a less significant amount of the project cost initially in the study period. Some projects like hydroelectric projects could have longer gestation period and investment realisation could take a bit longer in such projects. We do approve the investment only after a certain level of engagement of investors/developers with the Office of the Investment Board, Nepal. Initially, we do provide study rights to them and once they submit the Detailed Project Report (DPR) or Detailed Project Feasibility Report (DFSR), that will be reviewed and approved from the board prior to providing approval for investment, which is applied in solicited, unsolicited and directly negotiated projects and we do consider all the pledges received under all three ways of project procurement as commitments.