A study done by the National Planning Commission (NPC) has said foreign investment should not be made in the primary sector of agriculture.
The study report on 'foreign investment potential in agriculture, 2022' released last Thursday suggested the government to not bring in foreign investment in the agricultural products. However, it can be attracted for storage, pr0ocessing and marketing.
"There is no need to bring in foreign direct investment in the primary sectors of agriculture. Nepal's banks have adequately floated loan for this and government has also continued discount in tax. There are also other policy benefits," the report mentioned, arguing that as the companies working in the primary sector of agriculture are not listed in Nepal Stock Exchange, such companies are in need of search for foreign investment.
At such situation, it is not logical to float foreign investment in agriculture sector. However, it can be entertained for processing, storage and marketing to add value to the agricultural products. The foreign direct investment is essential in cold storage, canning, processing, mill etc. With this, a separate regulation is necessary on foreign direct investment in these sectors.
The regulation to be framed to govern the foreign direct investment in secondary sectors of agriculture should clearly mention the area where the investment is permitted, according to the study report. Similarly, how the investors would enjoy the rights as ownership of foreign land here needs to addressed clearly. The rights and benefits of farmers should also be incorporated in the regulation.
In the recent years, the agriculture sector has declining contribution to GDP in Nepal. Although 66 percent of population is said to have dependence on agriculture, the production in this sector is not up to the mark.
Two years back, the government had decided to allow foreign investment in agriculture, but the Supreme Court had issued an interlocutory order asking government to not implement the decision. The case is sub judice at Supreme Court.
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