THESIS ABSTRACT

Abstract

In order to attract Foreign Direct Investment (FDI), many countries embarked on various reforms. Nepal like many South Asian Countries, took some steps and introduced measures aimed at improving the FDI regulatory framework. This study examines the key determinants of FDI commitment in construction sector and overall FDI in Nepal. Furthermore, this study identified the cause for limited FDI in construction sector and suggest ways to enhance FDI. The mixed method research approach is employed in this study. The FDI model is specified using identified determinants of FDI and a number of variables characterizing economic, financial and environmental indicators. The time series data of 25 years from 1996 to 2021 A.D. considered in analyzing the data using regression model. The two linear regression model specifications were developed to find the key determinants of FDI in construction sector and overall FDI commitment in Nepal. The analysis tool used is STATA-15 for model analysis. In the first model specification, the analysis revealed that GDP per capita, CO2 emissions per capita, and the NEPSE index, which serves as indicator of market stability and size, are the key determinants of FDI within the construction sector. In the second model specification, findings underscored the significance of several determinants in shaping the overall FDI commitment in Nepal. These determinants include the exchange rate with the United States Dollar ($), human capital as measured by tertiary school enrollment, the NEPSE index, and the National Wholesale Price Index. To find the cause of limited FDI in construction sector in Nepal, questionnaire survey based on Likert scale was performed. The respondents of questionnaire survey were the persons working in policy level, particularly FDI related project in government organization. From the questionnaire survey, it was observed that difficulty in taking license and permission, difficulty in profit repatriation, land acquisition and ownership issue, lack of investment incentives and security issues are the profound causes of low FDI in construction sector. The analysis tool used for questionnaire survey were RII and SPSS. viii Moreover, Key Informant Interviews (KII) were conducted in this study to suggest strategies to enhance the FDI in construction sector. The findings highlighted that the facilitation of streamlined procedures, licenses, and permissions, coupled with the enhancement of the country's skilled human resources, holds the potential to bolster FDI in Nepal. Additionally, it is imperative to establish a robust legal framework that assures foreign investors of the protection of their investments and effective dispute resolution mechanisms to enhance FDI in construction sector in Nepal. Furthermore, the provision of incentives, such as tax concessions, grants, and subsidies, can be strategically employed to incentivize and attract foreign investors to Nepal.

Keywords

Foreign Direct Investment, Determinants, GDP per capita, C02 emission per capita, NEPSE index, National wholesale price index.