Read the following situations and answer the questions given below. Foreign direct investment (FDI) is considered an indispensable mode of economic development. For a least developed country (LDC)…

Read the following situations and answer the questions given below.

Foreign direct investment (FDI) is considered an indispensable mode of economic development. For a least developed-country (LDC) like Nepal with huge saving-investment gap; limited, albeit growing, contribution to gross domestic product (GDP) ratio; and limited amount of foreign aid flow. Even FDI is traditionally viewed as foreign investments made in manufacturing and services sectors, which undoubtedly contribute to employment opportunities as well as economic growth, they are increasingly attracted by host country Nepal for meeting financing requirements for large infrastructure projects. This is an area in which foreign investors used to shy away from investing in the past due to various risks associated with such projects resulting from long gestation and pay back periods. In the context of Nepal, although FDI is generally welcome in all sectors, due to acute dearth of resources for infrastructure financing, it has become an imperative in the latter sector. It is to be noted that the utility of foreign investment for a country like Nepal does not end there. It is an instrument for the transfer of technology from the technology-rich countries to technology-deficient countries. Similarly, leadership and managerial skills transferred by foreign investors and eventual expansion of local knowledge and skill base. As Nepal welcomes FDI in all sectors of the economy, it has several obstacles like political instability, labour conflict, market etc. for investment friendly environment so; those unwanted situations should be removed.

a. What are the causes for poor inflow FDI in Nepal?

b. Do you agree that FDI helps in solving the problems of unemployment and technological backwardness faced by developing country like Nepal? Justify.

c. What types of fiscal measures would you suggest to attract more FDI in Nepal?