Governance issues, energy, law & order chief factors: decline in fiscal year 2011 foreign investment

The Economic Co-ordination Committee of the Cabinet was informed that foreign direct and portfolio investment have declined by 27 percent and 38 percent respectively during July-June (2010-11), it is learnt. Analysts say that governance issues, on-going energy crisis as well as law and order situation are major factors for decline in investment in the country.
An official on condition of anonymity said that governance issues are leading to investment and growth problem in the country. A forum for speedy resolution of dispute was very critical to attract foreign investment. Sources said that the ECC was informed that total foreign direct investment which was 2.739 billion dollars in 2009-10 has gone down to 1.574 billion dollars in 2010-11, showing a decline of 29 per cent.
The meeting was informed that portfolio investment dwindled from 588 million in 2009-10 to 364 million dollars in 2010-11, reflecting a decrease of 38 per cent. However, the foreign public investment (FPI) which was in negative by 652 million dollars in 2009-10 improved to 20 million dollars negative by 2010-11, showing an improvement of 97 per cent.
The Finance Division reportedly informed the meeting about various foreign direct investment projects in the pipeline and stated that 1.13 billion dollars investment in Suki Kinari Hydropower Project would be materialised in five to six year as per the progress of the project. The PPIB is yet to issue letter of support for the project and financial year is yet to be closed.
The ECC was informed that 1.47 billion dollars investment in Korat Hydropower Project is also expected to be realised in the next four to six years while the official claimed that 360 million dollars FDI in Partind Hydropower project will start materialising within six months and the project is expected to be completed in three to four years.
The government is also expecting 350 million dollars investment in the ongoing 450 million dollars Centaurus project in the next two years whereas 100 million dollars have already been invested in the project. The meeting was informed that the project is progressing smoothly.
The ECC was also informed that M/S Korea Water Resources Corporation has submitted their technical, financial and legal proposal but the proposal was not found feasible by the Capital Development Authority because 300 million dollars investment @12 percent interest with repayment period of 14 years was found un-economical. M/s Sinohydro Corporation Limited, China showed interest in the project with the funding assistance by the Chinese government.
A MoU has been signed with the M/s Sinohydro Corporation Limited after detailed deliberations on October 12, 2010 to carry out the project. All the services rendered by the Chinese Company up to pre-award stage will be on gratis basis/free of charge and international competitive bidding process will be adopted as per laid down procedure of both the countries.