Foreign direct investment in hydropower: Challenges of economic diplomacy in Nepal

Abstract

Nepal has enormous prospect in hydropower development.Despite this fact, Nepal is facing energy crisis since decade. The major problem in this area is a lack of investment for hydropower generation. Foreign Direct Investment (FDI) is one of the options to generate investment for hydropower development of Nepal. Foreign relations and diplomacy is major tool to negotiating FDI and investment in their country. There are several challenges in the field of economic diplomacy, especially in the field of FDI generation to develop hydropower. Considering the fact this research is focused on the challenges of economic diplomacy of Nepal especially in the field of FDI generation of hydropower. The study is focused on library research, research articles, reports of different researchers, records of the draft or the reliable information of the past and present agreements between the Investors and Nepal Government, different policies and acts regarding and related to foreign investment, case study of ongoing and completed hydropower projects etc. are research variables. Research came with the conclusion that there are five major challenges of economic diplomacy in generating FDI in Hydropower. First is Policy Level Challenges that includes the issues like land ownership, labor management, taxation, currency exchange, one window policy. Second is Geopolitical Conditioning that includes physical geography, passible trading areas and immediate bordering countries related complications. Third challenge is Cost, Human Resources and Physical Infrastructures for energy trade and development. Fourth Challenge is Diplomatic Negotiation which includes diplomatic knowledge, authority and accountability. Finally, political instability and security is another challenge of economic diplomacy in FDI generation.