Determinants of Foreign Direct Investment in the Construction Sector in Nepal


Authors : Nirmal Paudel; Madhu Bhetuwal; Dr. Kamal Paudel; Sanjaya Khanal

Volume/Issue : Volume 9 - 2024, Issue 9 - September

Google Scholar : https://tinyurl.com/4fpm8343

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DOI : https://doi.org/10.38124/ijisrt/IJISRT24SEP1574

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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. Nepal possesses significant economic potential, including abundant water resources, tourism industry, a skilled workforce, and rich biodiversity. Realizing this potential and achieving targeted growth requires substantial investment from both bilateral and multilateral sources, as well as active participation from the private sector. In this context, the role of FDI becomes pivotal, not only for sustaining developmental efforts but also for alleviating poverty. This study examines the key determinants of FDI commitment in construction sector in Nepal. The FDI model is specified using identified determinants of FDI and a number of variables characterizing economic, financial and environmental indicators. Augmented Dickey Fuller Test is done to gauges the stochastic of time series data of FDI commitment of construction sector in Nepal. The time series data of 25 years from 1996 to 2021 A.D. is considered in analyzing the data using regression model analysis. GDP per capita, GNI per capita, doing business index, national wholesale price index, construction material price index, infrastructure development measured by Blacked Topped Road (BTR), NEPSE index and CO2 emissions per capita are considered as independent variable in the research. The analysis of model specification 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 commitment within the construction sector in Nepal.

Keywords : Foreign Direct Investment, Determinants, GDP Per Capita, C02 Emission Per Capita, NEPSE Index, National Wholesale Price Index.

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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. Nepal possesses significant economic potential, including abundant water resources, tourism industry, a skilled workforce, and rich biodiversity. Realizing this potential and achieving targeted growth requires substantial investment from both bilateral and multilateral sources, as well as active participation from the private sector. In this context, the role of FDI becomes pivotal, not only for sustaining developmental efforts but also for alleviating poverty. This study examines the key determinants of FDI commitment in construction sector in Nepal. The FDI model is specified using identified determinants of FDI and a number of variables characterizing economic, financial and environmental indicators. Augmented Dickey Fuller Test is done to gauges the stochastic of time series data of FDI commitment of construction sector in Nepal. The time series data of 25 years from 1996 to 2021 A.D. is considered in analyzing the data using regression model analysis. GDP per capita, GNI per capita, doing business index, national wholesale price index, construction material price index, infrastructure development measured by Blacked Topped Road (BTR), NEPSE index and CO2 emissions per capita are considered as independent variable in the research. The analysis of model specification 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 commitment within the construction sector in Nepal.

Keywords : Foreign Direct Investment, Determinants, GDP Per Capita, C02 Emission Per Capita, NEPSE Index, National Wholesale Price Index.

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