Foreign investment companies in Nepal – Implications for Domestic Brands
The Minister of Commerce and Industry of Nepal announced a crucial amendment pertaining to foreign investment in Nepal. Foreign investors can now register investment companies in Nepal; however, under strict conditions as prescribed by the Himalayan nation’s government. Additionally, the investors can also obtain business visas and manage investments with their business expertise. The downright implication of the amendment is clearly aimed at strengthening the country’s foreign currency reserves as investments of at least 1 billion Nepalese rupees can only be brought in the form of share capital with no allowance for receiving loans from domestic banks.
The aforesaid amendment is conducive to prosperity of several domestic investors and brands alike. They can gain access to a window of opportunities which are otherwise inconceivable without the aid of foreign investors. Provided that domestic brands can capitalize on such opportunities, lucrative benefits can certainly be enjoyed.
Opportunities for Domestic Investors
Technological Prowess
It is safe to say the Nepalese brands lag behind years when it comes to technological expertise in comparison to international brands. Majority of brands still reliant on traditional means of business operations, advertisement as well as data collection. One of such examples is evident in the tea industry of Nepal where modern machines were introduced to assist the human resource throughout all stages of production of tea leaves. While some brands like Himalayan, Sangrila and Gorkha have effectively utilized such machines to optimize quality as well as efficiency, several other brands have failed to do so because of unskilled workforces.
Likewise, Daraz is a household name which has grown significantly after Alibaba Group acquired it in 2018. Avid users of the company’s e-commerce platform are scarily fascinated by how recommended products influence impulsive and repetitive purchases. Here, the modern artificial intelligence concept known as “Machine Learning” acts behind the scene; it continuously collects and analyzes data patterns of individual customers to suggest them with products that are likely to urge purchase behavior. All in all, associating with advanced technological prowess of foreign investors can significantly increase the business prospects of domestic brands.
Collaboration with MNC’s
In the capitalistic nature of today’s world, movement of firms throughout several geographical locations plays a major role in stimulating any economy. Especially, in developing nations like Nepal, entry of foreign investors can stimulate the entry process of large corporations such as McDonalds, 7 Eleven, Wal-Mart and several others. While domestic investors have aspired to operate big brands like KFC; they have failed to enhance brand presence. As per the amendment, entry of foreign investments will be accompanied by foreign expertise and consultations in supply chain management, financial management and overall business operations management. Domestic investors have an opportunity to associate themselves with the foreign investment companies and work as a joint venture to establish successful franchises of such large multinational corporations.
Potential Threat to Domestic Brands
While there is a plethora of benefits due to the entry foreign investment companies in Nepal; impending threats need to be considered. Domestic brands face a threat of dissolution as they are barely able to compete with the expertise of large corporations. NEBICO was one of such brands whose biscuit (Thinarrowroot) was dominantly preferred by Nepalese throughout the country. However, brands like Britannia entered the Nepalese market and offered better quality substitutes at a very reasonable price. Ultimately, the market share of NEBICO biscuits decreased significantly.
In conclusion, allowing foreign investors to register investment companies can prove to be a beneficial amendment in stimulating Nepal’s economy; however, government regulatory bodies must ensure protection of domestic brands and their interests.
