Due to economic slowdown, high unemployment, and sovereign debt risks in developed economies after the financial crisis, investment is gradually flowing to rapidly growing emerging and developing economies. South Asia has drawn the attention of investors as a result of impressive growth rates, investment reforms, expanding domestic markets and good macroeconomic conditions.
Despite the increasing level of investment, however, several investment climate constraints, which are not entirely common to all countries, are still restraining potential investment. While acknowledging that sound macroeconomic conditions are crucial for increasing investment, this article will focus on country-specic firm-level challenges to investment.
The papers concludes with a few findings, highlighting the country-specific nature and dynamic of investment in the region. While investors in countries like Bhutan, with adequate electricity supply, do not think power outages as a challenge to investment, investors in other countries perceive it as a strong constraint. Tackling these and other challenges by by introducing new reforms, earnestly implementing the already enacted ones, promoting and protecting investments while at the same time maintaining good macroeconomic conditions might boost investment.