The Nepal Advantage ( Tips for potential Investors in Nepal )


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These are some of the advantages we see Nepal for investors and Entrepreneurs. If you have questions, please us know!

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The Nepal Advantage ( Tips for potential Investors in Nepal )

  1. 1. The Nepal Advantage “You can build a global business for the broader region based in Nepal.” The Nepal Advantage [Version 1.0] Page 1 of 10
  2. 2. Why? 1. We have the best location – The China India proximity 2. We are connected to the world 3. Time zone advantage for US and European companies 4. Cost advantage for global companies 5. Coming out of a period of political uncertainty 6. Success stories - Lack of global companies competing so whoever enters will win 7. High quality talent pool (coupled with lack of global firms here) 8. Strong education system generating great young talent 9. Great weather, friendly people and breathtaking terrain 10. A young and rapidly urbanizing population (fastest in South Asia) 11. Many growth areas exist in Nepal 12. With risks to manage The Nepal Advantage [Version 1.0] Page 2 of 10
  3. 3. 1) We have the best location –The China India proximity We are between the two emerging economic powerhouses - India and China. By 2030, StanChart predicts India (to our south) will be hold #3 economic position with an economy of USD 30.3 trillion, behind China, at Nepal’s north at USD 73.5 trillion and USA at USD 38.2 trillion1. Even with a small trickle effect, our economy is bound to grow exponentially! 1 source for state of India and China in 2030 The Nepal Advantage [Version 1.0] Page 3 of 10
  4. 4. 2) We are connected to the world We are very accessible from US, European, Middle Eastern, South East Asian and Asian markets. Within 24 hours, you can fly your Nepal staff to your headquarters or client office - thanks to global airline connectivity to Kathmandu, capital city of Nepal. Kathmandu is directly connected to global hubs - India’s capital Delhi is 1 hour away, Chinese cities like Chengdu, Guangzhou are 3 hours, HongKong is 5 hours, Singapore is 4 hours and vibrant Arab cities like Doha, Dubai, Bahrain are 4 hours away. Fly an hour to Delhi in 1 hour and directly fly to the major US, European and Asian cities. Mobile penetration in Nepal is above 45%. In 10 years, this will reach 100%2. Usage fee is cheap – for example - $0.02/minute to call US. Global companies can be connected 24x7 with staff in Nepal due to high speed Internet, VSAT, mobile telephony, Skype and other VoIP technology. Internet usage, while in the low 15%, has shown dramatic growth recently. It rose from 2 % to 7% in 20103. Usage in urban areas amongst the youth demographic must be over 80%. Facebook usage has grown exponentially with more than 1.4 million Facebook users inside Nepal as of May 20124. 3) Time zone advantage for US and European companies Nepal has approximately 12 hours time difference with the US. Nepal employees will work while the US employees are sleeping and vice versa. This time zone difference gives you a 24 hour work schedule – key to competitive growth. As for Indian and Chinese companies we are almost the same as your own time zones so we work while you work too! 2 source mobile telephone penetration 3 source internet usage 4 source facebook The Nepal Advantage [Version 1.0] Page 4 of 10
  5. 5. 4) Cost advantage for global companies In Nepal, you will attract top talent at huge cost advantage - average salary for starting IT engineer is $4000/year. Average income of even a Bank Manager is $29,000/year. Based on our own experiences, we estimate the cost to run a 10 person office in Kathmandu to be under $ 90,000 /year. As of May 2012, the exchange rate is 1 U.S. dollar = 85 Nepali rupees. Compare this to the Chinese and Indian rupee exchange rates - 1 U.S. dollar = 6.31 Chinese yuan 1 U.S. dollar = 53.55 Indian rupees Also, Nepal does not suffer from the high wage inflation and employee turnover problems that companies experience in India and China. Secondary market research shows 30% wage inflation and employee turnover problems in the technology hubs in India where large global companies such as Google, Microsoft, IBM compete for talent. These factors provide tremendous productivity and cost advantage for global companies. An analogy is comparing Denver to Silicon Valley in the US. 5) Coming out of a period of political uncertainty History is proof that businesses that succeed are those that start when a nation is coming out of a period of political uncertainty. Nepal is currently recovering from this uncertainty phase with a new constitution being finalized and social structures being updated to be on par with developed countries. The last decade has brought Nepal out of an old inefficient and feudal governance system. Foreign investment is at its infancy in Nepal but is growing exponentially (from only $1 million in 2008 to $87 million in 2010)5. So this is the time to enter. 5 Total foreign investment increase source The Nepal Advantage [Version 1.0] Page 5 of 10
  6. 6. 6) Success stories – Lack of global companies competing so whoever enters will win In the past decade only a few global companies have entered Nepal. Here are some examples of those who seized this opportunity and are flourishing. Surya Nepal Private Limited (SNPL) is an UK-India-Nepal joint venture in the tobacco and garment sectors. Surya started in Nepal in 1986 and is now the largest private sector enterprise in Nepal. Ncell (owned by TeliaSonera, Europe) has exponentially grown to more than 6 million customers within 10 years of operations. Standard Chartered is an international bank who has made a strong presence in Nepal. Bhote-Kosi is another foreign investment (US) in Hydro-power that continues to provide good returns to foreign investors as well as local stakeholders. Multiple US Technology firms have acquired Nepali firms or started Nepal offshore operations in the last few years thanks to the strong local analytical and IT talent. Few examples - Verisk Health (NASDAQ: VRSK) – Boston based health-care analytics company acquired Nepal’s best known software company, D2Hawkeye, in 2009. SPI – Atlanta based financial and IT firm with offices in US, Canada, India, Singapore, Australia and New Zealand acquired WorldLink Technologies, a Nepal based IT firm in 2011. Incessant Rain – Los Angeles based animation firm animation for TV, home entertainment and film started its offshore office in Nepal. Javra Software – Dutch software firm started and has been growing its offshore office in Nepal from 2005. The Nepal Advantage [Version 1.0] Page 6 of 10
  7. 7. 7) Strong education system generating great young talent Nepal’s education system and engineering talent is similar to that of India. English is the primary language of education in urban cities. Local engineers are an eclectic mix with global exposure - having been educated in Nepal, India, South-East Asia, US, UK and many European countries. The software engineering market is similar to that of Eastern Europe. Non-Fortune 500 companies can become the dominant employer in Nepal, attract the best talent and grow. A global company can be “The Facebook employer” in Nepal and attract top talents from Nepal, as well as the 300 million inhabiting the neighboring North Indian region. 8) A young and rapidly urbanizing population (fastest in South Asia) The number of skilled, young and energetic workers hungry for opportunities is growing. There are 18 million Nepalis between the ages of 15 and 64 (61.1% of Nepalis)6. The literacy rate in the 15 to 24 age group is above 80 % (up from 30%, 30 years ago).7 Young Nepali labor is driving construction and service growth in Dubai, Doha, Abu Dhabi, the Middle East, India, Malaysia, Korea and others. This group is available to channel their energy into promising opportunities. This is fresh ground to enter and recruit in a youthful country that is 40 biggest in the world in terms of population (27 million) where literacy rate for ages 15 to 24 is now 80%. Urban population in Nepal is growing at more than 5% on average each year8. With remittance income of at least $ 5 billion a year that is increasing every year, we have become a consumer driven economy with a rapidly urbanizing population. This group with higher purchasing power is demanding high quality global goods and services. There has driven the boom in consumer driven products and services. 6 Number of Nepalis age group 7 literacy rates 8 Urban Nepal The Nepal Advantage [Version 1.0] Page 7 of 10
  8. 8. 9) High quality talent (coupled with lack of global firms here) Today, Nepali engineers work for global US technology companies abroad such as Apple, Google, Cisco, Oracle, Disney and many more in Europe and Australia. Nepali expatriate talents are now all over the world. Nepali software developers have received the highest rating among South Asian countries (even higher than India) from employers utilizing an online marketplaces like Odesk. Nepali firms have secured international quality standards. For example, Verisk Health has CMM-I – Capability Maturity Model Integration – the stringent international standard for software firms. Multiple firms have ISO 9001:2000 standard. 10) Great weather, friendly people and breathtaking terrain Nepal has hot Savannah in the south and the cold Himalayan mountains in the north, all within 100 kilometers. Yet the big cities like Kathmandu and Pokhara boast moderate tropical climate like that of Northern California in US, or Spain in Southern Europe. Nepal has the holiest pilgrimage sites for two major religions, Buddhism and Hinduism (together estimated at least 2 billion followers). Furthermore, Nepalis have a laid back culture and easy going pleasant attitude. No wonder, Nepalis are ranked amongst the friendliest in the world often9. 9 Friendliest people The Nepal Advantage [Version 1.0] Page 8 of 10
  9. 9. 11) Many growth areas exist Growth opportunities exist for serving the local market and growing North Indian market. The states in North India that borders Nepal, (Bihar, Uttaranchal, West Bengal) have a huge population of more than 300 million and a rapidly increasing middle class. Bihar is having a phenomenal growth of more than 11% a year10. Some sectors with great potential are - ● Health-care: Facility, Distribution, Services ● Software: Health-care, IT, Analytics, Internet, Design ● Tourism: Mountaineering, Adventure, Historic, Artistic, Spiritual, Religious, Ecological, Healing and many more. ● Manufacturing: Textile, Natural products, Indigenous crafts and Himalayan art ● Consumer packaged goods: Food, packaged goods ● Energy: Oil, Gas, Wind, Solar and other alternate energy ● Agriculture: Herbal, Medical, Coffee, Tea, Milk, Organic food ● Infrastructure & distribution systems 12) With risks to manage Some risks that you will have to manage in Nepal - ● Political turbulence ● Labor unions ● Lack of infrastructure, specifically stable source of utility and energy ● Lack of strong legal structure ● Exchange rate volatility ● Red tape and corruption 10 Bihar growth stats source The Nepal Advantage [Version 1.0] Page 9 of 10
  10. 10. About the Authors Prasanna Dhungel is an entrepreneurial advisor and business executive. He was formerly Vice President at D2Hawkeye, now Verisk Health, and played a key role in its growth. He currently advises private equity investors, executives and entrepreneurs in the Health- care, Technology and Food sectors in US and Nepal. Email him at Ujwal Thapa is an activist entrepreneur and co-founder of Entrepreneurs for Nepal, a global platform of more than 5000 entrepreneurs targeting Nepal. He is also an organic coffee farmer, and has been running a IT company in Nepal for a decade. He mentors young entrepreneurs who are starting up and advises foreign entrepreneurs, investors on starting business in Nepal. Read more about him and his provocative ideas on his blog: ujwal Email him at Have suggestions ? Ideas to enhance this document ? Email us. This is version 1.0 of this document. We hope to improve this in the next couple of versions. Thank you all who have helped by proofreading this document. Please do suggest ideas and send in statistics you feel helps reflect Nepal’s investment scenario accurately. If we have erred in our statistics somewhere, please do correct us. We would be happy to rectify our errors. please email us at Thank you. The Nepal Advantage [Version 1.0] Page 10 of 10