Nepal faces several problems attracting foreign direct investment that limit its economic growth potential. Key issues include an unstable political environment, lack of infrastructure like reliable energy and transportation networks, and shortage of skilled labor. However, Nepal has significant opportunities for FDI in priority sectors like tourism, hydropower development, agriculture, and healthcare that could drive sustainable development if these challenges are addressed. Prioritizing reforms to improve governance, regulatory stability, and skills training could help Nepal better capitalize on its natural resources and strategic location to attract more foreign investment and boost its economy.

1. PRIORITIESANDPROBLEMINNEPAL
FOREIGNDIRECTINVESTMENT

2. Although a country with amplitude numbers of
natural resources from which any investment can
take huge return, they had to face some
problems.
ProblemsofFDIinNepal
Nepal as a least developed country
can gain a lot for FDIs. It should set
some priorities areas for investment.
PrioritiesofFDIinNepal

3. ForeignDirect
Investment
What is
Foreign direct investment (FDI) is a direct investment into production or
business in a country by an individual or company of another country, either
by buying a company in the target country or by expanding operations of an
existing business in that country.
Foreign direct investment includes "mergers and acquisitions,
building new facilities, reinvesting profits earned from
overseas operations and intra company loans“.

4. Foreign Direct Investment (FDI) is an effective instrument for promoting sustainable development.
Both the:
2002 Monterrey Consensus on Financing for Development
and its successor, the
2015 Addis Ababa Action Agenda on Financing for Development,
recognized FDI as a mechanism that can facilitate sustainable development and the
implementation of the Sustainable Development Goals (SDGs).
FDI can serve as a principal complement to domestic investment and capacity building for the growth and
development of the LDCs.
The unique aspect of FDI is that it brings in a package of resources — capital, technology, skills,
management know-how and marketing capabilities — together with production activities, to a
host economy.
They can produce not only products for domestic consumption or for export, income and employment but also
linkages and spillovers that bolster the capabilities of domestic firms and human resources, contributing to
capacity-building and accelerated growth in the host economy.
While these resources and capabilities are utilized in the host-country affiliates and help
optimize profits for the investing transnational corporations, they also have an array of direct
and indirect impacts that can, under suitable conditions, be very beneficial to the host
economy.

5. Nepal &FDI
HomeStatus:
Nepal is strategically located between India and China, two of the largest and fastest
growing economies of the world.
This offers unparalleled and preferential access to their markets for bilateral trade and
investments.
India and China are Nepal’s biggest trading partners. It is not only the potential of
increased trade in the future between Nepal and these countries but there is also a
huge potential for Nepal to act as a transit hub for trade between India and China.
It has established its interest in economic integration through its memberships in
regional economic blocs such as SAARC (South Asian Association for Regional
Cooperation), BIMSTEC (Bay of Bengal Initiative for Multi-Sectorial Technical and
Economic Cooperation) and SAFTA (South Asian Free Trade Area).
The first official record of FDI flow to Nepal was in 1951/52 when the Nepal
Commercial Corporation was set up as a joint venture with 67 percent equity
participation from Indian investors (Aryal, 2009).
The GoN organized Nepal Investment Summit on 2-3 March, 2017. This summit
observed the USD 13.74 billion investment commitment to ten sectors from 26
companies of eight countries.
Recently, Nepal Investment Summit 2019 has held on March 29-30 in Kathmandu. It
was concluded with signing of 15 deals and memorandums of understanding between
Nepali and foreign companies.

6. Nepal &FDI
HomeStatus:
Nepal has FDI from 39 countries. In terms of paid-up capital owned by foreign partners,
India has the highest FDI in Nepal. As of mid-July 2016, the paid-up capital of Indian
invested firms recorded Rs. 11.2 billion (Chart 4.3). This was followed by China (Rs. 7.3
billion), Singapore (Rs. 3.5 billion), Ireland (Rs. 3.1 billion), South Korea (Rs. 2.8 billion),
Australia (Rs. 1.9 billion), Bangladesh (Rs. 1.7 billion),

7. Nepal Foreign Direct Investment
2002 - 2019 | Quarterly | USD mn | CEIC Data
Nepal's Foreign Direct Investment (FDI) increased by 24.7 USD mn in Jan 2019, compared with an increase
of 13.6 USD mn in the previous quarter.
The data reached an all-time high of 80.1 USD mn in Jan 2018 and a record low of -6.0 USD mn in Apr 2006.
In the latest reports of Nepal, Current Account recorded a deficit of 614.2 USD mn in Jan 2019. The
country's Nominal GDP was reported at 28.8 USD bn in Jul 2018.
View Nepal's Foreign Direct Investment from Oct 2002 to Jan 2019 in the chart:

8. GLOBAL
TRENDS AND
PROSPECTS
WorldStatus:
This is a sample text. You can replace this text.
Global foreign direct investment (FDI) flows fell by 23 per cent in 2017, to $1.43
trillion from $1.87 trillion in 2016 (figure 1). The decline is in stark contrast to
other macroeconomic variables, such as GDP and trade, which saw substantial
improvement in 2017.

9. Nepal’s energy sector is
widely recognized as being
the key to the nation’s future
economic growth, and the
vehicle that will enable
Nepal to meet its
development goals.
The the availability of
highly educated IT
individuals at a cheaper
price in the country, IT
companies are emerging as
a new business endeavor in
Nepal.
Nepal is being listed as
top 10 tourist destination
of world. The number of
international tourists
entering Nepal is growing
at an exponential rate.
The economy of Nepal is
dominated by agriculture.
the idea of agriculture as a
business idea has emerged
in the country over the past
few years.
PrioritiesofNepal
ForeignDirectInvestment
1.
TOURISM
INFRASTRUCTURE
3.
EDUCATION
AND HEALTH
2.
ENERGY
INFRASTRUCTURE
4.
AGRICULTURE
INFRASTRUCTURE

10. Lying on the central part of
the Himalayan belt, the
mountainous nation of Nepal
is rich in natural resources like
water, minerals, forests and
agricultural products.
The creation of infrastructure is
vital to the success of the
country’s economic condition
and the government of Nepal is
always on the lookout for
companies that offer
infrastructure building services
Cable transport, road transport,
water transport etc. are business
opportunities which have a huge
potential for profit.
PrioritiesofNepal
ForeignDirectInvestment
5.
MINES &
MINERALS
6.
INDUSTRIAL
INFRASTRUCTUR
E
7.
TRANSPORT
INFRASTRUCTURE

11. TOURISM
Tourism
PrioritiesofNepal
ForeignDirectInvestment
Foreign investment can provide the tourism sector with:
a) An equity stake, e.g. in a hotel chain, a tour operator, or a car rental business;
b) Construction and development of a hotel or other tourism facility;
c) Property development;
d) Development of a theme park or attraction;
e) Setting up as a supplier to domestic or foreign firms (e.g. a training facility, provision of
equipment, cleaning, catering or marketing);
f) Management contracts for service providers in the tourism sector
Tourism and its associated services comprise a significant portion of Nepal’s GDP. Tourist
expenditures are comprised largely of outlays for hotels, travel agencies, tour operators, trekking
and rafting agencies, and miscellaneous other services.

12. Tourism
PrioritiesofNepal
ForeignDirectInvestment
Year 2017 seems remarkable improvement in tourist arrivals. Tourist arrivals increased by 25
percent compared to 2016. Out of total tourist arrivals, five countries occupy more than 50
percent. The proportion of tourists from these countries are; India (17.1%), China (11.1%), USA
(8.4%), United Kingdom (5.4%) and Srilanka (4.8%).

13. ENERGY INFRASTRUCTURE
FDI
SECTORS
PrioritiesofNepal
ForeignDirectInvestment
Nepal’s energy sector is widely recognized as being the key to the nation’s future economic
growth, and the vehicle that will enable the Government of Nepal (GoN) to meet its
development goals. In addition to setting quantitative targets for electricity generation,
transmission and distribution, prioritizing rural electrification, and promoting the efficient use
of electricity, the GoN has signaled its commitment to sector reform and the promotion of
private participation in the sector.
Investment Opportunities in Energy Infrastructure
• Hydropower
• Solar Energy
• Wind Energy
• Other Sectors
• Biomass
• Geothermal Geothermal

14. ENERGY
INFRASTRUCTURE
PrioritiesofNepal
ForeignDirectInvestment
Nepal’s hydropower sector is the
nation’s crown jewel. It is widely
recognized that this largely
unexploited asset is the key that
will unlock the nation’s
development potential. Nepal’s
hydropower potential is ranked
second in the world, behind only
Brazil which is geographically,
fifty times larger. Nepal’s river
systems comprise approximately
83,000 MW of hydropower
potential, of which only
approximately 800 MW, less than
one per cent of its proven
potential, has been harnessed.
HYDROPOWER

15. SOLAR ENERGY
PrioritiesofNepal
ForeignDirectInvestment
Sunshine on an average of 300 days in a year, there is great potential for harnessing solar energy
in Nepal. As installation costs continue to decrease, solar technology is emerging as a viable and
affordable solution for the country’s load shedding problem.
The Government of Nepal, with support from development partners, the private sector, and
nongovernmental organizations has been proactive in promoting and developing Renewable
Energy Technologies.
ENERGY
INFRASTRUCTURE

16. WIND ENERGY
PrioritiesofNepal
ForeignDirectInvestment
Nepal has high potential for wind energy. The SWERA Report cited above estimated Nepal’s
gross wind power potential to be 3,000 MW. Despite this, very little development work has been
accomplished. Wind data collection in Nepal began in 1967.
ENERGY
INFRASTRUCTURE
On the basis of the data obtained, Kagbeni, Thini, Tangbey, Bhorleni and Chisapani (Sindhuli)
have been found to be feasible wind farm locations, each having a wind power density above
300W/m2 (watts per square meter).

17. AGRICULTURE INFRASTRUCTURE
FDI
SECTORS
PrioritiesofNepal
ForeignDirectInvestment
Agriculture is the mainstay of Nepal’s economy. It comprises one-third of the nation’s GDP and
provides employment for two thirds of the population. Among Nepal’s natural gifts are
agricultural diversity and varied topographical, altitudinal and temporal conditions, making the
land suitable for, among any others, medicinal herbs and essential oils.
Despite being a major contributor to the nation’s economy, Nepal’s agricultural sector depends
heavily on the annual monsoon rains. Between 2011/012 and 2015/16 the agricultural sector’s
growth rate was static at 2.41%.
Nepal imported agricultural products worth $1.298 billion in fiscal year 2013/14, its exports
amounted to only $ 268.91 million.3

18. AGRICULTURE
INFRASTRUCTURE
PrioritiesofNepal
ForeignDirectInvestment
The growth rate in non-agriculture sectors has been stronger
than that of agricultural sector and as a result, there has been a
steady decline in the sector’s percentage of contribution to
GDP. Nevertheless, it remains a source of livelihood to about 76
% of households,4 further signaling the need to increase the
sector’s output and productivity
Prospective Investment in Agriculture:
• Fertilizer
• Infrastructure
• Agriculture Financing
• Agricultural Machine, Tools and Technology
• Seeds
• Tea and Coffee development

19. EDUCATION AND HEALTH
FDI
SECTORS
PrioritiesofNepal
ForeignDirectInvestment
Nepal’s new constitution recognizes health and education as a fundamental right.
The healthcare sector has witnessed the growth of private hospitals and diagnostic centers and
domestic pharmaceutical manufacturing, there remains a great deal of unmet demand.
Although the concept to invest in healthcare and education sector is new in Nepal, signs of
progress are evident and a considerable amount of private sector activity can be seen in
indicators of education and health outcomes including quality education, life expectancy,
maternal care, and rates of communicable diseases.
The investment opportunities and priorities:
TECHNICAL EDUCATION
PHARMACEUTICAL INDUSTRY
HEALTH CARE FACILITIES
AYURVEDIC DRUGS AND AYURVEDA HOLISTIC TREATMENT CENTERS
HEALTH CARE EDUCATIONAL SERVICES

20. PROBLEMS
ForeignDirectInvestment
FDI has the potential to achieve consumer
welfare, create employment opportunities,
increase labour and environmental
standards, and contribute to improved
living standards and poverty alleviation
According to Global Investment Competitiveness
Report 2017-18, the key factors influencing
multinational corporations’ investment decisions in
developing countries include political stability and a
business-friendly regulatory environment. These
two factors outweigh other country characteristics,
including infrastructure, access to land, and low tax
rates.
In Nepal’s case, though FDI commitments surged to
Rs 49.87 billion in the first 10 months of 2017-18,
the realisation appears to be nominal. As per data of
Nepal Rastra Bank, Nepal received FDI worth Rs
15.51 billion during the first 10 months of 2017-18.
If the investment climate in Nepal is assessed
against various parameters such as the
condition of the infrastructure, policy
stability, legal structure, capacity of the
banking and financial sector, human resource
profile, responsiveness of bureaucracy and
internal security, Nepal would not pass this
test as a number of reforms are required in
many areas.17

21. 01
02
PROBLEMS
ForeignDirectInvestment
Limited export basket and asymmetrical
development of export base.
Export markets are limited as more than
65 per cent is focused on one market
(India) and another 25 per cent of export
is concentrated in nine countries only.
Disintegrated, uncoordinated and
unsustainable performance of
Governmental facilitating
institutions in value chain
development and in encouraging
productive sectors for addressing
supply side constraints.

22. 03
04
PROBLEMS
ForeignDirectInvestment
Political Instability and Insecurity with
periodical power shortage and labour
unionism.
Poor preparatory efforts and
inefficient in trade diplomacy and
negotiations. Inadequate and
ineffective foreign marketing and
promotion efforts to support the
exporters.

23. 05
06
PROBLEMS
ForeignDirectInvestment
There are too many government agencies
that regulate a development work. The
one window policy introduced to end such
problem has not worked well.
Lack of skill man power is major
problem in our country .When
unskilled man power are
appointed in the factory can not
provide the expected result.

24. 07
08
PROBLEMS
ForeignDirectInvestment
Low demand of produced goods in the local
market. Most of the people our country are
not able purchase goods or product when
the price is highest. So the demand is low of
produced goods in the local market.
The Investment Board was
supposed to be a sort of one
window shop for investor.
However, it has turned out to be
one more window.

25. 09
10
PROBLEMS
ForeignDirectInvestment
Nepali labor force and skill human resource
goes aboard creating lack of human resource
in Nepal. This is being a problem for
investment and foreign investment in Nepal.
Investment related laws are old
and scattered. It is often very
difficult to figure out what is the
law in Nepal with respect to a
certain point.

26. PRIORITIESANDPROBLEMINNEPAL
FOREIGNDIRECTINVESTMENT
FDI allows the developed world to begin improving emerging market opportunities. The developing world can see
improvements in wealth and opportunity, while the developed world can benefit from increased profits, developing
relationships, and a greater level of market influence.

27. It’s
Ramesh & Group Presentation
Members of Group:
Ramesh Panthi
Bikash Shrestha
Bunu Rai
Eknarayan Aryal
INTERNATIONAL BUSINESS
MBS 3RD SEMESTER
SIDDHARTHA GAUTAM BUDDHA CAMPUS
BUTWAL