This presentation discusses foreign direct investment (FDI) in Nepal, including key statistics, legal and policy developments, modes of investment, sectoral trends, limitations, and commitments to protecting foreign investors. Some of the main points covered are: - FDI has been growing each year since 2012, with the largest sectors being energy, tourism, services, and manufacturing. - Nepal's constitution and policies aim to liberalize the economy and attract more foreign capital, though political instability and lack of infrastructure remain challenges. - Foreign investors can invest up to 100% equity in most industries, through direct investment, reinvestment, or technology transfers. - Limitations on FDI include Nepal's landlocked geography, complex approval

1. Presentation on International Conference on Social Entrepreneurship
Legal Aspects of FDI in Nepal:
Modes, Challenges and Protections
Saroj K Ghimire
Asst. Prof. of Law, Tribhuvan University, Nepal
Advocate, Supreme Court of Nepal
(LL.M. UK, LL.M. India, B.A, & LL.B. Nepal)
Partner

2. FDI Scenario of Nepal:
Sector wise
2
0
50
100
150
200
250
300
350
2012 2013 2014 2015
Energy based
Tourism
Service
Manufacturing
Agro and Forestry

3. Industrial Statistics 2014
-2014
3

4. • Nepal is land locked between two big economies
and surrounded by 4 big host economies
including India, China, Pakistan and Bangladesh.
• The disastrous earthquake (April 25, 2015) and
border blocked in terai has raised a major
challenge to the economy and to foreign
investment.
• Investment expectation has not heighten till date
as expected.
• Prospects for growth in FDI is seen to be
lowered though huge resources

5. Constitutional and Legislative
Development of FDI
• Formal invitation for Foreign investment was made via
Foreign Investment and Technology Act 1979.
• 1990- Year of Political movement and reinstatement of
democracy.
• Government of Nepal introduces Foreign Investment and
One Window Policy in the Year 1992.
• Foreign Investment and Technology Transfer Act 1992
(“FITTA”)
• Industrial Policy 2067 and formation of Investment Board
• Foreign Investment Policy 2015.
• Constitution of Nepal 2015 recognized importance of
foreign capital and given commitment to the liberal economy.5

6. Mode of Foreign Investment
• Direct Investment only.
• Investment should be in the form of foreign
currency or capital assets or foreign loans.
• The re-investment of earnings from foreign
investment also constitutes foreign investment.
• Technology Transfer is also treated as other
forms of Foreign investment
• Port folio investment is on momentum
6

7. • Foreign investment in cottage industry and trading
business are not opened.
• Equity participation up to 100 percent in almost all
industries is possible.
• a minimum amount of investment of NPR.5 million
(approx US$ 50,000) that a foreign investor needs to
invest.
• Investment Board of Nepal takes cares of industry having
fixed capital of Ten Hundred Million Rupees or more
Rupees project cost on different modality including PPP.
7

8. Limitation of FDI Ratio
Area of Investment Max investment
% wise
Hydropower, construction,
manufacturing, tourism
100
Telecom 80
Bank & Financial Institution 20-85
Consultancy (Management, account, legal
& engineering)
51
Insurance 70
Aviation
•Domestic
•International
49
80 (practically 49)
8

9. Limiting Factors of FDI in Nepal
• Complex geo structure & lack of infrastructure;
• Peace and security issue and frequent political changes;
• Static laws, unstable and ambiguous policies and
difficulties in implementing agreements;
• Complex and lethargic administrative procedure and
inconsistencies in decisions;
• Gap of cooperation among governmental authority and
concerned Ministry in licensing, approvals, and
regulations;
• Strict labor policies, lack of skilled workers and
dominant role of trade unions
• Limited capital market, threat of financing and
guarantee etc; and
• Lack of judicial expertise and arbitrational length;
9

10. Legislative and Policy Commitments
• Commitment of national treatment and no nationalization;
• No taxation with law making and guarantee of repatriation in
foreign currency;
• Arbitral dispute settlement mechanism and commitment to
recognize and enforce foreign arbitral award;
• Transparency, clean administration and simplified procedures;
• Formation and mobilization of Industrial Security force;
• Flexible immigration policies and facilitation of TTA and
skilled expats
• Developing effective mechanism of IPR protection
• WTO, WIPO, MIGA, BIPPA, BIMSTEC, SAFTA, NYC
obligation; and
• Corruption intolerance at all level 10

11. 11
References:
• The Constitution of Nepal 2015
• Foreign Investment and Technology Transfer Act 1992
• Industrial Enterprises Act 1992
• Investment Board Act 2010
• Foreign Investment Policy 2015
• World investment report 2015/UNCTAD- http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf
• FDI Intelligence, The fDi Report 2015
• World Bank Group, Doing Business 2015
• Department of Industry, Industrial Statistics 2014
• Procedural Manual of Foreign Investment 2013
sarojghimire@hotmail.com
Thank you