Opportunities for Foreign Investors to Invest in Nepal

Nepal is rapidly emerging as an attractive destination for foreign direct investment (FDI) with liberal policies, rich natural resources, and access to massive neighboring markets—India and China.

Why Invest in Nepal?

Nepal has been pursuing a liberal foreign investment policy and striving to create an investor-friendly environment to attract Foreign Direct Investments (FDIs). The country offers one of the lowest tax slabs in the region and holds a favorable position in the Ease of Doing Business Index.

• Strategic Location: Nepal serves as a gateway between India and China, two major global markets.
• Natural Resources: Rich in hydropower potential, minerals, arable land, and natural beauty.
• Young Workforce: A vibrant and educated youth population ready for employment in skilled sectors.
• Liberal Investment Laws: Nepal welcomes both joint ventures and 100% foreign-owned enterprises.

Liberal Foreign Investment Policy

Nepal has been pursuing a liberal foreign investment policy and striving to create an investor-friendly environment. With one of the lowest tax slabs in the region and a fairly favorable position in the Ease of Doing Business index, Nepal is actively seeking to attract FDIs.

Forms and Scope of Investment

The country allows foreign investment through:

• Joint ventures with Nepali investors
• 100% foreign-owned enterprises

While some sectors are reserved for local entrepreneurs or restricted for national security reasons, most industries are open for foreign investment with government approval. Foreign investment in cottage industries is not allowed, but technology transfer is welcomed even in those sectors.

Profitable Sectors for Investment

1. Land and Agriculture

Nepal has abundant fertile land in the Terai and rural areas, with prices still relatively low. Investing in land offers dual benefits: income from crops and long-term value appreciation.

Renowned investor Jeremy Grantham considers organic farming the best global investment right now. Nepal presents a unique opportunity to combine traditional farming with modern organic techniques in anticipation of the global rise in food prices.

2. Tourism and Hospitality

Nepal is uniquely located between India and China, which are experiencing a historic surge in middle-class growth. These populations are increasingly looking to travel—and Nepal is well-positioned to serve as a premier destination.

Investors can enter the sector by:

• Opening hotels, resorts, or eco-lodges
• Buying shares in tourism-related stocks
• Launching travel agencies or adventure tourism services

The key to success is offering unique and appealing experiences tailored to Indian and Chinese tourists.

3. Hydropower

Nepal holds immense hydropower potential—over 80,000 MW. Several projects are already underway and many are expected to go public in the coming decade.

Investment options include:

• Large-scale development projects
• Buying shares in hydropower companies
• Public-private partnerships (PPPs)

The Power Trade Agreement with India (2014) has further opened up electricity export opportunities, adding predictability to long-term returns.

4. Outsourcing and Technology

Due to its young, tech-savvy population, Nepal is becoming a hub for IT outsourcing. Companies from the US, Europe, and Australia are outsourcing services such as:

• Web and software development
• Graphic design
• Data processing and research

With a growing number of engineering and IT graduates, this sector is ripe for foreign investment.

5. Medical Tourism

Nepal is home to world-class medical professionals working in both domestic and international hospitals. While infrastructure may be developing, the skill level of doctors is globally competitive.

Medical tourism combines affordable healthcare with scenic travel. Foreign patients can receive high-quality treatments—like heart surgery or dental care—at a fraction of the cost found in developed countries.

Investment Board Nepal (IBN)

To facilitate both foreign and domestic investment, the Government of Nepal established the Investment Board Nepal (IBN), chaired by the Prime Minister. IBN offers:

• One-window service to investors
• Fast-track project approvals
• Policy advocacy and aftercare

Visit: https://investmentboard.gov.np

Global Investment Trends Align with Nepal

Many experts agree that agriculture, mining, and precious metals will be the most profitable sectors globally over the next 20–30 years due to rising demand from middle-income nations and global inflation. Nepal’s resource-rich landscape is well-suited for these investments.

Legal Framework for Foreign Investment in Nepal

All foreign investments require approval from the Government of Nepal (GoN), with the following legal acts providing the framework:

• Foreign Investment and Technology Transfer Act (FITTA), 2019
• Industrial Enterprises Act, 2020
• Company Act, 2006
• Income Tax Act, 2002

Approval and Registration Process

1. Register with the Department of Industry (DOI) or Investment Board Nepal (IBN).
2. Submit a detailed project proposal and obtain foreign investment approval.
3. Incorporate a business under the Company Act.
4. Open a foreign currency account in Nepal and bring in investment funds.
5. Comply with Nepal Rastra Bank (NRB) regulations and tax requirements.

Legal Support for Foreign Investors

At Law Scholars Nepal, we offer comprehensive legal services tailored for foreign investors, including:

• Business registration and licensing
• Legal due diligence
• Drafting joint venture and shareholder agreements
• Labor, tax, and regulatory compliance

Conclusion

Nepal is a land of opportunity for foreign investors looking for high returns, untapped markets, and long-term growth. From fertile farmland and hydropower to tourism and tech outsourcing, the potential is immense. With favorable policies and the right legal support, you can secure profitable ventures in Nepal’s thriving investment landscape.

Frequently Asked Questions (FAQs)