Nepal has has great potential for investment, and the country is pursuing a liberal Foreign Direct Investment (FDI) policy to create an investment-friendly environment to attract FDI. The major areas of investment include hydropower, manufacturing, services, tourism, construction, agriculture, and mineral and mining.
Nepal has the capacity to generate 83,000 MW of hydroelectricity, of which about 43,000 MW is techno-economically feasible. At the end of 2011, only about 700 MW was generated from hydropower projects. Of that total, 174.53 MW (24.9%) was generated through private investment. Nepalese industries and consumers suffer from huge power cuts each year. The annual domestic energy demand is estimated at 4,833.35 GW, of which 3,850.87 GW is generated from various sources and the remaining 982.48 GW is cut as load shedding. Nepal is unable to meet the demand, and approximately 694.05 GW is imported from India annually.
The Government of Nepal (GON) has already declared a national power crisis. So far, the Nepal Electricity Authority (NEA) has signed Power Purchasing Agreements (PPAs) worth 714.77 MW during 2011, which is almost double the total capacity of power purchase agreements signed in the past. The total capacity of PPAs signed has reached 1118.35 MW (Source: Nepal Electricity Authority)
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Nepal's abundance of natural resources, diverse culture and ethnicity, numerous archaeological and heritage sites, and diverse topography, including eight of the world’s ten highest peaks (including Mt. Everest), are some of the attractions for potential investment.
World heritage sites such as Lumbini (the birth place of Buddha), Chitwan National Park, Sagarmatha National Park, Pashupatinath, Swayambhunath, Bouddhanath, Changu Narayan, Kathmandu Durbar Square, Bhaktapur Durbar Square, and Patan Durbar Square are attractions to tourists worldwide.
Nepal offers a variety of interests to tourists, ranging from cultural tourism, nature/eco-tourism, adventure tourism, health and education tourism and religious tourism. The Himalayas, foot trails, rafting, paragliding, fauna, religious sites, eco-tourism and biodiversity are potential areas for investment.
Tourist Arrival
In 2011/12, the number of tourist arrival by air increased by 18.9% to 595,262. Of which, the number of Indian tourists accounted for 28.32% and the remaining 71.7% from other countries.
Inflow of Tourists via Air
| Countries | Tourist Arrival | Percent Change | Share | |||
| 2009/10 | 2010/11 | 2011/12 | 2010/11 | 2011/12 | 2011/12 | |
| India | 92,748 | 130,717 | 168,594 | 40.93 | 28.98 | 28.32 |
| Other Countries | 319,019 | 370,033 | 426,668 | 15.99 | 15.30 | 71.68 |
| Total | 411,767 | 500,750 | 595,262 | 21.61 | 18.87 | 100.00 |
Source: Annual Report 2011-12, NRB
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The GON has promulgated a new Industrial Policy 2010 to develop the industrial sector and to provide protection and facilities to investors. Similarly, the draft of a Foreign Investment Policy has been prepared. Industrialization is considered one of the most vital indicators of economic growth and prosperity of the nation. Therefore, the GON is committed to supporing industrialization by establishing industries based on agriculture and local resources in rural sector, and establishing and developing industrial zones in urban areas.
Steel–rolling mills, cement, cigarettes, jute, sugar, tea, beer, carpets, garments, textiles, oilseed mills, and food mills are some of the most viable areas for investment in manufacturing and production industries in Nepal.
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Agriculture isthe mainstay of the Nepalese economy, contributing approximately one-third of total GDP. A total of 74% of the total population still depends on agriculture for their subsistence. However, the growth rate of agriculture has not been encouraging, due to low investment both by the GON and the farmers themselves.
Nepal has great potential in tea, ginger, cardamom, and sugarcane production, which have high demand in the international market. Rice, wheat, and maize are the main food crops, and mustard, soybean and sunflower are the major oilseeds. Potato, lentil, tobacco and jute are the major cash crops, which have high demand in local market.
The Terai, Hills, and Mountains are suitable for various types of agriculture. There is considerable scope for commercial farming, tea, cardamom, coffee, honey, and ginger.
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The GON has formulated acts and regulation to promote mineral exploration and development in the country. Two separate acts and corresponding regulations exist to deal with different minerals. These are categorized into:
There are several areas in which to invest in commercially viable mining and mineral industries. Limestone, dolomite, quartz, talc, coal, peat, precious and semiprecious stones, and brine water (salt) are some of the economic minerals used by cement, soap, marble, paper, dead burnt magnesite, and agriculture lime industries. The promotion of gum industries is highly recommended. Ruby, sapphire, tourmaline, aquamarine, garnet, kyanite, and quartz crystals also have high potential in Nepal. International companies can invest in cement, coal, petroleum exploration and production, and precious and semiprecious stone.
Possible sectors for investment in service industries inclue medical colleges, schools, hospitals, and IT businesses.
IT includes telecommunications, electronic media, print media, postal services, and the development and production of motion pictures in Nepal. The tele-density per hundred persons is 27, which includes the involvement of the private sector. At present, 70% of the population has access to television; however, a much larger percentage has access to mobile phone services. Difficulties have arisen in the expansion and development of these services to rural areas due to geographical complexities and the lack of infrastructure development.
The GON aims to promote national unification by providing access to all in the IT sector. The government plans to establish a optical fiber network in all 75 districts of Nepal by 2015. Therefore, there is the increased opportunity for private sector investment in this sector.
Highways, airways, and rural roads connect all districts of Nepal. Hydroelectricity projects of varying scopes are in process and construction, and various international organizations are engaged. Plans to build a fast-track road linking the capital city to international airports and other locations are being formulated.
