Foreign Direct Investment in Nepal

Published Date: 2022-11-10

Foreign Direct Investment (FDI) is an effective measure for promoting sustainable development in the country. It serves as a catalyst for the development in an open integrated economic system. It is the investment that is made by a different foreign investor in the company which located in a foreign land. Foreign investment in Nepal has been growing as the development process is speeding within the country. The funds are transferred to purchase and acquire physical capital that includes machines and factories. Therefore, if someone invests in the business in another country rather in his/her own country, he/she can get more than 10% for its share. This is the reason foreign investment trend in Nepal has been going viral. If the investor owns less than 10% than the international monetary funds, it is known as his/her stock portfolio. Nepal has been introducing a different provision to increase and attract FDI including a set of the legal, institutional framework and regulatory. FDI has been an increasing trend over recent past years. There are many different companies in Nepal that have been participating in the FDI process in Nepal.

Nepal is participating nowadays to increase foreign direct investment in Nepal. Many different investors from 39 countries have made an investment in 252 firms in Nepal. The FDI stock in 2015/16 was reached around Rs.137.7 billion i.e. 6.1 percent of GDP. This is mainly driven by the rise of different FDI-based industries that are in existence. The service sector for highest share which is 70.2 percent of outstanding FDI in Nepal. The highest FDI existing in Nepal if from India. West Indies is the major source region with an FDI Rs. 62.8 billion as of mid-July 2016. According to UNCTAD’s World Investment Report 2018, the global flow of FDI was dropped by 23 percent in 2017. The FDI flows to developing countries remained stable at around $671 billion and was seen no recovery following the 10 percent drop in 2016. The flows to developing Asia also remained stable at $476 billion. There is a certain foreign direct investment policy in Nepal that attracts FDI within the country that helps in the economic development of the country. FDI serves as a principal complement to domestic investment and capacity building for the development of the Least Developed Countries. In the least Developed Countries, the negative trend remains a matter of concern for the policymakers where international investment is indispensable for the sustainable development of the country. The unique aspect of FDI is that it helps to bring a package of resources including technology, skills, management, capital, and marketing capabilities. These resources and capabilities are utilized in the host country and help to optimize profits for the investment of transnational corporations. This also has an array of direct and indirect impacts that comes under suitable conditions and is very beneficial to the host economy. This not only helps in the production of products for domestic consumption but also linkages and spillovers that bolster the capabilities of different domestic firms and human resources. The foreign direct investment law in Nepal helps various investors from different countries to invest in Nepal which is known as the net transferred fund.

Foreign Direct Investment is one of the essential elements that help in the economic growth of the country. There are many contributions of foreign direct investment in the Nepalese economy. FDI can be said as one of the roots for the development of the country. Nepal has been implementing a number of policies to promote a competitive investment from different countries and create a large number of investment opportunities.


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