Nepal and Foreign Investment

Nepal and Foreign Investment

About Nepal
Nepal lies in between the most populous countries of the world, India and China and maintains very good economic rapport with her neighbors which are also excellent trading partners with huge potentials for Nepalese exports. While Nepal has preferential trading arrangement with India, she has very close economic ties with China. Other close neighbors of Nepal are Bangladesh and Pakistan. Nepal and Bangladesh have already started bilateral trade through land route. Nepal along with Bangladesh, Bhutan, India, Maldives, Pakistan and Sri Lanka are the seven member countries of South Asian Association for Regional Cooperation (SAARC). The SAARC nations have a Preferential Trading Arrangement and are heading to free trade area under the SAARC framework.

The labor cost of Nepal is comparatively very low. Semiskilled and skilled laborers are plenty so as the unskilled laborers who generally work for 8 hours a day and 48 hours a week with a half and hour lunch break which is moreover known as tiffin break. The wage and salary of any of these groups is also lower than in any other developing countries. The permanent workers are entitled to 13 days of public holidays, 15 days of sick leave with pay or half pay. Female employees are entitled to 52 days paid maternity leave but all these employee benefits and facilities vary from one organization to the other. The retirement age in Nepal is 55 but in some cases, it can be extended to the age of 60. Most of the offices in Nepal are closed Saturdays and Sundays like the Government organizations; Banks; Diplomatic Corps, etc. but others work from Sunday through Friday – six days a week.

Banking Service
The Central Bank of Nepal - Nepal Rastra Bank, the two indigenous commercial banks - Nepal Bank and Rastriya Banijya Bank, other joint venture and commercial banks and financial corporations provides loans and full fledged services. The commercial banks also determine the open market exchange rate. There are insurance companies also providing insurance services.

Scope for foreign investment in Hydro Power
Nepal has a huge potential of hydro power that comes to about 83,000 MW out of which 43,000 MW is economically viable. Until now, Nepal has not been able to exploit much of its potentiality and the people in Nepal still face severe power shortages. In order to harness and develop hydropower, private sectors were involved to carry out small and medium sized hydro power projects. Similarly the government is encouraging private foreign investment in this sector. A number of projects for feasibility studies and development has also been recognized which are as follows:

Hydro Power Projects identified for Feasibility Study
Khimti Khola - 2 (27 MW)
Lower Arum (308 MW)
Kali Gandaki - 2 (660 MW)
Burhi Gandaki (600 MW)
Tila River (203 MW)
Naumure (245 MW)
Tama Koshi - 3 (287 MW)
Upper Trishuli (300MW)
Mai Loop (60 MW)
Tama Koshi - 2 (207 MW)
Upper Marshland - 3 (121 MW)

Hydro Power Projects identified for Development
Chameliya (30 MW)
Budhi Ganga (20 MW)
Kabeli - A (30 MW)
Arun - 3 (402 MW)
Kankai (60 MW)
Likhu - 4 (51 MW)
Dudh Koshi - 1 (300 MW)
Tamur - Mewa (101MW)
Rahughat Khola (27 MW)
Andhi Khola (176 MW)
Upper Arun (335 MW)

Scope for foreign investment in other areas/sectors
Tourism also avails high scope for foreign investment opportunities. As of the July 2004 statistics of Department of Industry, there are about 218 foreign direct investment projects in this sector.

As of July 2004, there are 14 projects under Agriculture and Forestry. Medicinal and Aromatic Herbs; Flower and Vegetable Seeds; Floriculture and Sericulture; Processing of Spices, Coffee; Fruits and Dairy Products; Vegetable and Mushroom Farming and Tea comes under this sector.

Mineral that includes Stone and Limestone; Talc; Silica; Dolomite; Iron-ore; Oil and Natural Gas needs to be further explored. There are 3 foreign direct investment projects in this sector.

Areas like Computer Software Development; Leather and Textile; Pharmaceutical; Electronic and the Service Industries also carry high possibilities of foreign investment. As per the same statistics of July 2004, there are 435 Manufacturing; 15 Energy Based; 17 Construction and 203 Service Industries related foreign direct investment projects in Nepal.

Although the Government of Nepal is open to foreign direct investment with all its liberal policies, sometimes its implementation policies seems unclear with the bureaucratic delays and inefficiency but it should not be considered as an obstacle towards the foreign investment in Nepal.

investmentboard.gov.np