Foreign Direct Investment

Foreign Direct Investment (FDI)

Foreign Direct Investments in Nepal are regulated mainly by the Foreign Investment and Technology Act (FITTA) of 2019, along with additional provisions applicable from the Public Private Partnership and Investment Act, Labor Act, and the Companies Act.

There is great potential for investment in Nepal. Nepal is pursuing a liberal foreign investment policy to create an investment-friendly environment. Major areas for investment include: hydropower, manufacturing, services, tourism, construction, agriculture, and mining and minerals Some of the initiatives undertaken in Nepal include:

1. Reforming business-related policies and procedures while ensuring industrial security and institutional reforms;
2. Developing industrial and commercial infrastructures and expanding services;
3. Expanding and promoting micro-, small- and medium-scale industries, while ensuring industrial peace; and
4. Focusing on tourism, hydropower, IT, agriculture, and mining industries, and creating an environment that utilizes the full capacities of existing industries.

Forms of Foreign Investment

Foreign Investment can be made in any industry in the following forms:

1. Investment in shares (equity);
2. Reinvestment of the earnings derived from equity;
3. Investment made in the form of loans or loan facilities; and
4. Investment in kinds, e.g. machineries and equipment.

The Government decision on September 6, 2012 has increased the minimum amount of FDI to NPR 5 million for each investor from USD 20,000

 Sectors of Foreign Investment in Nepal

3.1 Potential Sectors
The strategic location of Nepal, ease of market access to neighboring countries, amicable investment policies, priority by government, abundant natural resources and mines ores, availability of cheap labor, and other comparative benefits enhances the potentialities of different sectors for investment. Here are some sectors which are the most feasible and potential areas for foreign investment in Nepal:

•  Agriculture and agro-based industry
•  Tourism industry
•  Energy based industry
• Manufacturing industry
• Infrastructure industry
• Service industry
• Mines & Mineral based industry
• Transportation Scoter
• Information & Communication Technology

3.2 Categories and Sub-categories for Investment
The categories and sub-categories for Investment are enlisted as follows in accordance with the Industrial Enterprises Act, 2020, specifically in section 17(2) and schedules 3 to5. The categories and subcategories of the investment should align with these areas of investment. It's important to note that all the sectors listed are accessible for foreign investment, with the exception of the specific areas indicated in section 3.3 of this guide.
       3.2.1 Energy-Based Industries

• Industries generating energy from water resources, wind, solar power, coal, natural oil and fuel or gas, biomass or other sources, industries manufacturing       machines/equipment to be used for the generation of such energy;
• Electricity transmission lines;
• Electricity distribution system;
• Energy based on bio-gas;
•  Electric energy to be produced as a co-production of the sugar industry;
• Energy potentiality study.
  3.2.2 Industries Based on Agriculture and Forest Products
• Fruits farming or fruits processing;
•  Production, processing and storage of food products;
• Animal husbandry, birds farming (including ostrich), animal breeding, challa kadne business, and production and processing of meat;
• Industries producing milk and processing of dairy products;
• Fishery, production, processing and packaging of fry;
• Industries producing animal feed from Argo-products as the primary raw materials;
• Silk farming and processing;
• Tea garden, tea processing;
• Coffee farming and coffee processing;
• Herbs farming, herbs processing;
• Production of vegetable seeds;
• Vegetable farming, vegetable processing;
• Establishment and operation of green-houses;
• Bee keeping (bee breeding, honey production and processing;
• Floriculture, flower processing (making of garland, decoration, making bouquet, includingproduction of seeds);
• Nursery business, establishment, protection and management of botanical gardens, inclusive of tissue culture;
• Rubber farming, preliminary processing and operation of rubber;
• Operation and management of cold stores, agriculture markets;
•  Establishment and management of a community, leasehold, partnership, private forest and agriculture forest, and other non-timber forest products;
• Commercial farming and processing of cash crops (such as sugarcane, cotton (kapas), sanpat, sajiwan, sweet sargam, stevia, tobacco, jute, alaichi, keshar, oil seed.        Mashala cultivation, dalahan, etc. and production of their seeds);
• Bet, bamboo farming, bet, bamboo and other natural fiber products;
• Processing of seeds;
• Wood industries including Shaw-mills and furniture;
• Wood industries such as parquetting, seasoning, treatment plant, ply wood, composite,board;
• Industries based on other non-timber forest products including paper and resin;
• Industries producing mushroom,tissue culture (producing plants through new technology),Argo Forest;
• Cotton farming, production and processing of cotton and cotton seeds.
  3.2.3 Infrastructure Industries
• Road, bridge, tunnel;
• Ropeway, railway, tram, trolley bus, monorail and sliding car;
• Runway/airport;
• Industrial structure and infrastructure complex;
• Assembly conference center;
• Water supply and distribution;
• Irrigation infrastructure;
• Sports complex, stadium;
• Motor vehicle parking, parking house;
• Export processing zone;
• Special economic zone;
• Cargo complex;
• Polluted water purification industries (waste water treatment plant);
• Telephone tower, optical fiber network, satellite, satellite broadcasting center;
• Housing and residential building;
• Building film city, building film studio;
• Business complex;
• Private warehouse;
• Construction, management and operation infrastructure for installation of pipelines for fuel and gas supply;
• Construction, management and operation infrastructure for energy house and energy transmission line;
• Construction, management and operation infrastructure for installation of pipelines for fuel and gas supply;
• Construction, management and operation infrastructure for energy house and energy transmission line
  3.2.4 Tourism Industries
• Tourist housing, motel, hotel, resort, bar and restaurant;
• Travel agency, tour operator, healing center, casino, massage, spa;
• Adventurous tourism, trekking, skiing, paragliding, water rafting, hot air ballooning, cannoning, parasailing, horse riding, elephant riding, bungee jumping,                   expedition, zip flyer, ultra-light, sky walking, sky diving, and
•  similar other adventurous games;
• Cable car construction and operation industries;
• Golf course, polo, pony trekking, trekking, cycling;
• Rural tourism, home stay and ecological tourism, agricultural tourism;
• Cultural, religious, assembly, conference and sports tourism;
•  Fun Park, water park;
• Wildlife reserve;
• Museum.
  3.2.5 Industries Based on Information Technology, Communication Technology and Information Dissemination Technology
  Part I: Informational Technology Industries:
• Technology Park;
• IT park;
• Biotech Park;
• Software development;
• Data processing;
•  Cybercafé;
• Digital mapping;
• Business process outsourcing (B.P.O), knowledge process outsourcing (K.P.O);
• Data center, data mining, cloud computing;
• Digital signature certifying agency;
• Web portal, web designing service, web hosting, online classified advertising service.
  Part II: Informational Technology- Based Industries:
• Internet service provider (ISP);
•  Telephone, mobile phone, mobile satellite phone operator service;
• Teleport service;
• Establishment and operation of satellite, establishment of satellite broadcasting center, VSAT service;
• Broadband infrastructure, telecom tower, optical network, satellite network;
• Social networking, online message, video call, conference.
  Part III: Dissemination Technology-Based Industries:
•  FM radio, digital radio service;
• Digital land surface television, satellite television, cable television;
• IP television, online service;
•  Digital cable television, network, direct to home (DTH) satellite service, MMDS network, digital television (DTTV) network;
•  Recording studio, broadcasting studio;
•  Print media industries, audio-visual material production industries, advertisement production industries;
• Production of motion pictures or documentaries.
  3.2.6 Service Industries
• Mechanical Workshop;
• Printing and printing related services;
• Professional research and development, management, engineering and design, legal, accounting, audit, teaching training, educational and technical consultancy services;
•  Jining and welling business;
• Exhibition services;
• Cultural and recreational business;
• Construction business;
• Public transport business;
• Photography;
•  Hospitals;
• Establishment of nursing homes, clinics, polyclinics, rehabilitation homes, physiotherapy
  clinics, Aayurvedic and other alternative hospitals;
• Operation of physical training, mediation (Yog-Dhyan) and exercise centers;
• Teaching and training centers;
• Library, archive and museum services;
• Labs;
•  Air transportation services;
• Sports services, swimming pools;
• Operation of cold storage;
• House wiring, electrical fitting and maintenance;
• Solid wastes collection and sanitation, recycling of solid wastes;
• Business on purchase and sale of houses and land, upon land development;
• Hiring, maintenance and operation of construction related heavy equipment;
•  Veterinary services;
•  Battery recharging;
• Health check-up services (such as X-ray, CT scan, MRI and ultra sound) and health check-up laboratory;
• Already built infrastructures operation businesses (such as, businesses operating services like conference buildings, water supply, pipelines related to supply of fuel gas, warehouse and storage, airports, bus parks, stadiums, sports complexes, ropeways, roads, irrigations, electricity transmission, power houses, railway services, cargo complexes, Inland Container depots (ICD);
• Beating, grinding and crushing and packaging of foods;
• Clothing and yarn dying, sizing and printing on clothes (except when it is done by a weaving industry for its own purpose);
• Transport and cargo business or service;
• Customs agent service;
• Packaging and refiling services (inclusive of LPG gas refiling and vehicle gas refiling stations);
• Courier services;
• Dry cleaning business;
• Beauty parlor;
• Interior decoration;
• Security service providing business;
•  Publication service;
•  Advertising service;
•  Advertisement development service;
•  Mass communication service;
•  Production and broadcasting of programs and documentary telefilms made for television broadcasting;
•  Soil testing service;
•  Water purification, transport and distribution service;
•  Health clubs;
• Operation of zoological, geological, biotech parks;
•  Business incubation service;
• Trading business complex operation;
•  Foreign employment service;
• Cinema halls (inclusive of multiplex);
• Theatres (inclusive of multiplex);
• Sewing, knitting (inclusive of boutiques);
•  Electricity survey;
•  Mining study and research;
•  Research and development service;
• Sanitation service;
•  Wholesale and retail business service;
•  E-commerce, industry, business providing services to the public by using electronic medium (online or software or apps or other similar kind of medium);
•  Leasing machinery, equipment;
• Service businesses, such as, purification or processing cut to length sheet, photo film slitting, photo, paper slitting, tissue paper slitting, ball bearing assembly and repacking finished goods after importing such goods in bulk, involving nominal processing or procedure;
• Clothes and yarn dying, yarn sizing, and printing on clothes (except when it is done by a weaving industry for its own purpose);
• Commercial veterinary services;
•  Service apartment;
•  Food court, catering, mobile food stalls;
•  Equipment repair and installation, ready mix concrete, export house, technology and innovation center and office space with facilities services.
•  Investment Company

3.4 Industries or Businesses Restricted for Foreign Investment

• Industries, except the large Industries exporting at least seventy five percent of their own products, in the sectors of animal husbandry, fisheries, beekeeping, fruits, vegetables, oilseeds, pulses, dairy business and other industries or business related to primary products of agriculture.
• Cottage and micro industries,
• Personal service business (hair cutting, tailoring, driving etc.),
• Industries manufacturing arms, ammunition, bullets and shell, gun powder or explosives, and nuclear, biological and chemical (N.B.C.) weapons; industries producing atomic energy and radio-active materials,
•  Real estate business (excluding construction industries), retail business, internal courier service, local catering service, moneychanger, remittance service,
• Travel agency, guide involved in tourism, trekking and mountaineering guide, rural tourism including home stay,
• Business of mass communication media (newspaper, radio, television and online news) and motion picture of national language,
• Management, account, engineering, legal consultancy service and language training,music training, computer training, and
• Consultancy services having foreign investment of more than fifty-one percent.
• Ride Sharing having foreign investment of more than Seventy percent.