NEPAL > Why Invest in Nepal?

On April 25, 2013 by Santosh Thapa

Nepal is a landlocked Himalayan nation with a population of just under 30 million. Located between India and China, two of the largest and fastest growing economies of the world, Nepal promises tremendous investment potentials. With liberal policies adopted by the Government of Nepal, it has attracted the attention of many foreign investors in recent years particularly in hydropower, agriculture, manufacturing, tourism and service. Below is a very high level synopsis for each of these sectors.

Theoretically, Nepal has a capacity of 83,000 MW out of which 44,000 MW is said to be techno-economically feasible. Nepal’s baseline for electricity is hydro but less than 1 percent has been harnessed so far.

Despite the huge potential, Government of Nepal  has declared national energy crisis due to the mismatch between the demand and supply. Nepal Electricity Authority (NEA) has signed Power Purchasing Agreements (PPAs) worth 714.77 MW in 2011  for domestic consumption and many are under way. Also there is a huge potential of supplying generated power to India.

Read more about hydro here.

Nepal has a rich geography and has eight of the world’s ten tallest mountains, including the highest point on the Earth, Mount Everest. Also there are 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.

The influx of tourists is in increasing trend. According to Nepal Tourism Board, Nepal has seen more than 598,200 tourists in 2012, a 10 percent increase over 2011, making tourism one of the largest sources of revenue. As such, there is a huge scope for investment in hotels and resorts, eco tourism, religious pilgrimages and adventure sports.

Although the major contributor to Nepalese GDP is agriculture, it relies heavily in traditional methods of farming. Despite the major labour force being engaged in agriculture (66 percent), Nepal is heavily dependent on other countries for its food supply. Low productivity is the stark reality. Domestic production is unable to meet the growing demand.


FISCAL YEAR    2010-11
COMMODITIES     Value (in Rs)
Total commodities         79.89 billion
Vegetable products       21.72 billion
Prepared foodstuffs    16.48 billion
Edible oils                          13.88 billion
Cereals                              5.03 billion
Edible vegetables          4.36 billion
Edible fruits and nuts   3.63 billion
Live animals                     2.37 billion
Maize corn                       2.27 billion
Betelnuts                          2.05 billion
Dairy products               925 million
Source:- Ministry of Agriculture and Cooperatives (MoAC)

The geographical landscape is Nepal’s assets. For instance, within less than 100 km stretch, Nepal offers suitable places for Mango and Apple cultivation.  Identification of cash crops/fruits/ livestocks and use of scientific methods for higher productivity is necessary.

On the other hand, Nepalese tea, ginger, cardamom, lentils and sugarcane have a high demand in the international market. Further expansion in this sector is a viable option.

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.

Although Nepal is categorised as a Least Developed Country according to the United Nations, there is a growing middle class. According to a study conducted by the Asian Development Bank (ADB 2010), based on a 2004 survey, Nepal had a middle and higher class population of 23.36 percent with a combined annual expenditure of US$10.72 billion in purchasing power parity (PPP) terms. The increasing trend of middle class opens up the avenue for further investment in education, hospitals and IT businesses.