FDI Opportunity and

challenges in Nepal

Laxman Bhattarai
Joint Secretary
Ministry of Industry
(Nepal)

Disclaimer for presentations

The views expressed in this presentation are the views of the author and do not necessarily
reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian
Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does
not guarantee the accuracy of the data included in this paper and accepts no responsibility for
any consequences of their use.

Terminology used may not necessarily be consistent with ADB official terms.
 Policy Framework

 Interim Constitution(stated that the policy of

attracting foreign capital and technology will be
adopted)
 Introduced new Industrial Policy 2010
 Foreign Investment and Technology Transfer Act
1992
 3 year Interim plan has focused on attracting
more FDI on selective sectors: ( hydropower,
tourism, service sector & Infrastructure.)
 Double taxation avoidance agreement with 10
countries.
 Policy Framework cont ….

 Policy and institutional provision made to

implement the commitments made during WTO
membership
 Policy in pipeline:
 Special Economic Zone bill
 Foreign Direct Investment
 one window policy
 Act related to Non Resident Nepalese
 To make compatible with WTO,SAFTA and
BIMSTEC provision, Nepal Government going to
introduce new Industrial Enterprise Act
 Bilateral Investment promotion and protection
agreement(BIPPA) with six countries
Infrastructure

 Industrial Estate(11)
 Special economic zones(Bhairahawa
almost completed,Birgunj under
construction)
 Technology Park(IT park etc.)

 ICD(Birgunj ICD running)

 Cheap Service Cost

 Connectivity with world market

 Incentives and facilities provided
by existing policy and laws
 Duty exemption
 Duty drawback
 Bonded warehouse facility
 Visa arrangement(business visa for 5yrs. At a time with
multiple entry)
 Commitment not to nationalize industrial property
 Easily Acquiring land for Industrial purpose
 Real Estate Property Rights
 Investment and repatriation.
 Abundant cheap labor force
Institutional Arrangement

 High level Investment Board chaired

by Prime Minister
 Industrial Promotion Board chaired by
Industry minister
 Nepal Business forum chaired by
Rt.Prime Minister and so on..(Public
private policy dialogue, Investment
climate reform)
 Constraints & issues
• Weak infrastructure
 Road networks,
 insufficient irrigation infrastructure
 electricity
 SEZ not operated due to lack of law

• Weak governance
 Political instability,
 poor industrial relations & rigid labor regulations,
 the law & order situation,
 lack of policy clarity and existing policy not updated in
the changed context
 Others

 Procedural hurdles(lengthy and more paper

work)
 Weak economic diplomacy
 Lack of identification of viable sectors for FDI
 Weak negotiation capacity
 Weak coordination among line Ministries
 High cost of doing business
 Too many entities for investment approval,
concession, facilitation and promotion
Key issues
 Low FDI as compared with
other countries
 Retention of foreign investors
 Liberal policy for FDI
Key challenges for FDI
attraction
 Political instability
 Industrial insecurity
 Industrial relation& Labor regulation
(poor &rigidity)
 Power shortage
 Weak Industrial Infrastructure (road,
electricity, irrigation infrastructure,
SEZ etc.
Key challenges for FDI
attraction Contd.

 Regulatory and procedural

reform(cumbersome procedures &
more paper work)
 Technology adaptation
 Less dedicated Investment
Promotion Agency
 Lack of National strategic plan for
Investment promotion
 Limited capital market
 Policy, and act are not compactable
Action taken by Government to
address challenges
 Introduced, New Industrial policy 2010
 Set up Nepal business forum by executive
order for Public Private Dialogue and
Investment climate reforms
 SEZ bill submitted to the parliament
 BOI chaired by PM, one stop shop service
centre
 Initiated to reform existing foreign investment
policy, act regulation and procedures to make
create investment friendly environment
 No work no pay principle adopted by labor
policy
 Commitment to make flexible labor policy
 Economic diplomacy policy to attract FDI
Capacity building needs

 Enhancing Negotiation ,arbitration & professional

capacity
 Enhancing ICT related infrastructure
 Enhancing other investment related infrastructure
 Investment areas should be diversified.
 Focusing on Capacity building program for the staff
of BOI, DOI on IP and TRIPS
 Automation and simplification in the procedure of
FDI
 Expanding FDI to priority sectors
 Initiation taken for the Establishment of separate IP
office
Priority Areas
 Hydropower sector
 Manufacturing Industries
 Mining Industries
 Construction Industries
 Tourism Industries
 Service Industries
 Industries based on agriculture and
forest products
 Construction industries
 Information and Communication
Industries
Way Forward
• Amending the draft SEZ bill(remove 75% export
requirement, replacement of positive list with
negative list)
• Strengthen BOI as envisaged by New Industrial
Policy
• Investment promotion action plan for the BOI
• Develop a comprehensive capacity development
program for the new BOI and its staff
• Establish a professional, one stop investor
facilitation service and website to assist new &
existing investors.
• Gradual opening up business support services(
accounting, consulting ,marketing etc.)
• Rationalizing and reducing no. of organizations
dealing with FDI
• Simplification of procedures and regulation
Thank you so much
for attention!