Nepal’s Foreign Direct Investment (FDI) has seen significant growth, increasing by 11.8% to reach Rs. 295.50 billion by the end of the fiscal year 2022/23. This rise reflects Nepal’s ongoing efforts to attract foreign capital through strategic reforms and investor-friendly policies, according to the latest FDI survey report from Nepal Rastra Bank (NRB).
FDI has been a key driver of Nepal’s economic development, contributing to job creation, human capital development, technology transfer, and export growth. Since the introduction of Nepal’s sixth five-year plan in FY 1980/81, which first emphasized the importance of foreign investment, the country has implemented substantial legal and institutional reforms. These changes have created a solid foundation for foreign investors, promoting long-term investment and sustainable economic growth.
The NRB survey, which gathered data from 238 enterprises out of 754 active FDI-approved entities, offers a detailed look at Nepal’s FDI composition. The report highlights that paid-up capital is the largest component of FDI, making up 52.8% of the total stock. Reserves and loans account for 33.7% and 13.5%, respectively, demonstrating the diverse nature of foreign investments in Nepal.
In terms of sectoral distribution, the industrial sector dominates, holding 59.7% of total FDI. Within this sector, the electricity, gas, steam, and air conditioning industries lead with a 30% share, followed closely by the manufacturing sector at 29.4%. The service sector accounts for 40.2% of FDI, with financial and insurance services comprising 26%, information and communication services 6.7%, and accommodation and food services 6.3%.
The survey also identifies the top sources of FDI in Nepal, with India leading at Rs. 103.5 billion, followed by China at Rs. 35.5 billion. Other significant contributors include Ireland (Rs. 22.6 billion), Australia (Rs. 19.1 billion), and Singapore (Rs. 18.8 billion). As of mid-July 2023, Nepal has attracted foreign investments from 58 countries, underscoring its growing appeal as a global investment destination.
The outstanding foreign loans of FDI enterprises, excluding direct loans from foreign investors, amounted to Rs. 60.3 billion by mid-July 2023. The hydropower sector has utilized a significant portion of these loans, with outstanding debt in this sector reaching Rs. 29.3 billion.
Additionally, the survey reveals that the capacity utilization of FDI enterprises in the manufacturing sector stands at 60.69%, with an average profitability of 11.61% during FY 2022/23. These figures indicate the operational efficiency and financial health of foreign-invested enterprises in Nepal, showcasing the positive impact of FDI on the country’s industrial and service sectors.
As Nepal continues to build on these positive trends, further refinement of legal frameworks and institutional structures is expected to enhance the country’s attractiveness to foreign investors. Promoting FDI remains central to Nepal’s economic policy, with the goal of fostering sustained economic growth and development in the years ahead.