Electronic copy available at: http://ssrn.

com/abstract=2128969
1
Promoting Foreign Investment in Nepal: Prospects and Challenges

Basudev Sharma Poudel
1


Abstract

FDI is an important source of capital for economic growth in developing countries. It provides a
package which constitutes new technologies, management techniques, finance and market access
for the production and movement of goods and services. However, attracting FDI is a major
challenge for host countries as it faces the challenge of identifying the major factors that motivate
and affect the FDI location decision. The main FDI location factors are cost factors, market
factors, infrastructure, technological factors, political and legal factors and social and cultural
factor. Despite several conflicting circumstances, Nepal is attempting to sort out overarching
issues of FDI concerning with economic development. That's why Nepal is at a point wherefrom it
can excel for economic goals via FDI. The set trends illustrate that various indicators pertaining
to FDI in the country has been improving since peace process was begun in 2006. This analysis
comes to conclusions that the country owns unique advantages and, thereby, opportunities of FDI
useful for the countrys prosperity. Yet FDI in the country is not free of challenges, thus, that
need to be timely addressed with prudent measures.

Key word; FDI, TNCs, LDC, SEZ


Introduction
Foreign Direct Investment (FDI) is generally considered as a useful means so as to
energize an economy. One common view is that FDI helps accelerate the process of
economic development in host countries (Hanson, 2001, p1).However; FDI is not free of
disputes. Despite of all controversy, FDI has been a major economic policy issue for the
great majority of nations around the world. The increasing mobility of international firms
and the gradual elimination of barriers to global capital flows have stimulated
competition among governments to attract foreign direct investment. FDI per se is one
manifestation of globalization and the world economy over the past two decades. FDI is
an important indicator to boost the economic growth of Nepal. FDI was identified as a
medium in order to acquire skills, knowledge, technologies and to internationalize

1
Mr Poudel is a Under Secretary, Ministry of Finance Privatization cell /GoN in Kathmandu. A gold Medalist in
M.Phil in management. P.Hd Scholar in Faculty of Management Tribhuvan University , Kathmandu, Nepal
Electronic copy available at: http://ssrn.com/abstract=2128969
2
business and at the same time to reduce debts.McKern (1996), Kathuria (1998, 2000 and
2001) and Noorbakhsh et al., (2001) believed that foreign direct investment does not take
place automatically in a nation. Whereby, inflow of foreign direct investment should be
encouraged.

FDI, also known as (international) direct investment, forms part of the capital account of
the balance of payments. Direct Investment is defined as an investment that adds to,
deducts from, or acquires a lasting interest in an enterprise operating in an economy other
than that of the investor where the purpose is to have an effective voice in the
management of the enterprise. According to the IMF, FDI is the category of international
investment that reflects the objective of obtaining a lasting interest by a resident entity in
one economy, in an enterprise resident in another economy.

Foreign direct investment was considered as a medium for acquiring skills, technology,
organizational and managerial expertise. Unfortunately, the recent bulk of the inflow has
been directed to only a limited number of countries. Mohd Ridauddin Masud et al (2009)
claimed there were four elements that encouraged the inflow of foreign direct investment
to the host country, which was the component of investment, origin of foreign investor,
economic sectors and investment income generated. The openness of the economy with
the rest of the world has significant liberalization in terms of trade. The open economic
encouraged more confident investment. Other than trade liberalization, financial
liberalization was also important to sustain capital inflows.

Countries do welcome FDI for its various potential benefits. These include employment
creation, capital accumulation, transfer of technology, improved provision of services and
increased competition (UNCTAD, 2006: p1). Contrary to such positive views, skeptical
views run against FDI. Skepticism suggests inward FDI can also impose costs in the form
of displacement of local firms and workers and possible monopolistic practices, and there
can be valid economic rationales for restricting inward FDI (ibid, p1). Staying away from
economic rationales, political and social views do hold high handedness in denouncing
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FDI. There may also be non-economic reasons for limiting foreign ownership and
control, relating to national security or economic nationalism (ibid, p1).

Current financial and economic crises erupted since 2008 have downplayed the agenda of
investment attraction through liberalization and protecting foreign investors. With this
respect, Nepalese case per se is a unique as its agenda for economic transformation has
been shadowed in a hazy and hostile political situation. This process emerged when the
country posed years of internal war which shattered the mission of inviting FDI. The
situation is further complicated by protracted transition in which major two tasks -
constitution making and peace process - are not concluded yet.

At a time the country is striving for strengthening its infant republican democratic
system, political and economic agenda should go hand-in-hand. Whatever the nature or
size of system the country is going to switch over to, the future state will have to
ultimately deliver in economic term to common people. If delivered the peace dividend,
the system-in-design will sustain and vice-versa. Keeping it in mind, a sound
preparedness is a must in the direction of economic prosperity. Alleviating poverty in a
period of ten years in Nepal may require at least 8 per cent of sustained growth in GDP.
On top, growth has to be converted into inclusive growth as long as possible. Such
quantum and nature of growth is attainable only when FDI boosted investment will come
true.

It is an irony that the size of FDI to Nepal has been a meager for a long time, on one
hand. On the other, China and India have been enjoying one of the highest chunks of
global FDI. Now the time has come for Nepal to make an honest introspection and
retrospection so that a set of prudent and pragmatic measures could be designed
accordingly for both policy as well as operational levels in the times ahead.

Objectives of the Study
This paper aims to meet the following objectives:
1. What are the main trends observed in the FDI to Nepal?
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2. What are the major prospects for FDI in Nepal?
3. What are the chief challenges to be dealt by Nepal?

Trend of Global FDI
Recent years have painted somewhat negative sort of picture of FDI at global level.
Following statement of World Investment Prospects Survey (2010-2012) is the
manifestation of the current pessimistic scenario:
Faltering profits, reduced access to financial resources, and declining market opportunities,
as well as the perceived risk of a possible worsening of the global economic downturn are
among the reasons for a fall in FDI flows, as witnessed in 2009. Falling FDI in turn also
raises concerns among host countries especially those in the developing world that rely on
international investments to finance their domestic growth and employment creation
(UNCTAD, 2010: p3).

Like trade, foreign direct investment (FDI) has occurred throughout history. From the
merchants of Sumer around 2500 BCE to the East India Company in the 17th century,
investors routinely entered new markets in foreign dominions. In 1970 global FDI totaled
$13.3 billion. By 2007 it was nearly 150 times higher, peaking at $1.9 trillion. The
economic crisis slashed global FDI flows by about 40% in 2009, affecting all economies,
sectors, and forms of investment. FDI in developing economies fell 35% in 2009,
compared with 41% in high-income economies. Most indicators signal that FDI will be
higher in 2012 than in 2011. The recovery in FDI is good news for economies suffering
from the global economic downturn and seeking to stimulate economic growth.Statistical
data shows that the level of FDI was continuously increasing during 1990-2008, but the
directions and amount of such inflows differs significantly between the countries.
European countries proved to be successful in attracting FDI. According to UNCTAD
(2007) total FDI inflow in the world was 945.8 billion USD, of which developed
countries received 590.3 billion USD which is 62.4 % of the total FDI inflow in the
world, whereas in the same year developing countries received FDI only 314.3 billion
USD. It was only 38.6 % of the total FDI inflow in the world. Even that one can observe
a slight drop in total amount of FDI inflows in the world in 2008 developed countries
continuously dominate over the developing countries in attracting the FDI.
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Statistical data shows that the level of FDI was continuously increasing during 2003-
2007, but the directions and amount of such inflows differs significantly between the
countries. European countries proved to be successful in attracting FDI. According to
UNCTAD (2007), in 2005 total FDI inflow in the world was 945,8 billion USD, of which
developed countries received 590,3 billion USD which is 62,4 percent of the total FDI
inflow in the world, whereas in the same year developing countries received FDI only
314,3 billion USD. It was only 38,6 percent of the total FDI inflow in the world. Even
that one can observe a slight drop in total amount of FDI inflows in the world in 2008
(Table 1) developed countries continuously dominate over the developing countries in
attracting the FDI.




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Foreign direct investment has grown dramatically worldwide over the last decade.
Inflows of foreign direct investment into developing countries grew by an average of 23
percent a year during 1990-2000 (IMF, 2003). In addition, foreign direct investment was
now the largest and the most stable source of private capital for developing countries and
also economies in transition, which accounting for nearly 50 percent of all capital flows
(Kraay, 1998). However, less developed countries have greater expectation on foreign
direct investment.

Global foreign direct investment (FDI) flows rose moderately to $1.24 trillion in 2010, in
(table 2) but were still 15 per cent below their pre-crisis average. This is in contrast to
global industrial output and trade, which were back to pre-crisis levels. UNCTAD
estimates that global FDI recovered its pre-crisis level in 2011, increasing to $1.41.6
trillion, approaching its 2007 peak in 2013. This positive scenario holds, barring any
unexpected global economic shocks that may arise from a number of risk factors still in
play.

Table 2: FDI Flows and Stock Inflow
Year In billions US dollars Annual percent changes
2005/07 1472
2007 1971 0.34
2008 1744 -0.12
2009 1185 -0.32
2010 1244 0.05
Source: UNCTAD, weblink: www.unctad.org/fdistatistics

For the first time, developing and transition economies together attracted more than half
of global FDI flows. Outward FDI from those economies also reached record highs, with
most of their investment directed towards other countries in the South. Furthermore,
interregional FDI between developing countries and transition economies has been
growing rapidly. In contrast, FDI inflows to developed countries continued to decline.

Some of the poorest regions continued to see declines in FDI flows. Flows to Africa, least
developed countries, landlocked developing countries and Small Island developing States
all fell, as did flows to South Asia. At the same time, major emerging regions, such as
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East and South-East Asia and Latin America, experienced strong growth in FDI inflows.
International production is expanding, with foreign sales, employment and assets of
transnational corporations (TNCs) all increasing. TNCs production worldwide generated
value added of approximately $16 trillion in 2010 about a quarter of global GDP.
Foreign affiliates of TNCs accounted for more than one-tenth of global GDP and one-
third of world exports. State-owned TNCs are an important emerging source of FDI.
There are some 650 State-owned TNCs, with 8,500 foreign affiliates across the globe.
While they represent less than 1 per cent of TNCs worldwide, their outward investment
accounted for 11 per cent of global FDI in 2010. The ownership and governance of State-
owned TNCs have raised concerns in some host countries regarding, among others, the
level playing field and national security, with regulatory implications for the international
expansion of these companies.

The global financial crisis and subsequent economic downturn led in 2008-2009 to rapid
and significant contraction in international trade and investment. But the first half of 2010
has seen a gradual though cautious upswing in global consumer demand, investor
confidence, and economic activity. The resurgence of international commerce and
investment is creating new opportunities for companies and countries alike. The factors
driving investment decisions by multinational corporations are changing. When seeking
business opportunities, companies are now more concerned about financial and political
risks, with a focus on stable and predictable business environments. In response,
governments everywhere recognize that their chances of attracting more foreign
investment depend on making their investment climates more competitive.

The Investing across Border (IAB) indicator measures FDI regulation in 4 specific policy
areas. They aim to complement existing measures of the quality of business
environments. A company seeking to expand its global presence will assess its options
before deciding on a location for its investment. One of the first determinants of location
is whether the company is allowed to enter and operate in a specific market. Though most
economies have liberalized and opened most sectors to foreign investment, some
industries continue to be protected from foreign competition. IABs investing across
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sectors indicators find that while primary and manufacturing sectors are mostly open,
some industries such as media, transportation, energy, and telecommunications remain
restricted in many economies. Some of the more restrictive economies include large ones
such as China, Mexico, the Philippines, and Thailand.

Even if a foreign company can enter a particular sector, it may face other barriers to
market access and operations. Onerous start-up procedures, excessive licensing and
permit requirements, and time-consuming export and import processes are among the
factors that can make an economy less attractive to foreign investors. IABs starting a
Foreign Business indicators show that in some economies foreign companies must
complete lengthy procedures to obtain investment approvals, adding weeks and
sometimes months to the start-up time. In other economies the procedures can be done
online and take only a few days.

South Asian Experience
As evident from the table below, Nepal seems to be low performer amongst other
competing countries in the South Asian countries. Only in 1999/2000 and 2007, it got a
bright picture, whereas the rest years it was grappled with appalling prospects. As per the
UNCTADs World Investment Prospects Survey 2009-11, India stands among the five-
most attractive place for FDI globally.
Table 3: Inward FDI Flows
Source: UNCTAD: World Investment Report 2009
$ million as a % of gross fixed cap formation
1999-00 2005 2006 2007 2008 1999-00 2006 2007 2008
India 1705 7606 20336 25127 41554 1.9 6.9 6.5 9.6
Pak 463 2201 4273 5590 5438 5.1 16.1 18.3 18.3
Sri Lanka 159 272 480 603 752 5 6.8 7.5 7.3
Bangladesh 218 845 793 666 1086 2.9 5.3 4 5.9
Maldives 9 9 14 15 15 7 2.8 2.9 2.5
Nepal 6 2 -7 6 1 0.9 -0.3 0.2 NA
Bhutan 9 6 73 30 0.4 1.2 10.9 3.9
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Apart from India, the other big countries in South Asia namely Pakistan, Bangladesh and
Sri Lanka have also benefitted from FDI flows. Yet investment flows into Nepal, Bhutan
and Maldives have so far been meager.

Trends in Nepal
This analysis observes following trends mainly seen in recent FDI of Nepal.
1. Increasing number of FDI related projects
The table 1 shows that till the year 2002 the number of FDI induced projects
witnessed series of ups and downs. However, a steadily growth was observed since
2005 and that trend continued till 2009. In the subsequent years, the number of FDI
related projects slightly plummeted to Rs 179 from Rs 205 million. By and large,
since 2005 the line of trend has shown a new hope which was lost amidst conflict run
in the country.
2. Rolling back the cost of projects
The table 1 highlights that the year 1993 was the period when one of the largest
amounts invested ever. On the contrary to that, the following years except 1997 saw
series of downfall in the investment. The momentum again rolled back in 2008, 2009
and 2010. The situation of later years seems to be encouraging.
3. Rising the total fixed cost
Just like the acceding case of total project cost, 1993 was the year when a big surge in
fixed cost was witnessed. Similarly, 2008 and afterwards a rising trend in the fixed
cost was seen. But the data shows a distressing situation in between the year 1993 and
2008. However, a happy note is that since 2008 a rising fixed cost is in effect.
4. Growing foreign investment
Except the year 1993 the rest all years covered in this study witnessed a constant
fluctuation in foreign investment, including little ups and downs. However, since
2007 onwards an encouraging course has substituted the situation.
5. Slow going employment opportunity
The year 1993 is marked as the highest scoring period with respect to generating
employment opportunities as an outcome of FDI in the country. However, it remained
short-lived as the following years failed to sustain the gained momentum. Breaking
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the embarrassment continued till 2005, the year 2006 brought back once again the
hope. The largest number ever of employed man power was in 2008 when employed
figure grew up to 12480.
Table 4: Foreign Investment Projects in Nepal up to 2067/09/28 BS (Rs. in millions)
============================================================================
Fiscal Year Total Project Total Foreign Employment
In AD No. Est Cost Fixed Cost Investment
============================================================================
Up to 1990 95 7722.98 6549.23 868.92 20658
1991 24 1179.16 965.27 501.57 4130
1992 58 7101.33 6120.28 1110.25 7219
1993 55 15379.89 13822.37 3350.14 12716
1994 22 2258.47 2025.34 515.10 2890
1995 39 8910.55 8202.26 2208.23 6177
1996 46 3815.16 3356.29 757.16 5949
1997 88 11647.93 9712.39 3315.98 9246
1998 66 2933.73 2581.25 1150.86 2750
1999 52 4868.00 3820.63 2178.98 2521
2000 95 5094.39 4061.94 1494.33 6792
2001 94 7228.00 4345.59 3136.62 6434
2002 60 2876.81 2446.66 1361.40 3065
2003 81 4562.68 3133.24 1773.13 2072
2004 68 3206.98 2726.72 2108.95 5833
2005 106 2644.02 1791.11 2398.64 4955
2006 130 4371.04 3694.91 3377.54 7649
2007 194 8213.65 6385.36 6541.95 7532
2008 225 18038.82 14761.09 8389.33 12480
2009 205 9168.45 8170.48 4057.60 8824
2010 179 12568.18 13461.91 9295.75 8999
=====================================================================
Total 1986 143847.72 122180.13 59923.76 149109
=====================================================================
Source: Department of Industry, Nepal 2011

6. Urban-centric FDI
Table 5 shows that FDI in Nepal varies district wise. The table of up to fiscal year
067/068 depicts a very uneven picture of FDI hosted by various administrative districts.
In a case of hosting FDI above Rs 2000million, Kathmandu is the front-runner which is
followed by seven other countries. The others include Lalitpur, Kaski, Rupandehi, Parsa,
Makawanpur, Dhading and Bara. In quantum, a huge variance was observed between the
districts located in the KathmanduValley and the other districts. Out of the total FDIalone
Kathmandu based two districts scores 44.93 per cent, while the later group possesses only
55.07 per cent.Likewise the stated eight districts invited 68.38 per cent whereas the rest
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other districts could attract the remaining 31.62 per cent of the total FDI.By and large, the
FDI is glued with a certain urban centers that cater a huge number of customers.
Table 5: Districts hosting FDI up to 2067/068
No District Amount in (mill)and Percent
1 Kathmandu 23477.00 ( 34.49%)
2 Lalitpur 7101.97 ( 10.44%)
3 Kaski 4130.58 (6.06%)
4 Rupandehi 2958.59 (4.34%)
5 Parsa 2052.85 (3.41%)
6 Makawanpur 2321.73 (3.41 %)
7 Dhading 2171.00 (3.19 %)
8 Bara 2072.08 (3.04 %)
9 Others 21,764.17 ( 31.62%)
Total 68,049.97 (100)
Source: Department of Industry/GoN, 2011
7. Source of FDI
Source wise Nepal has India, China, South Korea, Japan and Canada in the list of such
five countries which account 67 per cent share in the total invested FDI, while 22 per cent
was invested from the group of traditional OECD countries. India and China, amongst the
five countries, are the countries having much greater share than the rest three countries.
Having compared to the case of other SAARC countries, location factor seems to be
strong in practices. Location factor in the FDI is an interesting part to be studied over.
Table 6: Sources of FDI
Share of 5 top investors in Individual South Asian Countries (%)
Host Country Year Top 5 Countries
Share of top 5
countries (%)
Share of traditional
OECD countries (%)
No of identified
source countries
India
2006 &
2007
Mauritius, UK,
Singapore, US, NRI
66.1 27 100
Bangladesh
2005 &
2006
US,UK,Egypt,
UAE,Norway
68 51.2 31
Pakistan
2006-7
& 2007-
8
US,UK,
UAE,Netherlands,
Switzerland
64.1 60.5 33
Nepal 2005-08
India, China, South
Korea, Japan, Canada
67 22 25
Sri Lanka 2002
Malaysia, Singapore, UK,
62 NA NA
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India, USA
Sources: BOI: Pakistan and Bangladesh; DOI Nepal; SIA India; ESCAP (2003): Srilanka

8. The volume of FDI: size of industry and type of investment wise
Annex 7,looking at the FDI up to 2067/68, illustrates a picture thatthe size of investment
is greater for both equity investment and technological transfer vis--vis for technological
transfer. Likewise, small sized industries accounted higher number of projects as
compared to medium and large sized industries. It is a clear manifestation that small
industries attracted bigger number whereas medium and big industries attracted smalleras
compared to the earlier.

9. The volume of FDI: sector wise
Annex 8 succinctly sheds light on the fact that the largest sector hosting FDI is
manufacturing that accounts Rs 58,291.54 million. That is followed by electricity, water
and gas that accounts Rs 38,718.70 million whereas third positioned hotel and resort,
fourth positioned service industry and fifth positioned construction sectors account Rs 21,
318.54 million, Rs 18,320.53 million and Rs 6,124.92 million respectively. The rest are
taken by some other sectors.

Prospects of FDI in Nepal
Despite contesting views on impact of FDI, on certain areas FDI has been seen to have
stimulated domestic investment. One study carried out by Research and Information
System in 98 countries covering the 1980-98 period depicts that in Asian countries such
as Bangladesh, Korea, Nepal, Sri Lanka and Thailand, FDI has had a positive effect on
FDI by crowding in domestic investment. The same study continues to demonstrate that
of the 107 countries surveyed, FDI has had a positive effect on domestic investment in 22
countries (OECD, 2002: p4).

Peace process undergoing in the country is already felt to be resulting in a great
implication for FDI. As the table 1 suggests, the year 2006 and afterwards almost all
potential sides of FDI have been improved. Number of projects, committed total cost,
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committed fixed cost, size of foreign investment and employment opportunities all were
arisen. These vividly signal that the prospects for FDI in the country is getting more and
more optimistic day by day as peace process is gradually consolidated. By this, one
assumption seems to be pretty valid that once peace process concludes, FDI will bring in
multiple positive implications. Thus, the undergoing peace process and prospects for FDI
are interlinked.

Nepals economy is badly crippled over the last one decade; however, a big opportunity
is awaiting the country at its door-step. Despite the size of its own market is limited for
surging its volume of trade, two giant markets of the world, i.e. Indian and Chinese, are
just in arm reach. To access the markets, because of the proximity the transaction cost for
Nepalese goods and services is lowered that of the other countries. Besides, being Nepal
a Least Developed Country (LDC) Nepalese goods and services are granted zero-tariff
market access in those markets. With the advantage of this General System of
Preferences (GSP) facility, Nepalese goods and services do enjoy better cost
competitiveness. It is an obvious hypothesis that lower cost is meant higher trade
prospects.

One recent phenomenon is that in the current era business and investment is gradually
shifting to East and South countries from West and North countries. The North countries
represent developed and the South countries represent developing as well as LDC group
of countries like Nepal. Part of the reason for this shift is lower labor cost in the South
vis--vis that of the North countries where it has always been on rise due to hit-syndrome
to be appeared in economy. Besides, chance of trickle down in investment from China
and India to Nepal seems to be encouraging in the years ahead. By these virtues, Nepal
could greatly entice FDI in the forthcoming times.

As the Law of Comparative Advantages, as propounded it by a classical economist
David Ricardo (1772-1823), argues every country has look at its own prime advantages.
Ricardo insisted there is mutual benefit from trade (or exchange) even if one party (e.g.
resource-rich country, highly skilled artisan) is more productive in every possible area
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than its trading counterpart (e.g. resource-poor country, unskilled labourer), as long as
each concentrates on the activities where it has a relative productivity advantage
(Wikipedia).While applied the law in the Nepalese case, natural endowment is such one
example wherein the country is blessed with many advantages. As Nepal Trade
Integration Strategy (NTIS) 2010 has succinctly identified, there are 19 areas in which
the country is much richer than other competing countries. This list includes cardamom,
ginger, honey, lentils, tea, noodles, medicinal herbs/ essential oils from agro food
category. Similarly, handmade paper, silver jewelry, iron and still, pashmina and wool
products are included from craft and industrial goods category. Likewise, tourism, labor
services, IT and BPO services, health services, education, engineering, hydro-electricity
are selected from services sector. Finally, transit trade services between Tibet and India,
sugar, cement, dairy products and transformers are picked up as other potential export
sectors (MoCS, 2010, p.10). In these sectors, Nepal could excel provided that suggested
matrix of the NTIS 2010 are implemented to ensure competitiveness.FDI can be easily
attracted to invest in these sectors since that are salable in destination markets.

Policy wise Nepal has already been a liberalized economy. Accession to WTO in 2004,
membership of BIMSTEC, becoming a part of SAFTA, new Trade Policy 2009, new
Industrial Policy 2010, Nepal Trade Integration Strategy 2010 are some instances of a
liberalized economy. In recent days, at high level the country has held Bilateral
Investment Promotion and Protection Agreement (BIPPA) and Double Taxation
Avoidance Agreement (DTAA) agreements with India in 2011 during the visit of Nepals
PM to India. One more agreement Nepal signed on Trade and Investment Framework
Agreement (TIFA) with the United States in 2010. Such arrangements are potential in
sending around good gesture and instilling confidence in prospective foreign investors so
as to feel them stepping into the country. They themselves are self-explanatory stating to
what extent Nepal is opened up along with treasury of tremendous opportunities. In terms
of tariff rates in-effect, the country is more liberal vis--vis many developing world. With
these credentials, foreign investors have leverage enough for profitability.
In institutional front, in the later days Government of Nepal (GoN) is underway of some
headway. The major initiatives include:
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a) Formation of Board of Investment
In pursuit of expediting the investment process with a new vigor, a separate Board is
placed in the system. A set of beauty lies with this newly placed institution. First, it is
free of regular bureaucratic configuration and procedures. Second, it is headed by the
Prime Minister of the country. Third, it is represented by leaders of all big ministries
and agencies, hand-in-hand, by business leaders from various umbrella associations
of business sector. Last and the least, the way it has been designed it is looked as pool
with sound professionals who know every bit and pieces of investment compared to
ordinary bureaucrats.

b) Declaration of Nepal Investment Year (2012/2013)
In view of creating a big momentum for investment in Nepal, the GoN has declared
Year 2012/2013 as the Nepal Investment Year. To make its grand success, the
government has formed following sub-committees and fixed their coordinators at a
very high level:
i) Program PMO Secretary
ii) Investment promotion FNCCI President
iii)Investment sector identification CEO of Board of Investment
iv) Act, rules, and policies revision Vice Chairman of NPC

Challenges in Nepal for FDI
Nevertheless the country enjoys very bright prospects; so far it is not free of challenges.
The major are as follows:
1. Scenario as per World Investment Prospects Survey
Looking at the indicators applied in the World Investment Prospects Survey 2007-2009,
war and political instability factor scores the most critical threat which is followed by
other such compounding factors as changes in investment regime; global economic
downturn and financial instability (Please refer the following table).






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Table 7: Major threats to global FDI flows in 2007-2009
Not important Important Very important
1. Financial instability 12 60 27
2. War and political instability 13 32 55
3. Change in investment regime 15 57 28
4. Global economic downturn 22 50 27
5. Perceived corruption 24 52 24

Sources: World Investment Prospects Survey 2007-2009, UNCTAD, p.2

Contextualizing the same factors into Nepalese case, data depicts that conflict and
turmoil political situation turned Nepal began sliding down its once rising FDI. This
situation per se seems self-evident that FDI in the country is hugely challenged by war
and political instability factor.

2. Transitional politics
Ending more than a decade long war, Nepal in 2006 stepped into new republican system.
However, its peace process is taking longer time than it had been expected at its outset.
As it happens elsewhere in a situation of big transition, the total environment in the
country is not yet out of fragility for the same reason. Obviously, in such times political
agenda vis--vis economic agenda gets smaller space while prioritizing public policies.
The government seems to have beheld a great amount of passion for economic agenda; as
a result, positive message is spread up to prospective investors. However, they are still
concerned with the amount of uncertainty associated with the transitional politics. In such
a circumstance, feeling of insecurity is stemmed from uncertainty.

3. Acute power crisis
For a couple of years, the country is under the grip of acute and pathetic power crisis. It
has resulted in, on one hand, a force shift towards diesel option for meeting the powergap
in business sector, on the other, a continuous down turn in the countrys cost
competitiveness for the fact that cost of production has risen. Unless the solution of this
power crisis devised, the situation would go daunting against prospective investors.

4. Good governance
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For years and years, the countrys governance has been rated one of the low performing.
Several global indices; such as being undertaken by Transparency International on
corruption issue, the World Bank on Doing Business related issue, and Global Economic
Forum on Global Competitiveness; all consistently echo the voices painting the country
as a least merit holder. There are many studies that iterate good governance as basic
condition to lure possible investment. This argument is further strengthened by
globalization of investment for the reason that the investors enjoy boarder less world so
as to flyany distance. In such backdrop, one has to be competitive enough with better
governance vis--vis other countries competing for the same opportunity.

5. Implement ability of the policies
Policies and institutional bases alone are not sufficient condition of attaining the set goals
for FDI. Many internationally carried out implementation research works have come to a
conclusion that a big part of success largely depends on a country specific implement
ability. From this vintage, bureaucratic attitude and readiness to cope the agenda, their
capacity to perform, coordination between different ministries and agencies involved,
resource commitment are some instances relevant to Nepalese case. In this, a happy
marriage between government-to-government (G2G) and business-to-business (B2B)
approaches can be extra mileage to go for. On top of these all, a persistent and visionary
leadership, which is business friendly, is the highest order of implement ability. In short,
implement ability is what Nepalese in dire need of.
7. Labor unrest and law and order
In the past, the situation associated with the issue had been very daunting for the FDI in
Nepal; however, speedy progress in this regard would better enable the FDI. Besides, no
anymore occurrence of similar case will have to be allowed to repeat. By this, a positive
signal about FDI-friendly environment the country could set forward and spread around.
8. Higher transaction cost in trade
Nepal, as being a Least Developed Country (LDC), is suffered from difficult geographical
terrain, uncompetitive transport sector, unreliable transport infrastructure and weak
telecommunication services, weak industrial infrastructures, i.e. Special Economic Zone
(SEZ), ICDs (Inland Container Depot)/ Container Freight Station (CFS). These have
18
cumulatively made the transaction costs in Nepal far greater than that of other neighboring
countries.

Conclusion

Despite various inter-locked issues, controversies and transitional political circumstances,
Nepal is well positioned among low-income economies to move emphatically on
development policy and spending priorities during the next decade. The country is
bountiful of numerous positive attributes. Trade policy and Trade Strategy has succinctly
identified sectors having comparative advantages. Prudent monetary, fiscal and trade
policies have created a modern and stable macroeconomic framework with the potential
to create a dynamic, competitive, and investment attracting economy in the decade ahead.
Above all, conclusion of political settlement, labor unrest and power crisis are the critical
factors. However, political agenda and economic agenda have to move in a best
synchronized way. Provided the conditions, a potential influx of FDI is at the countrys
door step but due to knock its door. Towards end this, political, business, bureaucratic
leaders are required to come closer and act in a business-friendly chorus. The whole
gambit of course ends with aggressive marketing that Nepal is ripe for hosting FDI.

References

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Kathmandu: SAWTEE
DoI (2011), Industrial Statistics Fiscal Year 2010/2011, Kathmandu: GoN/DoI
Fu, M., & Li, T. (2010), Human capital and technological spillovers from FDI in the
Chinese regions: a threshold approach, in The Rise of Technological Power in the South,
Xiaolan Fu and Luc Soete (eds.), Palgrave Macmillan

Garelli, Stephane (2002), Competitiveness of Nations: The Fundamentals, Hanson, H.
Gordon (2001), Should Countries Promote Foreign Direct Investment? G-24 Discussion
Paper Series, No 9 Feb 2001, New York and Geneva: UNCTAD and Center for
International Development Harvard University http://www02.imd.ch/wcy/fundamentals/

Hill, Michael and Peter Hupe (2006), Implementing Public Policy: Governance in
Theory and in Practice, London, Thousand Oaks and New Delhi: Sage Publications

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Joseph, A., Park, D., & Wang, P. (2009), The Impact of Exchange Rate on FDI and the
interdependence of FDI over time, The Asian Development Bank (ADB)

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625-642
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from Latin America. London, Anthem
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Developing Countries: New Empirical Evidence,In World Development,29(9), 1593-
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OECD (2002), Foreign Direct Investment in Asia: How to Maximize Its Benefits?, in
Global Forum on International Investment: Attracting Foreign Direct Investment for
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21
Annexure
Annex 1: Industries Approved for FDI Districtwise( Upto F.Y. 2067/68)(Rs. mln.)
22
District
No. of
Industries
Total
Project Cost
Total
Fixed Cost
Foreign
Investment
Total No. of
Employment
1 Dhankuta 1 46.62 37.62 0.00 120
2 Ilam 2 145.00 117.90 145.00 188
3 Jhapa 13 1036.14 663.90 278.35 3284
4 Morang 26 3403.83 2687.41 1661.47 4795
5 Okhaldhunda 1 250.00 245.00 19.00 122
6 Sankhuwasabha 1 500.00 488.00 500.00 250
7 Saptari 2 410.00 384.00 282.40 144
8 Siraha 4 2494.00 2230.07 1913.20 702
9 Solukhumbu 9 2959.17 2856.59 926.13 198
10 Sunsari 20 2324.17 1693.97 1252.25 3111
11 Taplejung 2 12.10 10.14 11.90 44
12 Bara 43 7265.35 5752.70 2072.08 4424
13 Bhaktapur 46 1958.25 1213.12 762.23 3739
14 Chitwan 48 3440.17 2752.25 1128.36 7581
15 Dhading 9 2405.89 2351.70 2171.00 721
16 Dhanusha 3 291.04 249.71 165.52 292
17 Dolkha 5 5800.20 5281.03 1505.73 325
18 Kathmandu 1176 53018.67 43890.58 23477.00 67891
19 Kavre 51 1780.94 1493.79 1121.92 4472
20 Lalitpur 261 10250.57 8047.69 7101.97 14422
21 Makwanpur 49 4720.38 3594.07 2321.73 4355
22 Nuwakot 8 220.58 193.65 110.70 665
23 Out Of Valley 1 24.34 21.22 24.34 70
24 Parsa 41 3393.32 2387.50 2052.85 5586
25 Ramechhap 1 291.34 237.89 262.21 200
26 Rasuwa 5 2622.40 2522.28 1236.43 176
27 Rautahat 1 559.18 509.18 44.06 589
28 Sindhuli 1 9.00 7.70 9.00 105
29 Sindhupalchowk 8 6832.73 6603.59 1292.08 2892
30 Terai Region 1 60.00 55.00 16.00 97
31 Arghakhachi 2 1342.09 199.27 449.60 331
32 Gorkha 4 704.09 648.32 75.23 758
33 Kalikot 1 0.00 1800.00 1520.00 125
34 Kapilbastu 9 421.71 206.42 307.81 300
35 Kaski 116 12308.46 11665.90 4130.58 5145
36 Lamjung 5 343.93 311.25 124.15 513
37 Manang 2 915.00 898.00 203.00 289
38 Manang,Tanah 1 75.00 69.75 47.01 635
39 Mustang 2 461.74 449.11 1.07 115
23
District
No. of
Industries
Total
Project Cost
Total
Fixed Cost
Foreign
Investment
Total No. of
Employment
40 Nawalparasi 21 2771.18 2373.76 513.40 2904
41 Palpa 2 330.00 183.38 304.90 136
42 Parbat 1 1100.00 1089.00 1.50 2614
43 Rupandehi 29 5630.09 4603.14 2958.59 3104
44 Tanahu 3 89.02 73.20 37.50 237
45 Undefined 3 251.67 154.37 37.00 146
46 Banke 16 513.83 404.44 152.43 1393
47 Bardiya 7 57.88 50.96 29.14 264
48 Dang 8 259.90 218.40 199.90 1078
49 Humla 5 41.00 37.20 19.24 96
50 Rolpa 3 32.22 28.31 29.00 156
51 Surkhet 2 3587.00 2819.40 2187.00 229
52 Achham 4 571.18 550.68 418.18 411
53 Baitadi 4 80.00 71.80 65.00 365
54 Darchula 1 34.00 32.00 2.94 60
55 Doti 1 10.00 7.20 10.00 33
56 Kailali 3 919.04 868.81 192.80 929
57 Kanchanpur 13 776.37 695.11 147.72 1466
58 Kavrepalanchock 1 30.00 28.00 20.40 40
Total 2108 152181.75 129116.39 68049.97 155432


Annex 2: Number of Industries Approved for Foreign Investment by
District (F.Y. 2067/68)
(Rs. mln)
S.N. District
No. of
Industries
Total
Project Cost
Total
Fixed Cost
Foreign
Investment
Total No. of
Employment
1 Ilam 2 145.00 117.90 145.00 188
2 Jhapa 2 50.00 32.00 50.00 188
3 Morang 3 1314.98 1179.93 1314.98 62
4 Siraha 1 1800.00 1570.00 1800.00 194
5 Sunsari 5 210.00 134.20 205.00 214
6 Taplejung 1 10.00 9.10 10.00 44
7 Bara 1 8.30 5.50 8.30 23
8 Bhaktapur 6 133.77 116.60 65.32 158
9 Chitwan 1 10.00 9.00 10.00 36
10 Dhanusha 1 206.48 188.01 103.24 125
11 Dolkha 1 200.00 195.00 200.00 100
12 Kathmandu 122 3763.87 3222.82 3623.38 5979
13 Kavre 3 495.00 411.50 495.00 282
14 Lalitpur 35 598.95 448.09 486.15 1943
15 Makwanpur 4 314.50 236.77 314.50 268
24
16 Nuwakot 1 10.00 8.90 5.00 34
17 Parsa 2 561.54 249.75 561.50 54
18 Kapilbastu 1 10.00 9.10 10.00 31
19 Kaski 8 81.90 71.94 76.00 269
20 Manang 2 915.00 898.00 203.00 289
21 Nawalparasi 1 8.50 7.00 8.00 20
22 Palpa 1 300.00 160.00 300.00 112
23 Bardiya 1 6.00 5.40 6.00 30
24 Dang 1 2.40 1.95 2.40 21
25 Baitadi 2 60.00 55.00 45.00 163
26 Drcula 1 34.00 32.00 2.94 60
TOTAL 209 11250.19 9375.46 10050.71 10887


25
Annex 3: Number of Industries Approved for Foreign Investment by
Country & Category (Upto F.Y. 2067/68)
(Rs. mln)
Country Category
No. of
Industries
Total
Project Cost
Total Fixed
Cost
Foreign
Investment
Total No. of
Employment
Australia
Agriculture 3 51.60 47.00 42.59 108
Energy Based 1 131.00 125.00 131.00 22
Manufacturing 6 53.84 43.84 28.34 408
Service 17 162.46 124.15 134.73 301
Tourism 7 65.02 60.12 58.57 135
Total 34 463.91 400.11 395.22 974
Austria
Manufacturing 5 128.44 88.37 32.61 366
Service 4 30.48 26.47 27.98 87
Tourism 6 46.64 43.62 20.78 108
Total 15 205.56 158.46 81.36 561
Azerbaijan
Service 1 7.40 6.70 7.40 27
Tourism 1 2.50 1.90 2.50 23
Total 2 9.90 8.60 9.90 50
Bangladesh
Agriculture 1 10.00 7.50 5.00 100
Construction 1 9.88 7.44 9.88 20
Manufacturing 9 430.09 195.05 199.02 3310
Service 9 47.01 37.91 33.26 202
Tourism 6 23.17 15.21 17.50 534
Total 26 520.15 263.10 264.66 4166
Belgium
Manufacturing 1 9.00 4.60 9.00 88
Service 8 34.10 24.12 25.65 199
Tourism 2 10.67 9.38 7.19 48
Total 11 53.77 38.10 41.84 335
Bermuda
Manufacturing 4 1987.96 1687.68 113.62 1415
Tourism 2 7.29 6.35 4.65 59
Total 6 1995.25 1694.03 118.27 1474
Bhutan
Manufacturing 1 5.10 2.10 0.50 0
Service 1 5.00 2.52 1.68 12
Tourism 1 17.16 15.96 1.43 86
Total 3 27.26 20.58 3.61 98
Brazil
Energy Based 1 500.00 488.00 500.00 250
Manufacturing 2 21.07 7.50 4.43 221
Service 1 10.00 9.00 6.40 30
Tourism 1 10.00 8.70 10.00 23
Total 5 541.07 513.20 520.83 524
Bri.Virg.Is
Manufacturing 1 415.15 358.45 28.87 108
Service 1 48.22 22.08 22.00 0
Tourism 1 2276.41 2255.65 910.57 910
Total 3 2739.78 2636.19 961.43 1018
Canada
Agriculture 1 10.00 9.10 10.00 44
Energy Based 3 4265.05 4192.15 1445.00 469
Manufacturing 5 722.61 629.29 642.92 966
Service 10 52.91 36.67 37.61 325
Tourism 6 31.30 25.56 31.01 122
26
Country Category
No. of
Industries
Total
Project Cost
Total Fixed
Cost
Foreign
Investment
Total No. of
Employment
Total 25 5081.87 4892.78 2166.54 1926
China
Agriculture 17 193.30 163.84 181.08 627
Construction 7 361.21 257.71 336.93 431
Energy Based 8 4754.68 4498.31 1072.94 530
Manufacturing 126 4760.23 2997.89 2454.49 10336
Mineral 29 651.60 559.10 640.60 3993
Service 106 2008.13 1716.67 1545.08 4279
Tourism 108 818.39 705.79 805.05 3129
Total 401 13547.54 10899.31 7036.17 23325
Colombia
Tourism 1 2.40 1.50 2.40 7
Total 1 2.40 1.50 2.40 7
Congo
Service 1 2.50 2.10 2.50 28
Total 1 2.50 2.10 2.50 28
Croatia
Service 1 2.50 2.10 2.50 15
Total 1 2.50 2.10 2.50 15
Cyprus
Service 1 1000.00 974.00 304.00 235
Total 1 1000.00 974.00 304.00 235
CzechRepublic
Service 1 3.50 2.50 3.50 12
Total 1 3.50 2.50 3.50 12
Denmark
Agriculture 1 110.00 98.00 44.00 50
Construction 1 42.00 34.60 4.10 74
Manufacturing 7 558.02 491.38 99.59 566
Service 5 12.40 9.20 12.40 84
Tourism 6 38.27 33.38 33.27 156
Total 20 760.69 666.56 193.36 930
Dutch
Service 1 18.90 13.90 18.90 80
Total 1 18.90 13.90 18.90 80
Ecuador
Manufacturing 1 2.50 1.30 2.50 45
Total 1 2.50 1.30 2.50 45
Egypt
Manufacturing 1 10.00 6.00 10.00 98
Service 1 10.00 8.50 2.00 0
Total 2 20.00 14.50 12.00 98
Finland
Manufacturing 2 10.00 6.86 4.55 91
Tourism 3 15.00 12.90 10.00 58
Total 5 25.00 19.76 14.55 149
France
Agriculture 1 7.00 4.90 7.00 27
Construction 2 65.04 51.24 18.33 169
Manufacturing 15 299.68 247.45 144.74 1004
Service 8 45.31 36.82 27.23 210
Tourism 23 179.82 157.35 112.55 626
Total 49 596.85 497.77 309.85 2036
Germany
Agriculture 4 111.42 98.09 14.24 287
Construction 2 59.25 43.90 58.90 137
Energy Based 6 1361.00 1302.90 452.30 207
Manufacturing 15 234.12 147.70 101.63 1293
Service 28 274.36 233.04 106.62 1140
Tourism 24 324.17 299.00 193.02 784
Total 79 2364.31 2124.64 926.72 3848
Ghana
Service 1 6.50 6.18 1.95 0
Total 1 6.50 6.18 1.95 0
Guatemala Manufacturing 1 10.00 5.00 2.50 84
27
Country Category
No. of
Industries
Total
Project Cost
Total Fixed
Cost
Foreign
Investment
Total No. of
Employment
Total 1 10.00 5.00 2.50 84
Holand
Tourism 1 7.00 0.00 1.79 0
Total 1 7.00 0.00 1.79 0
Hong Kong
Construction 2 83.88 39.85 59.55 236
Manufacturing 5 387.72 262.58 155.58 852
Service 7 430.03 202.25 279.17 609
Tourism 5 959.91 933.67 246.54 919
Total 19 1861.54 1438.34 740.84 2616
Hungeri
Tourism 1 10.00 8.90 5.00 29
Total 1 10.00 8.90 5.00 29
India
Agriculture 7 792.91 343.06 416.81 784
Construction 17 2246.19 1614.33 1876.32 830
Energy Based 12 8336.00 9810.31 5146.55 1222
Manufacturing 296 29492.51 21023.28 14687.28 36142
Mineral 6 4477.02 3632.50 2260.70 1521
Service 112 12355.13 10016.43 6485.21 11781
Tourism 51 5025.25 4678.73 1517.43 4127
Total 501 62725.01 51118.64 32390.31 56407
Iran
Manufacturing 1 4.80 3.00 4.80 32
Service 3 6.90 5.55 6.90 49
Tourism 3 12.50 6.80 8.00 51
Total 7 24.20 15.35 19.70 132
Ireland
Manufacturing 1 5.00 1.00 1.50 40
Service 3 14.50 11.20 14.00 76
Tourism 2 704.40 668.40 325.47 204
Total 6 723.90 680.60 340.97 320
Israel
Manufacturing 2 603.00 501.88 72.50 68
Service 5 44.80 34.21 35.45 218
Tourism 5 33.40 30.55 31.30 119
Total 12 681.20 566.64 139.25 405
Italy
Manufacturing 6 156.54 119.97 139.98 188
Service 3 21.00 18.75 11.45 83
Tourism 10 1246.16 1161.73 113.20 245
Total 19 1423.69 1300.45 264.63 516
Japan
Agriculture 4 176.60 157.85 44.50 454
Construction 1 30.45 22.20 10.98 348
Energy Based 1 275.00 270.00 21.00 0
Manufacturing 31 560.04 347.11 147.21 1800
Service 52 600.24 491.65 219.69 1353
Tourism 65 1552.69 1424.68 727.87 2728
Total 154 3195.03 2713.48 1171.24 6683
Kazakistan
Service 3 15.40 13.03 15.40 67
Total 3 15.40 13.03 15.40 67
Kyrgystan
Manufacturing 1 5.00 2.80 3.00 50
Service 3 31.50 29.25 19.50 125
Total 4 36.50 32.05 22.50 175
Lebnon
Service 1 2.00 1.60 2.00 15
Tourism 1 5.00 3.90 5.00 34
Total 2 7.00 5.50 7.00 49
28
Country Category
No. of
Industries
Total
Project Cost
Total Fixed
Cost
Foreign
Investment
Total No. of
Employment
Libiya
Manufacturing 1 5.00 2.80 5.00 80
Total 1 5.00 2.80 5.00 80
Malaysia
Agriculture 1 5.00 4.20 1.50 33
Manufacturing 2 70.59 51.64 64.24 184
Service 6 456.31 441.08 20.10 109
Tourism 4 159.34 148.30 159.34 118
Total 13 691.24 645.22 245.18 444
Mauritius
Energy Based 3 900.00 879.00 765.00 558
Manufacturing 2 2080.00 2030.87 2080.00 334
Total 5 2980.00 2909.87 2845.00 892
Mexico
Tourism 2 17.93 16.35 15.33 35
Total 2 17.93 16.35 15.33 35
N. Korea
Service 1 44.82 41.20 12.55 71
Tourism 2 20.00 17.60 20.00 76
Total 3 64.82 58.80 32.55 147
Netherlands
Agriculture 2 59.45 41.10 18.27 428
Manufacturing 3 984.59 816.26 386.08 405
Service 17 119.55 85.09 93.73 1760
Tourism 12 145.83 133.62 90.81 453
Total 34 1309.42 1076.07 588.89 3046
New Zealand
Manufacturing 1 248.46 200.00 0.00 1851
Service 4 14.18 10.76 12.74 73
Tourism 4 33.99 28.94 17.33 145
Total 9 296.63 239.71 30.07 2069
Norway
Agriculture 1 6.00 5.10 6.00 50
Construction 1 158.55 154.01 62.46 25
Energy Based 3 7580.00 6292.41 933.23 394
Manufacturing 2 236.11 185.05 10.94 119
Service 1 60.93 60.93 54.70 0
Tourism 4 75.00 69.30 68.50 138
Total 12 8116.59 6766.80 1135.83 726
Pakistan
Manufacturing 7 282.24 201.02 118.29 2288
Service 5 1866.62 1665.03 25.32 57
Tourism 3 20.59 17.72 6.13 58
Total 15 2169.45 1883.77 149.73 2403
Panama
Manufacturing 1 83.28 65.17 24.98 121
Total 1 83.28 65.17 24.98 121
Philippines
Agriculture 1 10.00 9.00 10.00 35
Manufacturing 5 1154.18 989.53 72.35 1452
Service 1 2.50 2.00 2.50 40
Tourism 4 14.43 9.15 12.43 106
Total 11 1181.12 1009.68 97.28 1633
Poland
Energy Based 1 84.94 84.00 5.00 16
Manufacturing 1 4.78 1.55 2.39 23
Service 1 2.50 2.00 2.50 38
Tourism 4 46.00 41.00 45.50 117
Total 7 138.22 128.55 55.39 194
Russia
Service 1 2.50 2.00 2.50 23
Portugal 1 2.50 2.00 2.50 23
Agriculture 1 8.00 7.00 6.00 15
Manufacturing 4 93.08 54.87 42.23 412
29
Country Category
No. of
Industries
Total
Project Cost
Total Fixed
Cost
Foreign
Investment
Total No. of
Employment
Service 9 135.42 111.55 59.25 279
Tourism 4 18.30 15.77 18.30 87
Total 18 254.80 189.19 125.78 793
S. Africa
Manufacturing 1 10.00 7.20 10.00 33
Service 2 27.50 22.00 27.50 25
Tourism 2 9.80 8.64 9.80 79
Total 5 47.30 37.84 47.30 137
S. Korea
Agriculture 3 19.95 15.55 19.95 65
Construction 4 243.49 209.83 196.38 463
Energy Based 2 5388.12 5370.99 2278.84 242
Manufacturing 31 1879.44 1593.85 1051.73 1797
Service 57 517.25 406.35 435.48 2436
Tourism 52 295.31 244.25 338.51 1229
Total 149 8343.56 7840.81 4320.89 6232
Singapore
Agriculture 1 7.50 6.50 7.50 45
Energy Based 1 530.00 518.00 530.00 110
Manufacturing 4 44.86 31.70 21.04 82
Service 8 276.37 242.70 109.45 483
Tourism 9 2057.60 1989.44 837.40 1245
Total 23 2916.32 2788.34 1505.39 1965
Slovenia
Service 1 4.19 3.94 4.19 0
Total 1 4.19 3.94 4.19 0
Spain
Construction 2 75.40 37.50 53.98 138
Manufacturing 2 10.00 5.20 6.25 38
Service 2 7.60 6.40 7.60 46
Tourism 7 61.02 53.94 39.40 143
Total 13 154.02 103.04 107.23 365
Sri Lanka
Service 4 89.15 65.10 47.41 99
Total 4 89.15 65.10 47.41 99
Sweden
Agriculture 1 3.30 0.99 3.30 35
Manufacturing 1 1.50 1.01 1.50 12
Service 4 16.70 14.76 13.90 105
Tourism 2 8.90 6.50 8.90 71
Total 8 30.40 23.26 27.60 223
Switzerland
Agriculture 1 6.00 4.50 4.20 52
Energy Based 1 23.44 22.94 0.25 8
Manufacturing 9 365.48 311.51 58.65 124
Service 8 44.78 29.20 29.85 129
Tourism 12 294.77 296.89 238.30 315
Total 31 734.48 665.05 331.25 628
Syria
Service 1 2.50 2.10 2.50 17
Total 1 2.50 2.10 2.50 17
Taiwan
Manufacturing 4 106.60 72.10 35.15 206
Service 1 50.11 40.83 10.50 0
Tourism 4 258.04 247.50 128.97 390
Total 9 414.75 360.43 174.62 596
Tchad
Service 1 2.50 1.86 2.50 18
Total 1 2.50 1.86 2.50 18
Thailand
Energy Based 1 70.00 65.00 21.00 22
Manufacturing 6 410.12 290.68 90.64 666
Service 2 6.25 4.61 2.66 16
30
Country Category
No. of
Industries
Total
Project Cost
Total Fixed
Cost
Foreign
Investment
Total No. of
Employment
Tourism 2 546.00 524.50 2.00 455
Total 11 1032.37 884.79 116.29 1159
Turkey
Agriculture 1 10.00 9.00 10.00 50
Service 6 28.20 22.12 28.20 114
Tourism 2 10.00 7.20 22.50 61
Total 9 48.20 38.32 60.70 225
UAE
Manufacturing 2 278.54 87.24 80.00 398
Mineral 1 34.00 32.00 2.94 60
Service 1 823.20 170.00 403.37 139
Tourism 1 500.00 444.50 400.00 124
Total 5 1635.74 733.74 886.31 721
UK
Agriculture 2 12.50 11.75 12.50 52
Construction 2 230.00 210.50 75.00 145
Energy Based 2 1800.00 1782.00 145.66 2657
Manufacturing 27 1966.55 1563.34 857.40 3276
Service 30 254.70 201.12 205.09 1188
Tourism 40 420.60 381.83 244.06 1260
Total 103 4684.35 4150.54 1539.71 8578
Ukraine
Service 2 91.70 83.25 16.40 52
Total 2 91.70 83.25 16.40 52
USA
Agriculture 6 63.90 51.58 28.85 156
Energy Based 1 4760.00 4680.00 1071.00 1240
Manufacturing 50 3413.36 2603.34 1475.87 4885
Service 76 3704.20 3363.65 1930.00 3168
Tourism 41 1951.00 1861.91 450.17 2838
Total 174 13892.46 12560.48 4955.90 12287
Uzbekistan
Manufacturing 1 10.00 7.50 10.00 52
Total 1 10.00 7.50 10.00 52
Vietnam
Tourism 2 24.60 22.80 24.60 55
Total 2 24.60 22.80 24.60 55
Total 2108 152181.75 129116.39 68049.97 155432


Annex 4: Number of Industries Approved for Foreign Investment by
Fiscal Year & Category (Up to F.Y.2067/68)
(Rs. mln)
Fiscal Year Category No. of Industry
Authorized
Capital
Fixed
Capital
Foreign
Investment
Total No. of
Employment
Upto Ashad 2046
Construction 1 52.71 43.81 6.00 103
Manufacturing 39 4702.74 3921.64 347.36 7894
Service 7 32.36 22.37 13.58 1297
Tourism 11 314.99 283.78 82.63 1292
Total 58 5102.80 4271.60 449.56 10586
2046/47
Construction 1 42.00 34.60 4.10 74
Manufacturing 16 750.11 570.65 84.03 6415
Mineral 1 826.80 755.10 28.70 1111
31
Fiscal Year Category No. of Industry
Authorized
Capital
Fixed
Capital
Foreign
Investment
Total No. of
Employment
Service 5 85.97 73.55 9.54 1162
Tourism 7 733.32 705.69 272.14 753
Total 30 2438.19 2139.60 398.51 9515
2047/48
Energy Based 1 23.44 22.94 0.25 8
Manufacturing 18 800.33 631.06 398.84 2679
Service 1 3.52 3.51 0.70 29
Tourism 3 36.27 33.23 6.49 258
Total 23 863.56 690.74 406.28 2974
2048/49
Agriculture 2 10.94 9.98 5.43 35
Manufacturing 23 2672.77 2086.08 362.75 4485
Service 4 124.03 117.36 31.94 128
Tourism 9 700.43 688.68 197.72 967
Total 38 3508.17 2902.10 597.84 5615
2049/50
Energy Based 2 6100.00 5589.00 736.50 2664
Manufacturing 38 4950.22 3963.69 779.92 8182
Service 9 3548.57 3427.77 1150.56 1012
Tourism 15 3287.44 3230.35 416.68 2015
Total 64 17886.22 16210.81 3083.67 13873
2050/51
Agriculture 5 181.56 162.32 28.19 368
Construction 1 30.45 22.20 10.98 348
Manufacturing 20 2781.16 2328.39 980.90 3033
Service 5 241.04 189.13 61.56 233
Tourism 7 499.02 473.63 297.13 752
Total 38 3733.23 3175.66 1378.76 4734
2051/52
Agriculture 1 28.40 22.75 12.80 65
Manufacturing 14 973.22 624.18 411.92 1774
Service 1 31.89 31.00 31.36 31
Tourism 3 593.77 569.93 21.51 516
Total 19 1627.28 1247.85 477.59 2386
2052/53
Agriculture 1 74.90 67.16 26.97 270
Energy Based 1 4760.00 4680.00 1071.00 1240
Manufacturing 24 3040.07 2586.22 698.08 3102
Service 8 176.18 150.41 54.52 1690
Tourism 13 1996.32 1914.76 369.30 1730
Total 47 10047.47 9398.54 2219.86 8032
2053/54
Agriculture 1 34.33 32.26 1.39 73
Construction 2 168.43 161.45 72.34 45
Manufacturing 28 2574.33 2006.74 773.88 5739
32
Fiscal Year Category No. of Industry
Authorized
Capital
Fixed
Capital
Foreign
Investment
Total No. of
Employment
Mineral 1 3.22 3.00 0.00 18
Service 27 3442.79 2398.57 1079.57 1957
Tourism 18 2336.15 2090.13 468.35 1515
Total 77 8559.25 6692.15 2395.54 9347
2054/55
Manufacturing 25 1200.45 993.58 394.70 1855
Service 24 1031.08 898.54 431.54 598
Tourism 28 3337.85 3250.20 1174.04 1883
Total 77 5569.38 5142.32 2000.28 4336
2055/56
Agriculture 1 11.40 10.00 4.70 0
Energy Based 2 2923.11 2766.61 525.65 108
Manufacturing 19 1566.61 867.37 734.20 1291
Service 15 487.53 445.83 201.95 187
Tourism 13 335.78 290.36 199.93 560
Total 50 5324.42 4380.17 1666.42 2146
2056/57
Energy Based 1 146.96 141.88 22.04 27
Manufacturing 31 1306.60 722.12 490.98 3567
Service 22 846.29 702.19 736.51 498
Tourism 17 369.24 344.04 168.08 611
Total 71 2669.09 1910.24 1417.61 4703
2057/58
Agriculture 1 10.00 9.75 10.00 31
Energy Based 3 2105.00 2047.91 395.60 352
Manufacturing 54 4024.02 2555.85 1816.01 5234
Service 19 883.28 672.32 343.08 579
Tourism 19 895.31 836.66 537.87 684
Total 96 7917.62 6122.49 3102.56 6880
2058/59
Agriculture 2 76.62 60.99 4.90 144
Construction 3 90.00 81.00 69.00 285
Energy Based 1 84.94 84.00 5.00 16
Manufacturing 37 2643.94 1036.93 893.57 2285
Service 21 318.93 210.87 144.45 684
Tourism 13 104.10 85.80 92.73 317
Total 77 3318.53 1559.59 1209.65 3731
2059/60
Construction 8 538.52 404.04 345.44 464
Energy Based 3 2574.45 1767.85 448.68 344
Manufacturing 27 660.67 442.04 335.66 1279
33
Fiscal Year Category No. of Industry
Authorized
Capital
Fixed
Capital
Foreign
Investment
Total No. of
Employment
Service 12 987.19 858.36 565.61 944
Tourism 24 161.00 135.96 98.38 541
Total 74 4921.82 3608.25 1793.77 3572
2060/61
Construction 1 53.88 14.69 53.88 0
Energy Based 1 734.40 719.28 41.43 4
Manufacturing 22 1179.59 841.06 925.05 276
Service 31 2241.56 2084.40 1622.35 1603
Tourism 23 114.31 116.43 122.09 261
Total 78 4323.74 3775.86 2764.80 2144
2061/62
Agriculture 1 12.00 10.00 7.38 37
Construction 2 88.28 53.85 63.95 18
Manufacturing 25 887.09 527.49 1181.98 2072
Service 24 756.54 513.85 348.93 3195
Tourism 11 52.20 44.29 33.53 237
Total 63 1796.10 1149.49 1635.77 5559
2062/63
Construction 2 81.30 63.00 28.23 112
Energy Based 3 251.00 223.00 156.00 136
Manufacturing 33 1472.62 944.70 924.47 2974
Service 40 2082.49 1876.57 1332.93 2739
Tourism 38 233.67 189.68 164.68 1397
Total 116 4121.08 3296.95 2606.31 7358
2063/64
Agriculture 1 5.00 4.20 5.00 20
Construction 5 82.50 52.36 78.22 290
Energy Based 1 111.00 107.30 30.30 0
Manufacturing 44 1911.20 1333.73 1897.95 2796
Mineral 1 10.00 5.00 10.00 128
Service 81 990.79 898.25 938.20 2669
Tourism 55 315.08 249.72 267.12 1486
Total 188 3425.57 2650.56 3226.79 7389
2064/65
Agriculture 11 127.20 99.79 107.35 377
Construction 13 2118.71 1584.80 1803.71 1143
Energy Based 8 7346.12 7287.59 2867.60 967
Manufacturing 51 3028.52 1920.23 1244.06 3775
Mineral 7 3630.00 2852.85 2230.00 722
34
Fiscal Year Category No. of Industry
Authorized
Capital
Fixed
Capital
Foreign
Investment
Total No. of
Employment
Service 55 3370.03 2454.24 813.29 1513
Tourism 67 783.30 696.77 744.99 2180
Total 212 20403.88 16896.27 9811.00 10677
2065/66
Agriculture 8 618.70 204.79 302.07 671
Construction 1 88.57 31.61 56.97 8
Energy Based 9 3519.77 3440.51 2244.72 1011
Manufacturing 48 1464.42 895.37 1178.26 2396
Mineral 17 479.00 417.20 474.00 2635
Service 78 2273.88 1645.70 1235.97 2587
Tourism 70 973.55 894.84 763.11 1800
Total 231 9417.89 7530.02 6255.09 11108
2066/67
Agriculture 2 10.00 8.60 10.00 69
Construction 1 20.00 15.70 20.00 36
Energy Based 5 9961.05 9765.15 4747.00 493
Manufacturing 37 3751.50 3420.93 2605.35 1994
Mineral 4 100.00 87.85 94.00 514
Service 72 976.05 760.37 906.11 3205
Tourism 50 1035.17 929.39 717.53 1537
Total 171 15853.78 14987.98 9100.00 7848
2067/68
Agriculture 23 473.36 393.03 367.12 1337
Construction 1 150.00 120.00 150.00 90
Energy Based 6 2018.00 1738.00 1227.00 577
Manufacturing 39 6269.01 5135.46 6135.92 3312
Mineral 5 113.60 102.60 67.54 446
Service 88 1020.92 783.33 918.81 3555
Tourism 47 1205.30 1103.05 1184.33 1570
Total 209 11250.19 9375.46 10050.71 10887
Grand Total 2108 152181.8 129116.4 68049.97 155432

35
Annex 5: Number of Industries Approved for Foreign Investment by
Fiscal Year (Up to F.Y.2067/68)
(Rs. mln)
Fiscal Year
No. of
Industries
Total Project Cost
Total
Fixed Cost
Foreign
Investment
Total No. of
Employment
UPTO ASHAD 2046 58 5102.80 4271.60 449.56 10586
2046/47 30 2438.19 2139.60 398.51 9515
2047/48 23 863.56 690.74 406.28 2974
2048/49 38 3508.17 2902.10 597.84 5615
2049/50 64 17886.22 16210.81 3083.67 13873
2050/51 38 3733.23 3175.66 1378.76 4734
2051/52 19 1627.28 1247.85 477.59 2386
2052/53 47 10047.47 9398.54 2219.86 8032
2053/54 77 8559.25 6692.15 2395.54 9347
2054/55 77 5569.38 5142.32 2000.28 4336
2055/56 50 5324.42 4380.17 1666.42 2146
2056/57 71 2669.09 1910.24 1417.61 4703
2057/58 96 7917.62 6122.49 3102.56 6880
2058/59 77 3318.53 1559.59 1209.65 3731
2059/60 74 4921.82 3608.25 1793.77 3572
2060/61 78 4323.74 3775.86 2764.80 2144
2061/62 63 1796.10 1149.49 1635.77 5559
2062/63 116 4121.08 3296.95 2606.31 7358
2063/64 188 3425.57 2650.56 3226.79 7389
2064/65 212 20403.88 16896.27 9811.00 10677
2065/66 231 9417.89 7530.02 6255.09 11108
2066/67 171 15853.78 14987.98 9100.00 7848
2067/68
209 11250.19 9375.46 10050.71 10887
TOTAL 2108 152181.75 129116.39 68049.97 155432

36
Annex 6: Number of Industries Approved for Foreign Investment by
Country of Origin (Up to F.Y. 2067/68)
(Rs. mln)
S.N. Country of Origin
No. of
Industries
Total
Project Cost
Total Fixed
Cost
Foreign
Investment
Total No of
Employment
1 Australia 34 463.91 400.11 395.22 974
2 Austria 15 205.56 158.46 81.36 561
3 Azerbaijan 2 9.90 8.60 9.90 50
4 Bangladesh 26 520.15 263.10 264.66 4166
5 Belgium 11 53.77 38.10 41.84 335
6 Bermuda 6 1995.25 1694.03 118.27 1474
7 Bhutan 3 27.26 20.58 3.61 98
8 Brazil 5 541.07 513.20 520.83 524
9 Bri.Virg.Is 3 2739.78 2636.19 961.43 1018
10 Canada 25 5081.87 4892.78 2166.54 1926
11 China 401 13547.54 10899.31 7036.17 23325
12 Colombia 1 2.40 1.50 2.40 7
13 Congo 1 2.50 2.10 2.50 28
14 Croatia 1 2.50 2.10 2.50 15
15 Cyprus 1 1000.00 974.00 304.00 235
16 Czech Repbul 1 3.50 2.50 3.50 12
17 Denmark 20 760.69 666.56 193.36 930
18 Dutch 1 18.90 13.90 18.90 80
19 Ecuador 1 2.50 1.30 2.50 45
20 Egypt 2 20.00 14.50 12.00 98
21 Finland 5 25.00 19.76 14.55 149
22 France 49 596.85 497.77 309.85 2036
23 Germany 79 2364.31 2124.64 926.72 3848
24 Ghana 1 6.50 6.18 1.95 0
25 Guatemala 1 10.00 5.00 2.50 84
26 Holand 1 7.00 0.00 1.79 0
27 Hong Kong 19 1861.54 1438.34 740.84 2616
28 Hungeri 1 10.00 8.90 5.00 29
29 India 501 62725.01 51118.64 32390.31 56407
30 Iran 7 24.20 15.35 19.70 132
31 Ireland 6 723.90 680.60 340.97 320
32 Israel 12 681.20 566.64 139.25 405
33 Italy 19 1423.69 1300.45 264.63 516
34 Japan 154 3195.03 2713.48 1171.24 6683
35 Kazakistan 3 15.40 13.03 15.40 67
36 Kyrgystan 4 36.50 32.05 22.50 175
37 Lebnon 2 7.00 5.50 7.00 49
38 Libiya 1 5.00 2.80 5.00 80
39 Malaysia 13 691.24 645.22 245.18 444
37
S.N. Country of Origin
No. of
Industries
Total
Project Cost
Total Fixed
Cost
Foreign
Investment
Total No of
Employment
40 Mauritius 5 2980.00 2909.87 2845.00 892
41 Mexico 2 17.93 16.35 15.33 35
42 N. Korea 3 64.82 58.80 32.55 147
43 Netherlands 34 1309.42 1076.07 588.89 3046
44 New Zealand 9 296.63 239.71 30.07 2069
45 Norway 12 8116.59 6766.80 1135.83 726
46 Pakistan 15 2169.45 1883.77 149.73 2403
47 Panama 1 83.28 65.17 24.98 121
48 Philippines 11 1181.12 1009.68 97.28 1633
49 Poland 7 138.22 128.55 55.39 194
50 Portugal 1 2.50 2.00 2.50 23
51 Russia 18 254.80 189.19 125.78 793
52 S. Africa 5 47.30 37.84 47.30 137
53 S. Korea 149 8343.56 7840.81 4320.89 6232
54 Singapore 23 2916.32 2788.34 1505.39 1965
55 Slovenia 1 4.19 3.94 4.19 0
56 Spain 13 154.02 103.04 107.23 365
57 Sri Lanka 4 89.15 65.10 47.41 99
58 Sweden 8 30.40 23.26 27.60 223
59 Switzerland 31 734.48 665.05 331.25 628
60 Syria 1 2.50 2.10 2.50 17
61 Taiwan 9 414.75 360.43 174.62 596
62 Tchad 1 2.50 1.86 2.50 18
63 Thailand 11 1032.37 884.79 116.29 1159
64 Turkey 9 48.20 38.32 60.70 225
65 UAE 5 1635.74 733.74 886.31 721
66 UK 103 4684.35 4150.54 1539.71 8578
67 Ukraine 2 91.70 83.25 16.40 52
68 USA 174 13892.46 12560.48 4955.90 12287
69 Uzbekistan 1 10.00 7.50 10.00 52
70 Vietnam 2 24.60 22.80 24.60 55
Total 2108 152181.75 129116.39 68049.97 155432

Annex 7: Foreign Investment and Technology Transfer by Type and Scale (up to
2067/68)

Category
No. of
Industries
Type Scale
Equity
Invest.
Eqt. Invest.
& Tech. Tran
Technology
Transf.
Small Medium Large
Manufacturing 714 631 41 42 505 130 77
38
Agro Based 60 59 0 1 50 9 1
Energy Based 47 46 0 1 5 8 34
Construction 42 40 2 0 23 13 6
Mineral Based 36 35 0 1 28 4 4
Service 648 637 4 7 571 54 25
Tourism 561 549 6 6 493 30 38
Total 2108 1997 53 58 1675 248 185


Annex 8: Number of Industries Approved for Foreign Investment by
Sector (Up to F.Y.2067/68)
(Rs. mln)
Sector
No. of
Indus.
Total
Project
Cost
Total Fixed
Cost
Foreign
Investment
Employment
Agriculture & Forestry
91

3696.06 2900.17 1975.78 7452
Manufacturing 715 58291.54 44271.56 27321.65 78844
Food, Beverage &
Tobacco
106 10887.32 9188.94 3499.65 11375
Textile & Rea. Garment 256 13209.06 8739.66 6304.69 40544
Wood & Wood Product 19 425.06 292.14 457.42 2006
Paper & P. Product 42 2070.78 1702.50 541.56 1513
Chem. & Pl. Product 122 9190.72 6965.88 4762.30 9737
Non-Met Mi. Product 33 11661.02 8789.68 6451.42 4195
Basic Metal Product 26 1930.86 1158.71 729.72 2134
Fabric Metal, M/C & 88 8011.22 6790.03 4339.78 5833
Other Manufacturing
Units
23 905.50 644.02 235.12 1507
Electricity, Water, Gas 50 38718.70 38220.83 13579.55 7953
Construction 79 6124.92 4044.52 4815.41 5943
39
Hotel & Resort 565 21318.54 19993.66 8688.95 25227
Transport & Communication 82 4575.34 3205.48 2060.50 6688
Housing & Apartment 25 1136.13 443.94 339.38 2234
Service Industries 501 18320.53 16036.22 9268.75 21091
Total 2108 152181.75 129116.39 68049.97 155432

Project Cost for Foreign Investment Industries
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40
Annex 9: Number of Industries Approved for Foreign Investment by
Scale Wise (Up to F.Y.2067/68)
(Rs. mln)
Category
No. of
Industries
Total Project Cost
Total Fixed
Cost
Foreign
Investment
Employment
Large 185 115318.14 104128.39 47401.19 42841
Medium 248 18083.29 12686.87 8321.21 31455
Small 1675 18780.33 12301.12 12327.58 81136
Total 2108 152181.75 129116.39 68049.97 155432


Annex 10: Number of Industries Approved for Foreign Investment by
Category (Up to F.Y.2067/68)
(Rs. mln)
Category
No. of
Industries
Total Project
Cost
Total Fixed
Cost
Foreign
Investment
Total No. of
Employment
Agriculture 60 1674.42 1095.61 893.29 3497
Construction 42 3605.34 2683.10 2762.81 3016
Energy Based 47 40759.24 40381.02 14518.77 7947
Manufacturing 712 54611.18 40355.50 25595.87 78409
Mineral 36 5162.62 4223.60 2904.24 5574
Service 650 25955.40 21220.18 12974.65 32127
Tourism 561 20413.55 19157.38 8400.34 24862
Total 2108 152181.75 129116.39 68049.97 155432