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Fdi In Nepal Case Study

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CHAPTER-4
FOREIGN DIRECT INVESTMENT OPPORTUNITIES IN NEPAL

4.1 Historical Background of FDI in Nepal

The history of FDI flow in Nepal has not so long. FDI flow in Nepal was started in the decade of 1980s. At that time, FDI flows to Nepal were neglegible, with an annual average of Rs.45 million. After adapting open and liberal policies, FDI inflow was speeded during the 1990s, although total flows remained small. The average FDI inflow in 1990s was Rs.18 billion per annum. The major factor explaining the speed of FDI in the 1990s was Nepal’s more liberal trade and investment policy. For example, the unweighted average rate of import tariff was reduced from 111 per cent in 1989 to 16 percent by 1992; and the number of tariff slabs also fell …show more content…

The industrial act and the Foreign Investment and Technology Transfer act (FITTA), 1982 were the acts that were responsible for overall administration and regulation of FDI in the country. The main objectives of the acts were to institutionalize the FDI policies especially in industrial sectors. Also, these acts were the basic legal docuents that gurrented the rights and facilities to foreign investors. After introducing these acts, the role of government was limited to mediator, infrastructure provider and environment creator. However, the FITTA 1982 was not seemed to be productive as it could not able to attract FDI as per expectation. Only few projects were invested by foreigner on the basis of this act. Owing to this, government reformed the act in 1992 and established Foreign Investment and One Window Policy act …show more content…

Hydropower generation has become most attractive area for FDI for large investments. Approximately 58% of commitment for FDI in F/Y 2013/14 was found in hydropower sector. Service sector (banking, insurance, tourism and education) is also onsidered most attractive sector for FDI. Almost all banking, financing and insurance companies where there is FDI are in profit. Approximately 50% out of 10 big tax payers are under FDI.
Department of the Industry (DOI) databse shows that service, manufacturing and tourism have the highest number of FDI inflow accounting to 31.86%, 31.18 % and 26.92% respectively and followed by agriculture, energy, mineral, and construction. The figure 4.2 shows the sectorwise FDI distribution in Nepal. Figure 4.2: Sectorwise FDI distribution in Nepal,
Source: Department of Industry,

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