Investment Climate in Nepal
The Government of Nepal (GON) is highly supportive of all investment. It aims to create social and economic systems that can provide reliable access to good-quality, basic necessities such as education, health, and food, that can generate jobs, protect the environment, and eradicate poverty.
The GON and private sector organizations work well in tandem. Through sustainable economic development, the country is working toward political stability, peace building, trade facilitation and economic capacity building.
The GON has placed a high priority on industrial development in the country. To that end, the GON is focused on creating an investment-friendly environment, increasing employment, production and productivity, and substituting imports and minimizing the trade deficit by promoting export-oriented industries.
The new Industrial Policy 2010 was created to replace the Industrial Policy of 1992 with the primary objective of attracting domestic and foreign investments by improving the industrial environment, increasing industrial production and productivity, creating more employment opportunities, substituting imports through the promotion of export-based industries, and improving Nepal’s balance of payment by minimizing the trade deficit.
The policy has already been approved and is in the implementation phase, while preparations for the approval of the Technology Transfer Policy 2010 are in process. Likewise, a Nepal Business Forum has also been constituted to promote an investment-friendly environment and to maintain mutual trust and understanding amongst government officials, private investors, and stakeholders.
Export – Import Scenario
Source : Economic Survey 2012-13, Ministry of Finance
Size of the Market
The principal attraction for foreign investors to Nepal is the size of the market. In 2012-13, Nepal had the gross national disposable income (GNDI) of NRs. 2,195,827 millions. At NRs. 95 to a dollar, this amounts to approximately $23113.968 million USD. Nepal’s GDP is NRs. 1,701,194 millions, per capita GNDI in 2012-13 was $926 USD, and per capita GDP was $717 USD (CBS National Account, 2013-14).
Return on Investment (ROI)
Compared to other countries in South Asia, Nepal offers the lowest tax burden in the region. Some of the reasons for comparatively high ROI in Nepal include:
- Huge investment potential in tourism, hydropower, agriculture, and mine and mineral sectors;
- Abundance of natural resources;
- Maximum income tax rate of 25% and value added tax (VAT) of 13%;
- Income tax exemption on profits from exports and interest income on foreign loans;
- Tax rate of 15% on royalties and technical and management fees; and
- Customs, excise duties, and VAT levied on raw materials and auxiliary raw materials of export-oriented industries is reimbursed to the exporter on the basis of the amount of exports within 60 days of application.
Industrial Infrastructure Development
The Industrial Infrastructure Development Program was brought into effect in 2008-09 in order to develop Nepal’s physical infrastructure, establish and operate feasible industries, and promote an investment-friendly environment for industrialists and entrepreneurs. Under this program, road construction and electricity transmission line expansion works are undergoing in Udaypur, Makwanpur, Dhading, Lalitpur, Dang, Rolpa and Palpa districts. Cement industries are also planned for these districts.
Labor practices of Nepal are guided by the Labor Act of 1992. The creation of a new labor law is in process, and is being drafted with input from regular bipartite discussions and consultations with trade unions and employers, and with tripartite consensus of the GON, employers, and trade unions.
15-Point Declaration on the Third National Labor Conference (9 – 11 July, 2012), Nepal
- Recognize that labor law is fundamental law
- Ensure social security to workers
- Amend labor and trade union law in a timely way
- Set times for collective bargaining
- Strengthen labor administration
- Build investment/industry-friendly atmosphere
- Build confidence among government agencies, employers and trade unions
- Set scientific criteria for minimum wage
- Improve industrial safety
- Promote gender-friendly environment at work places
- Abolish Child Labor
- Explore alternatives to foreign employment
- Develop integrated labor information system
- Endorse minimum wage agreement (March 24, 2011)
- Organize national-level labor conference every three years