The Nepalese government has been making it easier for foreign investors to invest in the country through the automatic route system. This system, which has been available online since October 2023, allows investors to get approvals without long delays. The automatic route covers seven key sectors: energy, agriculture and forestry, infrastructure, tourism, information technology, services, and manufacturing industries.
Growing Interest from Foreign Investors
Foreign investors can now apply online from abroad to invest up to Rs 500 million. This system allows them to get pre-approval quickly. The Department of Industry (DoI) has reported that investors in IT-related projects have been using this system actively.
The system has helped attract many investment commitments this year. Foreign investors have pledged funds for 386 different projects. The tourism and service sectors have received the most attention, making up more than half of all registered projects. According to DoI, 216 projects have been approved in these two sectors, which is 56 percent of the total.
Tourism and Service Sectors Lead in Investments
In the review period this year, the tourism sector received the highest investment commitments. A total of 168 firms pledged Rs 17.32 billion, which makes up 64.53 percent of the total pledged investment. The service sector followed closely, with 48 firms securing foreign investment commitments worth Rs 5.69 billion. This accounts for 19.8 percent of the total pledged amount during this period.
Nepal’s tourism sector has been a strong attraction for foreign investors. The country’s natural beauty, cultural heritage, and adventure tourism have drawn significant interest. With improvements in infrastructure and hospitality services, foreign investors see tourism as a sector with strong potential for high returns. The government has also introduced various incentives, such as tax exemptions and simplified licensing processes, to encourage foreign investment in this field.
Investment in Other Sectors
Apart from tourism and services, investors have also shown interest in infrastructure, energy, and IT. The demand for IT-based solutions in Nepal has grown, and many investors have applied for projects in this area through the automatic route.
According to DoI, foreign investors have pledged Rs 1.94 billion through different types of agreements, including share purchase agreements, share subscription agreements, and technology transfer agreements. These agreements allow foreign businesses to collaborate with local companies, bringing in expertise, technology, and capital to Nepal’s economy.
Project Sizes and Government Targets
During the review period, 375 out of the total registered foreign investment projects were small-scale. Additionally, seven were medium-sized, and four were large projects. While small projects play an essential role in job creation and economic activity, the government is also aiming to attract larger projects that can have a more significant impact on national development.
The government has set a target to attract foreign investment worth Rs 44 billion in the current fiscal year. The success of the automatic route system will play a crucial role in meeting this target. By making the approval process simpler, faster, and more transparent, Nepal hopes to become a more attractive destination for foreign investors.
Challenges and Future Outlook
Despite the positive momentum, there are still some challenges in attracting foreign investment. Issues such as bureaucratic delays in other approval processes, inconsistent policies, and concerns about political stability can discourage investors. Additionally, infrastructure gaps in transport, electricity, and digital connectivity need further improvements to support large-scale investments.
To address these issues, the government has been working on reforms to improve the business climate. Measures such as reducing paperwork, enhancing transparency, and providing better support for investors are being implemented. Nepal also aims to strengthen its legal framework to protect foreign investments and ensure ease of doing business.
With growing investor confidence, continued government support, and improvements in infrastructure, Nepal’s foreign investment sector is expected to expand further in the coming years. The automatic route system is a step in the right direction, and if managed effectively, it could position Nepal as a strong investment destination in South Asia.
For more updates on foreign investments and Nepal’s economic developments, visit Nepal Monitor.
