Foreign Investment (FDI) & Joint Ventures (JV) in Nepal
Nepal has adopted a liberal policy towards foreign investment and is focused on creating an investment-friendly environment to attract FDIs into the country. The tax slabs are among the lowest, and Nepal’s position in the ease of doing business index is fairly good. Areas of investment that are expected to be profitable include hydropower, industrial manufacturing, services, tourism, construction, agriculture, minerals, and energy. Foreign investment is encouraged either as joint ventures with Nepalese investors or 100% foreign-owned enterprises. However, some sectors are not open to foreign investment for national security reasons or to promote small local enterprises and protect indigenous skills and expertise. Approval from the GoN is required for foreign investment in all sectors, except cottage industries, where no foreign investment is allowed but no restrictions are placed on the transfer of technology.
Investment experts predict that agriculture and mining will produce the best returns globally in the next 20-30 years. With the growing middle class population in emerging markets, food prices are expected to rise, and worldwide inflation will be higher than expected. Therefore, holding precious metals will be better than holding cash.
Nepal is geographically close to India and China, which will experience the largest surge in the middle class population in the world’s history. As families become smaller and wealthier, they will start eating well, and meat consumption will rise. Nepal is an attractive destination for both Chinese and Indian tourists due to its proximity to these countries.
Investment opportunities in Nepal include buying land, investing in tourism-related stocks, hydropower, outsourcing from US, Europe, and Australia, and medical tourism. Nepal has a vast potential for hydropower, and many hydropower projects are currently underway. Outsourcing opportunities exist, especially in web programming, as many Nepali students are interested in computer engineering. Medical tourism is also a viable option in Nepal, as it has produced some of the world’s best doctors, and healthcare services are much cheaper compared to developed countries.
The Government of Nepal has constituted an Investment Board, chaired by the Prime Minister, to facilitate domestic and foreign investors in investing in the potential sectors in Nepal. The Board provides one-window facilities to investors. Investment in Nepal can generate significant returns, and with the growing middle class population in Nepal, there will be even more investment opportunities in the future.
Nepal has a policy for foreign investment that is open, but still regulated. They require approval for foreign investments and usually allow them in industrial sectors. Most sectors have no limit to how much foreign investors can own. There are laws that regulate foreign investment, including the Foreign Exchange (Regulation) Act, Foreign Investment and Technology Transfer Act, and the Investment Board Act. The Nepal Rastra Bank, Department of Industries/Industrial Promotion Board, and the Investment Board Nepal are the regulators for these laws. Foreign investments usually involve equity investment and loan investment and the laws also regulate technology transfer.
The Companies Act deals with the incorporation of a company and registration of the branch office or contact office of foreign companies.
Kalika Law Firm is experienced in helping foreign investors with their investments, from the beginning to the end. We help structure investments, incorporate local joint ventures/subsidiary companies/branch offices, conduct legal due diligence, get necessary approvals, document transactions, advise on compliance issues, and help with suitable exit strategies.
Please contact us for any inquiries you may have about Foreign Direct Investment (FDI) & Joint Ventures (JV) in Nepal.
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Kalika Law Firm is experienced in helping foreign investors with their investments, from the beginning to the end.