FDI – Potential Areas/Sectors for Investment
1. Energy
- Rich in water resources with multiple sources of water, including glaciers, snowmelt from the Himalayas, rainfall and
- Theoretical capacity of hydropower is around 80,000 MW, out of which 43,000 MW is estimated to be economically
- As per the government policy to encourage the production and use of electricity, the production and consumption of electricity is increasing. The access to electricity of the population has reached 0 percent in mid-March 2021 with the increase of the electricity production. As of mid-July 2020 the access to electricity was 90.0 percent of the population.
- Total electricity connected to the national grid has increased by 4.1 percent to 1,458 megawatts, in mid-March 2021, compared to that of the 1,401 megawatts of July Out of the total generated electricity, 1299 megawatts is from hydroelectricity, 30.14 megawatt solar plant,53.4 megawatt thermal plant, 72 megawatts from renewable energy and 3 megawatt as the by-product of the sugar mills.
- As of mid-March of 2021, the power generated by projects owned by Nepal Electricity Authority (NEA), 645 megawatt and private sector owned hydropower project 742.45 megawatt are connected with the national
- As of mid-March of 2021, the electricity imported from India was 1,488.94 gigawatt hours and exported 33.85 gigawatt hours. In fiscal year 2019/20 the import of electricity was 1729 gigawatt hours and the export was 107 gigawatt hours.
- In fiscal year 2020/21, survey licenses have been issued to private sector hydropower companies for the generation of an additional installed capacity of 231.8 megawatt hydropower. Altogether, survey licenses of total installed capacity 17,064 megawatt electricity have been issued to generate electricity from 269 projects of as of mid-March of
- To meet the target of graduating from least developed country (LDC) status to developing country status by 2022 AD and become a middle income country by 2030 AD, additional 6,000+ MW (which requires investment of approximately USD 10 billion) is required, consequently huge
- Investment opportunities in the up-gradation and expansion of distribution systems (for which investment of approximately USD 2 billion is required) and transmission systems (for which investment of approximately USD 45 billion is required).
- The Power Trade Agreement (PTA) signed with India has opened up a large market for
- The SAARC Framework agreement on Energy Cooperation signed during the 18th SAARC Summit in 2014 has paved the way for the eventual formation of a regional energy
- Tax holiday of 100% for first 10 years and 50% for next 5 years.
Electricity Production, Demand and Infrastructure Status
Particulars 2015.16 2016.17 2017.18 2018.19 2019.20 Electricity Production (MW) 855.89 972.49 1074.135 1182.21 1401 Transmission Line (KM) 3,006 3,483 3,538 3,990 4,251 Distribution Line (KM) 124,115 124,976 139,825 144,536 164,643 Peak Demand (MW) 1,385 1,444 1,508 1,320 1,408 Access of Population to Electricity (in %) 63.19 68.30 84 88 90 Source: Economic Survey, GoN Fiscal Year 2077.78 (2020.21AD)
2. Tourism
- Tourism sector is the highly affected sector from the Covid-19. In 2019 the arrival of tourists was increased by 1 percent whereas such arrival was decreased by 80.8 percent in 2020. Foreign currency earning has reduced by 70.0 percent during the same period. In 2020 the number of total tourist arrivals was limited to 230,085.
- With the world’s highest mountain range, the Himalayas, and 8 of the 10 highest peaks in world, popular among mountaineers, trekkers and adventure
- Offers beautiful lakes, steep rivers and gorges, unique wildlife, historic monuments, impressive fine arts, significant religious sites and exotic cultures attracting a wide array of travelers for a variety of
- A destination for religious tourism and
- Lumbini, the birthplace of Lord Buddha, and Pashuptinath and other Hindu pilgrimage sites are the main attractions for people following Buddhism and
- Opportunities in developing tourism infrastructure (hotels, restaurants, roads, airports, cable car ).
- Also great potential for expanding the market for meetings, international conferences and events (MICE).
- Plans to upgrade the current international airport are underway, which will increase the tourist traffic
Tourists arrival data of Nepal
Year No. of Tourists Average stay (days) Annual Growth 2020 230,085 15.1 -80.8% 2019 1,197,191 13.0 2.1% 2018 1,173,072 12.4 24.8 % 2017 940,218 12.6 24.9% 2016 753,002 13.4 39.7% 2015 538,970 12.8 -31.8% 2014 790,118 12.4 -0.9% Note: arrival of Indian Tourist by land not included)
Source: Economic Survey, GoN Fiscal Year 2077/78 (2020.21 AD)
3. Infrastructure
- As the country is focusing on the development of infrastructures, lots of opportunities to expand the road network in PPP
- As of mid-March of 2021, the total length of the road has reached 33,528 kilometers including 15,974 kilometers blacktop (including strategic and local road networks), 8,582 kilometers graveled and 9,972 kilometers fair weather. By mid-July 2020, there were 33,244 kilometers of roads including 15,424 kilometers blacktop, 8,622 kilometers graveled and 9,198 kilometers of fair
- Nepal’s main highways require expansion to accommodate the increase in traffic, which is another area for public-private
- In order to cater to the needs of the growing population, the development of mass public transportation systems – bus-rapid transport (BRT), railways, monorails, airports has been prioritized. To finance these projects, the government is looking at public – private
- The number of international airlines operating in Nepal was 29 in last fiscal year whereas it has remained 27 as of mid-March of the current fiscal The number of countries having bilateral airline services agreement has reached 40. The annual two way airlines seats have reached nearly 7.8 million. The number of domestic airlines in operation (Fixed wing + Rotor wing) has reached 20.
- All over the country there are 54 air Of the total airports, 37 airports are feasible to operate in all weathers. The regular air services are being carried out in 35 airports in all weather. One domestic and 3 international airports are under construction.
- Eight north-south corridors (roads) linking China and India through Nepal, a cross-border railway line connecting Kathmandu with China, five cross-border railway lines, ultimately connecting Kathmandu with India, a railway line along the East-West Highway, and cable cars in the hilly regions are planned.
4. Agriculture
- Economy is largely dependent on agriculture, which accounted for about 26 % of GDP and absorbs about two- thirds of the labor
- The contribution of agriculture sector (agriculture, forest and fisheries) to GDP was 7 percent in fiscal year 2011.12 whereas it has been gradually decreasing in recent years and is estimated to remain 25.8 percent in fiscal year 2020.21.
- According to the Nepal Labor Force Survey of 2018, 60.4 percent of the population is engaged in agriculture
- About 28% of the total land area is cultivable
- Government is focused on the modernization, diversification, commercialization and marketing of the agriculture
- Government plans to make available agricultural inputs, such as irrigation, electricity, transportation and agro-credit.
- The Nepal Trade Integration Strategy 2010 focuses on the development of cardamom, ginger, honey, lentils, tea, noodles and medicinal herbs/ essentials oil as priority export
- Good opportunities exist in agriculture production; processing, packaging and
- Non-timber forest products, cardamom, ginger, aquaculture, vegetables, floriculture, tea, coffee and honey offer many
- Good opportunities in input markets (such as for seeds, nurseries, fertilizers, agricultural infra- structure and technology, and agriculture financing).
- Due to favorable climatic conditions, the focus on high value organic crops is increasing.
5. Information and Communication Technology
- One of the fastest emerging sectors in the country, with huge potential for growth in the coming
- All areas open to foreign direct investment except for media. For telecommunications, 80% foreign ownership is
- The Government has identified IT and business process outsourcing (BPO) as one of the five priority potential export service
- Only two major telecommunications companies (NTC and NCell) dominating the sector, ample room for new firms to enter the
- By mid-March of fiscal year 2021, telephone density has reached 130.3 percent and the internet subscriber density has reached 82.2 percent. In mid-July 2020, telephone density was 7 percent and internet subscriber density was 73.0 percent. Access to internet service was reached 73.0 percent of the population in the last year, whereas it has increased to 82.8 percent in the current fiscal year.
- As of mid-July of 2020, optical fiber has been laid in 293 kilometer area to provide high speed internet to Mid-Hill Highway and surrounding As of mid-March of current fiscal year, 767 kilometer area has been added making a total of 1060 kilometer of fiber laid area.
- Foreign BPO companies can tap into the young English-speaking population and benefit from the cost advantages offered by the low wages and low establishment and operating
- The time zone favorable for companies looking to outsource from America or
- Unmet needs for the use of ICTs in governmental agencies and the private
- Long Himalayan range and cold climate in the surrounding area presents opportunities for establishing data mining/warehouse industries in Nepal.
Some indicators related to ICT
Indicators Till Mid-March 2021 Telephone Density (%) 130.34 Broadband Density (%) 82.79 Customers of mobile telephone (in millions) 38.21 Broadband Subscribers (in millions) 24.73 Source: Economic Survey, GoN Fiscal Year 2077.78 (2020.21AD)
6. Health and Education
- Opportunities exist in developing education infrastructure, including upgrading and building educational institutions and even education cities (medical, IT, engineering, management etc.), for which the government is seeking to engage in private-public partnership.
- Every year, thousands of students go abroad for further studies spending large sums of With more and better education institutions within country, this could be avoided.
- Government is looking to develop health infrastructure, including modernization and increasing the capacity of health facilities and mobilizing privately-run hospitals by means of public-private partnership.
- Persistent shortages of quality medicines in the market presenting opportunities for manufacturers of pharmaceutical goods.
7. Financial Sector
- Although the financial sector is growing at a rapid pace, still a significant portion of Nepal’s population has no bank
- As of the mid-March 2021, a total of 143 banks and financial institutions are in operation including 27 commercial banks, 19 development banks, 20 finance companies, and 76 micro finance companies and 1 infrastructure development bank. Similarly, 40 insurance companies (including 19 life insurance,20 non-life insurance and 1 reinsurance company), 29,886 co- operatives (savings and credit cooperatives), Employees’ Provident Fund, Citizen Investment Trust, Deposit and Credit Guarantee Fund, Social Security Fund and Postal Saving Banks are also in
- For the facilitation of electronic transactions, 10 institutions have obtained licenses for payment system operators and 28 institutions have obtained licenses for payment service The R. T. G. S. system has come into operation.
- The weighted average interest rate on 91-day Treasury Bills was 3.9 percent in mid-March 2020, whereas it has come down to 2.03 percent in mid-March 2021. The weighted average interest rate in interbank transactions between commercial banks has declined to 1.3 percent in mid-March 2021 from 4 percent in mid-March 2020.
- Banking services are heavily concentrated in urban
- Financial sector of Nepal still has a large untapped market for banking and financial
- By mid-March of 2021, population having access to insurance services has reached 4 percent. It is estimated that about 26.0 percent of the population have access to insurance, including foreign employment and term life insurance.
- Nepal’s Insurance market has also huge potential as the penetration rate is very low.
8. Mines and Minerals
- Nepal has an abundance of minerals used in industry and construction, including limestone (most abundant), coal, talc, red clay, granite and marble, gold, and precious and semi-precious stones (tourmaline, aqua- marine, ruby and sapphire).
- Recent studies have shown that Nepal may have 2.5 billion metric tons of cement grade
- Nepal has an estimated 5 billion metric tons of dolomite and 180 million metric tons of high grade
- The western part of Nepal has witnessed gas and oil seepage, confirming the presence of oil and natural gas in
- About 10 petroleum and natural gas exploration sites have been identified so
- Nepal has more than 20 million metric tons of ore reserves in more than 80 locations.
- Copper occurs in Nepal in more than 107
- About 10 petroleum and natural gas exploration sites have been identified so
- Nepal has more than 20 million metric tons of ore reserves in more than 80 locations.
- Copper occurs in Nepal in more than 107 locations.