Nepal’s FDI Stock Surges by 11.8% to Rs. 295.50 Billion in FY 2022/23, Led by Industrial and Service Sectors with India as Top Investor
Nepal’s stock of Foreign Direct Investment (FDI) has experienced a notable surge, growing by 11.8 percent to reach Rs. 295.50 billion by the end of the fiscal year 2022/23, according to the latest Foreign Direct Investment (FDI) survey report published by Nepal Rastra Bank (NRB). This increase reflects the country’s continued efforts to attract foreign capital and stimulate economic growth through strategic reforms and investor-friendly policies.
FDI has played a crucial role in Nepal’s economic landscape, significantly contributing to job creation, human capital development, technology transfer, and export growth. Since the inception of the country’s sixth five-year plan in FY 1980/81, which first highlighted the importance of inward foreign investment, Nepal has undertaken substantial legal and institutional reforms to enhance the FDI climate. These reforms have been pivotal in establishing a significant framework for foreign investors, facilitating long-term investment and sustainable development.
The survey conducted by NRB, encompassing responses from 238 enterprises out of 754 active entities that had secured FDI approvals, revealed detailed insights into the composition of FDI stock in Nepal. The report emphasizes that paid-up capital remains the dominant component, accounting for 52.8 percent of the total FDI stock. Reserves and loans comprise 33.7 percent and 13.5 percent, respectively, underscoring the diversified nature of foreign investments in the country.
In terms of sectoral distribution, the industrial sector commands the majority share of FDI, representing 59.7 percent of the total stock. Within this sector, the electricity, gas, steam, and air conditioning industries lead with a 30 percent share, closely followed by the manufacturing sector at 29.4 percent. The service sector accounts for 40.2 percent of the total FDI stock, with financial and insurance services comprising 26 percent, information and communication services at 6.7 percent, and accommodation and food services at 6.3 percent.
The survey also identified the top sources of FDI in Nepal, with India leading at Rs. 103.5 billion, followed by China with Rs. 35.5 billion. Other notable contributors include Ireland (Rs. 22.6 billion), Australia (Rs. 19.1 billion), and Singapore (Rs. 18.8 billion). In total, Nepal has attracted foreign investments from 58 countries as of mid-July 2023, highlighting the country’s growing appeal as a global investment destination.
The outstanding foreign loans of FDI enterprises, excluding direct loans from foreign direct investors, stood at Rs. 60.3 billion as of mid-July 2023. Notably, the hydropower sector has utilized the majority of these loans, with outstanding debt in this sector amounting to Rs. 29.3 billion.
Further, the survey indicates that the capacity utilization of FDI enterprises within the manufacturing sector stands at 60.69 percent, while profitability for these enterprises averaged 11.61 percent during FY 2022/23. These figures reflect the operational efficiency and financial health of foreign-invested enterprises in Nepal, demonstrating the positive impact of FDI on the country’s industrial and service sectors.
As Nepal continues to build on these positive trends, the ongoing refinement of legal frameworks and institutional structures is expected to further enhance the country’s attractiveness as a destination for foreign investment. The strategic focus on promoting FDI remains central to Nepal's economic policy, with the goal of fostering sustained economic growth and development in the years to come.
