Post implementation of the peace process, the Maoist insurgency has settled to a large extent, and the constituent assembly is in the process of drafting the new constitution with the following key aspects
- Nepal will be ruled as a federal democratic republic with the creation of semi-autonomous states which will decentralize governance.
- From a Hindu state the new constitution envisions a secular Nepal.
These developments have created a favorable environment for investment to encourage and attract foreign direct investment. The Nepalese government has adopted investment friendly policies and keeping in mind the core competencies of Nepal, following sectors can be the most lucrative for investment:
- Nepal is one of the world’s top destinations for outdoor adventure as surveyed by National Geography and Forbes.
- Major attractions are – the Great Himalayas, Jungle Safari and White Water Rafting.
- Religious tourism – birth place of Lord Buddha (Lumbini).
- Holiest of the Hindu sites – Pashupati Nath Temple (Kathmandu), Ram-Janaki Temple (Janakpur)
- Temples in and around the Kathmandu valley – most of them fall in World Heritage Sites.
- Only 0.7 mill tourist visiting every year due to lack of airport capacity and in adequate hotels.
- Considering the potential, investment activity has already started with hotel and resort chains being constructed.
- Brand new airport with the capacity of 20 million on the final stage of planning to be constructed at Neejgadh.
- Present International Airport, TIA, under modernization.
- Additional International Airports under construction at Bhairawa (Lumbini) and Pokhara, the key tourist destinations.
- Although it employs 75% of population, contribution to GDP is only 38%.
- Mainly subsistence farming and in need of Mechanization.
- Large potential markets highly accessible – India and China.
- Nepal has all the climate zones in the world (from sea level to the high mountains) hence anything can be grown here.
- World’s rarest herbs and medicinal plants are found in the foot hills of the Himalayas.
- Highly fertile land – large river basins / well nourished soil (mineral rich river from the Himalayan glaciers flow to the southern plains).
- Nepal has the world’s 2nd highest proven Hydro-Electricity generation potential. > 40,000 MW.
- High domestic pent up demand / Export potential to India & Bangladesh. Can’t be a better synergy with neighbors…
- Current domestic output limited to 450MW and demand is 1000MW. Demand will be 2000MW in the next 5 years.
- Bordering UP & Bihar (India) corridor which has energy shortfall of 20,000MW.
- Several cross border transmission lines being constructed / planned
- Muzzafarpur – DhalkebariTx Line (completed)
- Gorakhpur – ButwalTx Line (Survey)
- Purnia – DuhabiTx Line (Survey)
- Silguri – AnarmaniTx Line (Survey)
- Govt. implementing a progressive strategy of dividing Nepal Electricity Authority (state owned utility monopoly) into 3 entities –
- Power Generation Co.
- Power Distribution Co. (Transmission)
- Power Trading Co. (Energy Exports)
- Investment activity is increasing: Major projects announced
- Private Nepalese producers – US$ 2 bil (approx. 1500 MW)
- GMR India (Upper Karnali – 900MW – US$ 1.4 bil – Export)
- GMR India (Upper Marshangdi – 600MW – US$ 1 bil – Export)
- Sutlej India (Arun III – 900 MW – US$ 1.5 bil – Export)
- CWE / 3 Gorges Co. (West Seti – 650 MW – US$ 1.5 bil)
- Govt. of Nepal guarantees Power Purchase for 30 years at attractive rates – High IRR (min. 18%) and return on equity (above 20% on ave.)… guaranteed payback.
- Other Govt. incentives such as Tax cuts / benefits & Subsidies.
- Currently only one International Airport / Runway serving entire country
- Only around 6,000 daily passenger capacity
- Airport is the bottleneck for expansion of tourism sector!
- From the current Least Developed Country (LDC) status, Nepal will need at least US$ 20 billion investment in the next 10 years to be elevated to a Developing Country status.
- Govt. of Nepal guarantees project viability in Infra sector projects for investors by funding the viability gap (Toll Roads, Airports, Railway & Metro, etc.)
- High priority projects –
- Kathmandu – Terai Fast Track Highway (Links capital city to the Southern Plains and the new Intl’ Airport) – IL&FS India principal bidder – US$ 2 bil
- Neejgadh Intl’ Airport – US$ 2 bil
- Pokhara Intl’ Airport & Bhairawa Intl’ Airport under construction – US$ 1 bil
- Kathmandu Metrorail – US$ 3 bil (phase-wise)
- East – West Railroad project
- Mid-Hill East West Highway project
Foreign Direct Investment Guideline in Nepal