FDI inflows to Nepal was the second lowest in South Asia in 2010. It received approximately US$39 million last year. The highest recipient was India with US$ 24 billion and the lowest Bhutan with US$ 11.69 million. The total FDI inflows in the world was US$ 124.37 billion, to developing countries US$ 573.57 billion, and to South Asia US$ 31.95 billion (South Asia excluding India received US$ 7.3 billion of which approx 30 percent went to Pakistan).
FDI inflows to Nepal was US$ 5.94 million in 1990. It then decreased to almost nil up until 1995. In 1996, FDI inflows was US$ 19.16 million and fluctuated quite a bit until 2000, when FDI inflows was negative US$ 0.48 million. In the last two years FDI inflows have been stable at around US$ 39 million.
Nepal received 0.12 percent of total FDI inflows to South Asia in 2010. Similarly, it received 0.15 percent and 0.17 percent of FDI inflows to LDCs and landlocked developing countries in 2010. The corresponding figures in 1990 to these destinations, respectively, were 2.79 percent, 1.04 percent, and 0.98 percent. In 2005, they were 0.02 percent, 0.02 percent and 0.04 percent.
Persistent labor problems, power outages, political instability, cumbersome regulations and tax regime (leading to high transaction costs), corruption, and lack of adequate infrastructure (leading to high transportation costs), among others factors, are impacting FDI inflows to Nepal. Here is a blog post I wrote in 2009 about FDI policy and investment climate in Nepal. According to Enterprise Survey 2009, 62 percent of enterprises think instability is the biggest constraint. Here is a report on FDI investment opportunities in Nepal. There are plenty of opportunities for FDI in agriculture and agro-based industries, flowers and flowering plants, Pashmina, garments, tourism, health, education, IT, nursing homes, construction, hydropower and alternative energy sources, and manufacturing, among other sectors.
| Total FDI inflows | ||||||
| FDI inflows (US$ million) | 1990-1995 | 1996-2000 | 2001-2005 | 2006-2010 | 2009 | 2010 |
| Afghanistan | -0.01 | 571.81 | 566.38 | 1041.65 | 185.00 | 75.65 |
| Bangladesh | 125.85 | 4608.81 | 2338.69 | 4158.61 | 700.16 | 913.30 |
| Bhutan | 2.25 | 18.93 | 17.18 | 138.28 | 14.68 | 11.69 |
| India | 4220.69 | 43360.95 | 28827.96 | 148512.08 | 35648.78 | 24639.92 |
| Maldives | 41.57 | 249.65 | 182.86 | 565.43 | 112.34 | 163.82 |
| Nepal | 8.16 | 89.80 | 31.70 | 77.89 | 38.56 | 38.99 |
| Pakistan | 2591.56 | 7556.31 | 5059.00 | 19655.00 | 2338.00 | 2016.00 |
| Sri Lanka | 658.88 | 2191.96 | 1102.01 | 2717.20 | 404.00 | 477.60 |
| Total FDI inflows | ||||||
| FDI inflows (US$ billion) | 1990-1995 | 1996-2000 | 2001-2005 | 2006-2010 | 2009 | 2010 |
| World | 1349.12 | 7825.63 | 3750.82 | 7605.60 | 1185.03 | 1243.67 |
| Developing economies | 423.78 | 2214.48 | 1199.64 | 2744.64 | 510.58 | 573.57 |
| South Asia | 7.53 | 72.40 | 51.56 | 188.43 | 42.46 | 31.95 |
| Least developed countries (LDCs) | 8.40 | 79.49 | 56.34 | 132.93 | 26.54 | 26.39 |
| Landlocked developing countries | 7.81 | 65.02 | 42.29 | 102.30 | 26.19 | 23.02 |
[All data are sourced from the latest UNTCAD’s World Investment Report 2011. Here is a WIR’s FDI profile of Nepal].
