Nepal’s FDI Commitments Fall 84%, but Project Approvals Jump 50%

Kathmandu — Nepal recorded a steep decline in foreign direct investment commitments in the first month of the current fiscal year, but a closer reading of the figures presents a more complex picture: foreign investors are proposing more projects than a year ago, yet those projects are overwhelmingly small and concentrated in relatively low-capital sectors.

According to Department of Industry data, foreign investment commitments stood at Rs 3.77 billion in the first month of fiscal year 2026/27, compared with Rs 24.10 billion in the corresponding period last year. On the surface, this represents a decline of about 84.3 percent.

The headline fall, however, needs to be interpreted with caution. Last year’s figure was heavily distorted by an exceptionally large commitment in the agriculture sector. Agriculture alone attracted Rs 20.04 billion in the first month of the previous fiscal year, accounting for more than four-fifths of total commitments during that period.

If that unusually large agricultural commitment is excluded, foreign investment commitments in other sectors last year amounted to about Rs 4.06 billion. Compared with that adjusted figure, this year’s Rs 3.77 billion represents a decline of only around 7 percent, rather than 84 percent.

This suggests that the dramatic year-on-year contraction reflects the absence of a single large-ticket project as much as a broad deterioration in foreign investor interest.

The number of approved foreign-investment projects, in fact, moved in the opposite direction. The Department of Industry approved 191 projects during the first month of the current fiscal year, up from 127 projects a year earlier. That is an increase of just over 50 percent.

But almost all of the new projects are small. Of the 191 approved ventures, 188 are classified as small industries, two as medium-sized and only one as a large industry. This helps explain why the number of projects rose substantially while the amount of committed capital fell.

The average investment commitment per approved project dropped sharply. This year’s Rs 3.77 billion spread across 191 projects works out to roughly Rs 19.8 million per project. A year earlier, Rs 24.10 billion across 127 projects translated into an average commitment of nearly Rs 189.8 million per project.

The average size of an approved foreign-investment project has therefore fallen by almost 90 percent year-on-year. Although last year’s unusually large agricultural investment exaggerates the comparison, the figures still underline a clear shift toward smaller foreign-funded businesses.

Sectoral data further illustrate that change.

Tourism attracted the largest amount of committed foreign investment during the month, receiving about Rs 1.64 billion across 33 projects. It accounted for roughly 43 percent of total FDI commitments, making it the largest destination for foreign capital by value.

Manufacturing followed with Rs 843.2 million, or about 22 percent of the total, while the service sector received Rs 682 million, equivalent to roughly 18 percent. Information and communication technology attracted Rs 569.8 million, or around 15 percent of total commitments.

Energy and agriculture each received only Rs 20 million. No foreign investment was approved in mining or infrastructure during the month.

The ranking changes significantly when investment is measured by the number of projects rather than the amount of money involved.

Of the 191 projects approved, 128—or about two-thirds—were in the ICT sector. Tourism accounted for 33 projects, services for 19 and manufacturing for nine. Agriculture and energy had just one project each.

The contrast is notable. ICT represented about 67 percent of all approved projects, but only around 15 percent of committed investment. This indicates that most ICT investments are relatively small and are likely to require much less fixed capital than manufacturing, energy or infrastructure ventures.

Tourism, by comparison, accounted for only around 17 percent of approved projects but more than 43 percent of total committed capital.

The data therefore point to an emerging pattern in Nepal’s foreign investment profile: investors appear increasingly willing to enter sectors where businesses can be established with relatively modest capital, while large, capital-intensive projects remain limited.

The government’s automatic approval system appears to be playing an important role in this shift.

Of the 191 projects approved during the month, 187 were processed through the automatic route, representing nearly 98 percent of all projects. Those projects accounted for Rs 3.47 billion, or about 92 percent of total committed investment.

Only four projects, involving Rs 299.4 million, were approved through the regular approval route.

The figures suggest that simplifying investment approval has made it easier for smaller foreign investors to enter Nepal. However, the same data also highlight the limitation of measuring investment performance only by the number of approvals. A large number of small projects cannot necessarily substitute for a few major investments in industries capable of generating substantial production, exports and employment.

Employment commitments reinforce that concern.

The 191 projects approved this year are expected to create 1,773 jobs, equivalent to an average of just over nine jobs per project.

In the corresponding period last year, 127 projects had pledged to generate 8,268 jobs—an average of around 65 jobs per project.

The sharp drop in employment per project is another indication that the current investment pipeline consists largely of smaller and potentially less labour-intensive ventures.

This does not necessarily make such projects economically insignificant. ICT and service businesses can generate high-value employment and exports without requiring the same amount of physical investment as factories or hydropower projects. But their contribution should be assessed differently from large industrial investments.

The first-month figures also need to be distinguished from actual FDI inflows.

An investment commitment or approval represents an investor’s declared intention to invest; it does not necessarily mean that the entire approved amount has already entered Nepal. Actual foreign capital inflows depend on whether approved projects proceed, how quickly investors bring in funds and whether planned investments are fully implemented.

This distinction is important when interpreting Nepal’s FDI performance. A rise in approvals may signal investor interest and an easier regulatory process, but the economic impact ultimately depends on realised investment rather than commitments alone.

Meanwhile, foreign investors repatriated more than Rs 242 million in royalties during the month. No dividend repatriation was recorded.

The royalty outflow was substantially lower than in the same month last year, when around Rs 2.90 billion was reportedly repatriated under royalty payments. The Department of Industry also recommended 135 visas related to foreign investment activities during the month.

Overall, the first-month data send two different signals.

On one hand, the 50 percent increase in approved projects, particularly the heavy concentration in ICT, suggests that Nepal is attracting a broader pool of smaller foreign investors and that the automatic approval system may be reducing procedural barriers.

On the other hand, the sharp fall in average project size, limited investment in energy and agriculture, and absence of investment in infrastructure and mining indicate that Nepal has yet to secure a strong pipeline of large, capital-intensive foreign projects.

For policymakers, the challenge is therefore no longer simply to increase the number of FDI approvals. The more difficult task is to convert investor interest into actual capital inflows while attracting larger investments into manufacturing, energy, infrastructure and export-oriented industries.

The first month of the fiscal year shows that Nepal is getting more foreign-investment projects, but not necessarily more foreign capital. Whether this shift becomes a positive structural change will depend on the quality of the projects, their implementation rate, employment creation and their eventual contribution to production and exports.