Nepal Secures Over Rs 38 Billion in FDI Commitments in Five Months, Energy Sector Lags Behind

Nepal has received foreign direct investment (FDI) commitments worth more than Rs 38.59 billion during the first five months of the current fiscal year 2022/23 (mid-July to mid-December), according to data released by the Department of Industry. The figures reflect total investment commitments from projects approved during the period, highlighting a steady inflow of foreign interest into the country.

During these five months, a total of 438 foreign investment projects were approved. In terms of project numbers, the information and communication technology (ICT) sector dominated, with 236 projects—accounting for more than half of all approved proposals. This trend suggests Nepal’s growing appeal as a destination for digital services, software development, and outsourcing-based businesses.

However, when measured by investment volume, the agriculture and forest-based industries emerged as the leading sector. Commitments in this category stood at nearly Rs 22 billion, the highest among all sectors. Tourism followed as the second-largest recipient, with investment pledges exceeding Rs 10 billion across 135 projects, signaling renewed foreign interest in tourism infrastructure and related services.

Sector-wise data show that 54 percent of total investment commitments were directed toward ICT, 31 percent to tourism, 6 percent each to manufacturing and services, and 3 percent to agriculture. Despite ICT leading in project count, the total investment amount in the sector remained limited to around Rs 1 billion, reflecting the small-scale and service-oriented nature of most technology ventures.

A notable concern highlighted by the data is the weak foreign investment presence in energy and infrastructure—sectors considered critical for long-term economic growth. Economists warn that although the number of foreign-funded projects is rising, limited investment in capital-intensive sectors such as hydropower, transmission, and large infrastructure could constrain job creation, export capacity, and industrial expansion.

The structure of approved projects further underlines this imbalance. Of the 438 projects, 423 were small-scale, eight were medium-sized, and only seven fell into the large-scale category. The low number of large projects indicates Nepal’s continued struggle to attract high-value, long-term foreign capital despite growing interest at the smaller end of the investment spectrum.

According to the Department of Industry, FDI commitments worth Rs 1.91 billion were approved in the month of mid-November to mid-December alone, covering 56 industries. Most of these were small enterprises, reflecting a preference among foreign investors for projects that promise quick returns with limited exposure to regulatory and implementation risks.

The department also reported that approval was granted during the five-month period for the repatriation of over Rs 1.62 billion in royalties. This includes permissions to remit USD 640,236 and INR 153.35 million, indicating ongoing operational activity by existing foreign investors alongside new commitments.

Economists note that while the rise in FDI commitments is encouraging, the concentration of investment in services, tourism, and small digital ventures limits its broader economic impact. They argue that without significant progress in attracting foreign capital into energy and infrastructure, sustainable economic transformation will remain elusive. Policy stability, faster project facilitation, and stronger investment protection mechanisms are widely seen as essential to converting commitments into actual inflows and long-term growth.