Survey Report

on
Foreign Direct Investment in Nepal
(2021/22)

Nepal Rastra Bank

Economic Research Department

September 2023
 Foreword

Global foreign direct investment experienced a slowdown in 2022 posing challenges to developing
economies. UNCTAD (2023) reported a decline in global foreign direct investment (FDI) by 12.4
percent in 2022 after a strong rebound in 2021. Such a decline in FDI inflows will pose a significant
challenge in developing economies which are in greatest need of investment. The importance of
FDI remains even more pertinent for Nepal given the considerably increasing resource gap in the
economy. Not only is the FDI vital for capital formation and investible resources for Nepal, but its
significance cannot be ignored for the transfer of technology, skills and managerial as well as
organizational practices it brings along.

The Foreign Direct Investment Survey (2021/22) aims to provide valuable insights to all
stakeholders about the current status of FDI in Nepal. The analysis of FDI including its trend, and
stock across the sectors, and countries is important information for policymakers to assess the
existing situation along with policies and commence reforms in this sector.

I would like to extend my sincere gratitude to companies with FDI and other stakeholders for
providing the required data and participating in the survey. Further, I would like to thank the study
team of the Economic Research Department comprising Acting Director Dr. Birendra Bahadur
Budha, Deputy Director Ms. Sona Rana, and Assistant Director Ms. Merina Shrestha for their
valuable efforts in processing and analyzing data and carrying out the report in this form. I would
also like to thank Director Dr. Dilli Ram Pokhrel, Deputy Directors Mr. Medani Prasad Pokhrel,
Mr. Janak Raj Sapkota, Ms. Swechhya Shakya, Assistant Directors Mr. Anil Lama, Mr. Rolendra
Bikram Jabegu, Mr. Madhu Bhandari and Assistant Mr. Sharish Man Joshi for their contribution
to this survey work.

September 2023

Prakash Kumar Shrestha, PhD

Executive Director
Economic Research Department

ii
 Table of Contents
Foreword ......................................................................................................................................... ii
Executive Summary ........................................................................................................................ v
Chapter I: Introduction .................................................................................................................... 1
Background ..............................................................................................................................1
Objectives ................................................................................................................................2
Methodology ............................................................................................................................2
FDI Compilation Method .................................................................................................... 3
Limitations ...............................................................................................................................4
Chapter II: Trend of Foreign Direct Investment ............................................................................. 5
Global and Regional Trends in FDI Flows ..............................................................................5
FDI Inflows to Nepal ...............................................................................................................6
Dividend Repatriation ..............................................................................................................7
Chapter III: Foreign Direct Investment in Nepal: Survey Results .................................................. 8
FDI Stock .................................................................................................................................8
FDI Stock by Sectors ...............................................................................................................9
FDI Stock by Countries .........................................................................................................10
Province-wise FDI Stock .......................................................................................................11
Foreign Loans ........................................................................................................................12
Capacity Utilization ...............................................................................................................13
Sales from Operation and Profitability ..................................................................................13
Chapter IV: International Investment Position of Nepal .............................................................. 14
References ..................................................................................................................................... 16
Appendix I: FDI Inflows in South Asia ........................................................................................ 17
Appendix II: Foreign Investment Approval and Realization in Nepal ......................................... 18
Appendix III: Sector-wise Stock of FDI ....................................................................................... 19
Appendix IV: Country-wise FDI Stock in Nepal ......................................................................... 20
Appendix V: Country-wise and Sector-wise Composition of FDI Stock ..................................... 22
Appendix VI: International Investment Position (IIP)* of Nepal As of mid-July ........................ 23

iii
 List of Tables
Table 1 : Sample Size .................................................................................................................... 3
Table 2 : FDI Inflows by Economy and Region ........................................................................... 5
Table 3 : Dividend Repatriation..................................................................................................... 7
Table 4 : FDI Stock ........................................................................................................................ 8
Table 5 : FDI Stock by Components (Share in total) .................................................................... 9
Table 6 : FDI Stock by Major Sectors ........................................................................................... 9
Table 7 : FDI Stock by Major Countries ..................................................................................... 10
Table 8 : FDI Stock by Major Sectors (India) ............................................................................. 11
Table 9 : FDI Stock by Major Sectors (China) ............................................................................ 11
Table 10: Province-wise FDI Stock .............................................................................................. 12
Table 11: Outstanding Foreign Loan ............................................................................................ 12
Table 12: Foreign Assets and Liabilities of Nepal ....................................................................... 14

List of Figures
Figure 1 : Net FDI Inflows .............................................................................................................. 6
Figure 2 : Approved FDI and Actual Net FDI Inflows ................................................................... 7

iv
 Executive Summary

1. Foreign Direct Investment (FDI) plays an important role in the economic development of
developing countries. In addition to capital formation, FDI is mainly driven by investors
aiming to make long-term profits through the transfer of technology, management
expertise and access to global markets. Nepal has adopted liberal economic policies with
several incentives to establish an investment-friendly environment to attract FDIs into the
economy.

2. This report presents the latest data of FDI stock in Nepal and provides the estimates of
inward direct investment position or the FDI stock at book value and country-wise as well
as sector-wise distribution of FDI stock at the end of 2021/22.

3. The survey offers a detailed overview of the face value of foreign liabilities of Nepalese
companies established in FDI. These statistics are used as inputs in the compilation of
Balance of Payments (BoP) and International Investment Position (IIP).

4. The survey covers 231 firms out of 694 companies that have taken FDI approvals from
Nepal Rastra Bank up to 2021/22. The details on FDI stock are obtained from the financial
statements of the surveyed companies as well as from the standard questionnaire. The FDI
stock is valued using the company's value appearing in the statement of financial position
as shareholder's equity and debt from foreign direct investors.

5. The survey shows that the stock of FDI in Nepal increased by 16 percent to Rs.264.3
billion at the end of 2021/22. Paid-up capital is the major component in FDI stock as it
accounts for 53.7 percent of total FDI stock whereas the reserves and loans in total FDI
stock accounts for 31.7 percent and 14.6 percent respectively.

6. Nepal has received foreign investment from 57 different countries as of mid-July 2022.
In terms of total FDI stock, India ranks top position with Rs.88.6 billion followed by
China (Rs.33.4 billion), Ireland (Rs.20.9 billion), Singapore (Rs.16.1 billion), and Saint
Kitts and Nevis (Rs.15.1 billion).

v
7. Industrial sector accounts for 62.6 percent of total FDI stock. Of which, electricity, gas,
steam and air conditioning sector constitutes 32.8 percent and manufacturing sector 29.5
percent of total FDI stock.

8. About 37.3 percent of total FDI stock is in service sector. Of which, financial and
insurance services sector constitutes 25.6 percent, accommodation and food services
sector 5.3 percent, and information and communication sector 4.8 percent of the total FDI
stock.

9. The electricity, gas, steam and air conditioning sector, particularly hydropower sector, in
Nepal has been a preferred sector for FDI in recent years. The latest survey shows that
32.8 percent of FDI stock and 41.8 percent of total paid-up capital is in this sector.
Moreover, hydropower sector has also attracted other sources of external financing such
as foreign loans in addition to FDI; the electricity, gas, steam and air conditioning sector
accounts for 41.4 percent outstanding foreign loan at the end of 2021/22.

10. The capacity utilization of FDI based manufacturing companies stands at 71.1 percent,
while the profitability of FDI companies remains at 14.3 percent in the review year.

vi
 Chapter I: Introduction

Background

1.1. Foreign Direct Investment (FDI) plays a significant role in the economic development
of developing economies.1 The infusion of FDI serves as a mechanism for bridging
gaps in domestic capital availability to sustain a desired economic growth and
development trajectories. FDI brings not only financial resources but also advanced
technology, managerial expertise and access to global markets.

1.2. Nepal has initiated institutional and legal reforms in recent decades with the aim of
promoting FDI to complement the resource gap in capital formation. Gradual
liberalization of FDI inflows in various sectors has been encouraged by creating an
investment-friendly environment and prioritizing foreign investment-related reforms.
There are several legal framework for guiding and encouraging FDI in Nepal as
follows:

a) Foreign Investment Policy, 2015,

b) Foreign Investment and Technology Transfer Act, 2019 (FITTA),
c) Public-Private Partnership and Investment Act, 2019,
d) Industrial Enterprises Act, 2020,
e) Institutional reforms such as the establishment of One Stop Service Center
to facilitate foreign investment, and
f) Nepal Rastra Bank Foreign Investment and Foreign Loan Management By-
law, 2021 (Second Amendment).

1.3. Reliable FDI statistics is crucial for the analysis of its trend, and cross-border financial
assessments. Moreover, it is important to identify the sources of foreign investments
(partner countries) and recipient industries. Such data helps policymakers to attract

1
Organization for Economic Cooperation and Development (OECD, 2008) defines direct investment as a
category of cross-border investment associated with a resident in one economy (direct investor) having control
or a significant degree of influence on the management of an enterprise (direct investment enterprises) that is
resident in another economy other than that of direct investor.
1
 and utilize foreign investment and formulate evidence-based policy. In this context,
NRB has conducted this survey to update FDI statistics in Nepal up to 2021/22.

Objectives

1.4. The specific objectives of the survey are:

• To update and compile the FDI stock of Nepal by counterpart economies and
economic activities, and
• To compile the liabilities component (particularly FDI stock) of the International
Investment Position (IIP) statement of Nepal.

Methodology

1.5. This study is primarily based on survey data collected from companies2 that have taken
FDI approvals from Nepal Rastra Bank (NRB). A structured questionnaire has been
prepared and administered through a field survey and email correspondence.
Furthermore, the financial statements of surveyed companies have been reviewed to
verify the data and information collected.

1.6. Data and information are also gathered from various governmental, and non-
governmental agencies as well as FDI-related published reports. This study has
employed a descriptive approach to present the results and findings of the survey.

1.7. The population is classified into three distinctive groups based on the size of the capital
of companies (Table 1). Accordingly, the survey has been conducted across all groups.
In total, 231 companies3 were surveyed which covers 93.8 percent of large-size
companies (45 out of 48 companies), 88.2 percent of medium-size companies (30 out
of 34 companies), and 25.5 percent of small-size firms (156 out of 612 companies).

2
The list also includes FDI companies that have recorded FDI at end of 2021/22. The list published by
Department of Industry shows a large number of companies registered for foreign investment but a considerable
number of such registered companies have not brought in FDI.
3
A total of 197 companies were surveyed in the last fiscal year.
2
 Table 1: Sample Size
Number of Firms Capital (Rs. Million)*
Group
Total Sample Share (%) Total Sample Share (%)
Large 48 45 93.8 216,751.2 214,269.9 98.9
Medium 34 30 88.2 12,770.7 11,587.7 90.7
Small 612 156 25.5 -1,932.1 -528.0 27.3
Total 694 231 - 227,589.7 225,329.6 -
*For sample purposes, capital as of mid-July 2021 is taken as a reference that includes total FDI stock as of mid-
July 2021, new FDI inflows as well as FDI accounting done during 2020/21.

1.8. The FDI stock is valued using the company’s value in the statement of financial
position as shareholder's equity and debt from foreign direct investors.

FDI Compilation Method

1.9. Organization for Economic Cooperation and Development (OECD, 2008)

disaggregates FDI stock or position into equity and debt. Equity positions of FDI stock
cover all components of shareholders’ funds (proportionate to the percentage of shares
held by foreign direct investors). Therefore, it includes equity, contributed surplus,
reinvestment of earnings, revaluations, as well as any reserve accounts. Debt positions
of FDI stock include loans4 and borrowings, and debt from foreign direct investors.

1.10. This survey distinguishes the equity portion of FDI stock under paid-up capital and
reserves headings, and the debt portion of FDI stock under loans heading5 and
disaggregates FDI stock by major industry sectors based on International Standard
Industrial Classification (ISIC)6.

1.11. The final FDI stock reported in this survey consists of two parts: aggregation of FDI
stock as reported by the sampled units and estimation of FDI stock for other non-

4
The procedure for taking approval to obtain foreign loan by any Nepalese individual, firm, company, bank and
financial institutions or other associations has been clarified by Nepal Rastra Bank Foreign Investment and
Foreign Loan Management by-law, 2021 (Amendment II).
5
Other capital (share application money, share premium) attributed to foreign direct investors are also accounted
under this heading.
6
Revision 4
3
 sampled firms. The estimation has been made based on the ratio derived from the FDI
stock value reported by firms with respect to their approved amount for investment.

∑ rij
𝑥𝑗 =
𝑛𝑗

Where 𝑛𝑗 is the number of sampled firms in group 𝑗, 𝑟𝑖𝑗 is the ratio of realized capital
to approved capital of an individual firm 𝑖 which was included in the sample from
group 𝑗, and 𝑥𝑗 is the average ratio of realized capital to approved capital of firms in
group 𝑗. And, 𝑗 stands for the groups: small, medium and large. The average ratios
were calculated separately for all categories and FDI stock is estimated by multiplying
this ratio with the approved FDI amount.

Limitations

1.12. This survey is solely based on the list of industries that have taken FDI approvals from
NRB which differs in number than those registered in the Department of Industry,
Government of Nepal.

1.13. As the primary focus of the survey is to collect FDI stock, it includes only descriptive
statistics related to the FDI.

4
 Chapter II: Trend of Foreign Direct Investment

Global and Regional Trends in FDI Flows

2.1. The World Investment Report 2023 published by UNCTAD shows that global FDI
inflow decreased 12.4 percent to USD 1,294.7 billion in 2022 from USD 1,478.1 in
2021. The Russia-Ukraine war, high food and energy prices, fears of a recession, and
debt pressures resulted in the decline of FDI inflows around the world (UNCTAD,
2023).

2.2. FDI in developed economies decreased 36.7 percent to USD 378.3 billion in 2022
from USD 597.2 billion in 2021. However, inflows to developing economies increased
4.0 percent to USD 916.4 billion in 2022 from USD 880.9 billion in 2021.

Table 2: FDI Inflows by economy and region 7

(US$ Billion)
Percent

Year 2017 2018 2019 2020 2021 2022 Change

2021
World 1,644.9 1,375.4 1,707.8 962.0 1,478.1 1,294.7 -12.4
Developed economies 943.2 678.2 998.7 315.5 597.2 378.3 -36.7
Developing economies 701.7 697.2 709.1 646.5 880.9 916.4 4.0
Asia 504.4 497.3 503.5 516.5 662.1 661.8 -0.05
China 136.3 138.3 141.2 149.3 181.0 189.1 4.5
Singapore 85.4 73.6 97.5 72.9 131.2 141.2 7.7
Hong Kong-China 110.7 104.2 73.7 134.7 140.2 117.7 -16.0
South Asia 46.6 49.9 57.6 69.7 51.3 55.9 9.0
Source: UNCTAD (2023)

2.3. FDI inflows to Asia decreased 0.05 percent from USD 662.1 billion in 2021 to USD
661.8 billion in 2022. The region remains the largest recipient of FDI, accounting for
51.1 percent of global FDI (UNCTAD, 2023). However, the inflows are highly
concentrated among its largest recipients: China (USD 189.1 billion), Singapore
(141.2 billion), and Hong Kong-China (USD 117.7 billion).

2.4. In contrast to global trend, FDI inflows to South Asia increased 9 percent to USD 55.9
billion in 2022. FDI in India, the largest FDI recipient of the sub-region, increased

7
FDI Data may differ from previous report as data are continuously updated by relevant national authorities.
5
 10.3 percent with inflows of USD 49.4 billion in 2022. The trend of FDI inflows to
the sub-region is presented in Appendix I.

FDI Inflows to Nepal

2.5. In line with global trend, gross FDI inflows decreased 3.5 percent to Rs.19.2 billion
in 2021/22. The divestment of foreign investment (repatriation of investment) during
2021/22 remained at Rs.658.7 million which is around 3.4 percent of gross FDI
inflows (NRB, 2022).

2.6. Net FDI inflows to Nepal decreased 4.9 percent to Rs.18.6 billion in 2021/22 (Figure
1).

Figure 1: Net FDI Inflows

25

19.5 19.5
20 18.6
17.5
Rs. Billion

15 13.5 13.1

9.1
10
5.9
4.4
5 3.2

0
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

Source: NRB (2022)

2.7. There is a significant gap between approved FDI and actual net FDI inflows in Nepal.
Figure 2 shows the evolution of approved FDI and actual net FDI inflows over the
period. Between 1995/96 and 2021/22, total actual net FDI inflow stood at around
36.2 percent of total FDI approval (Appendix II). The FDI approval may simply
indicate an intended investment (the approved investment may not actually take place)
or there may be significant time lags between approval and actual investments. In
some instances, the realization of the approved investment may take place over several
years as usually seen in projects with longer gestation periods. As a result, there exists
a gap between FDI approval and actual FDI inflows.

6
 Figure 2: Approved FDI and Actual Net FDI Inflows
80
70
60
50
Rs. Billion

40
30
20
10
0
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
-10

Approved FDI Actual Net FDI Inflows

Source: MOICS (2022), and NRB (2022)

Dividend Repatriation

2.8. In 2021/22, Rs.15.7 billion was approved for dividend repatriation by companies with
foreign investment. The highest dividend repatriation approval was for the
manufacturing sector followed by the information and communication sector (Table
3).

Table 3: Dividend Repatriation

Rs. Million
Sectors 2019/20 2020/21 2021/22
1 Agriculture, Forestry and Fishing - - 3.0
2 Construction 50.0 - 52.2
3 Electricity, gas, steam, and air conditioning 32.3 3,816.2 1,678.1
4 Manufacturing 7,527.1 6,747.7 7,315.5
5 Mining and Quarrying - - -
6 Accommodation and food services 42.9 - 1.9
7 Education 347.7 303.0 -
8 Financial and Insurance Services 4,799.6 868.3 1,089.3
9 Human Health and Social Work 2.3 - -
10Information and Communication - 13,984.1 5,402.8
11Transport and Storage 4.1 - 25.7
12Other 97.1 357.3 106.6
Total 12,903.1 26,076.6 15,675.2
Source: NRB (2022)

7
 Chapter III: Foreign Direct Investment in Nepal: Survey Results

3.1. This chapter summarizes the results of the survey related to FDI stock in Nepal as of
mid-July 2022. The comparison across the previous survey reports needs to consider
the change in coverage due to the addition and removal of companies that have
received FDI.

FDI Stock

3.2. The stock of FDI in Nepal increased by 16 percent during 2021/22 and stood at
Rs.264.3 billion as of mid-July 2022 (Table 4). The paid-up capital, reserves, and loans
increased 15.5 percent, 16.4 percent, and 16.6 percent respectively. The foreign
liability of Nepal in terms of direct investment stands at Rs.264.3 billion as of mid-
July 2022.

Table 4: FDI Stock

Rs. Million
S.N. As of Mid-July Percent Change
Components
2019 2020 2021 2022 2020/21 2021/22
1. Paid-up Capital 88,158.3 108,072.3 122,885.5 141,962.5 13.7 15.5
2. Reserves 78,381.9 67,071.9 71,982.1 83,786.1 7.3 16.4
8
3. Loans 16,379.4 23,376.6 33,079.3 38,581.0 41.5 16.6
Total FDI stock 182,919.6 198,520.8 227,946.9 264,329.5 14.8 16.0
Source: NRB's Previous Survey Reports in FDI, and Field Survey, 2023

3.3. Paid-up capital is the major component in FDI stock accounting for 53.7 percent of
total FDI stock (Table 5). The share of reserves and loans in total FDI stock stood at
31.7 percent and 14.6 percent respectively. In 2020/21, paid-up capital, reserves, and
loans accounted for 53.9 percent, 31.6 percent, and 14.5 percent of total FDI stock
respectively.

8
Only direct loan from foreign direct investment and other capital (share application money, share premium)
attributed to foreign direct investors are accounted.
8
 Table 5: FDI Stock by Components (Share in Total)

S.N. As of Mid-July
Components
2019 2020 2021 2022
1. Paid-up Capital 48.2 54.4 53.9 53.7
2. Reserves 42.8 33.8 31.6 31.7
3. Loans 9.0 11.8 14.5 14.6
Total FDI stock 100.0 100.0 100.0 100.0
Source: NRB's Previous Survey Reports in FDI, and Field Survey, 2023

FDI Stock by Sectors

3.4. Electricity, gas, steam, and air conditioning sector has the highest FDI stock of Rs.86.8
billion (32.8 percent of the total) followed by the manufacturing sector (Rs.77.9
billion) and financial and insurance services sector (Rs.67.8 billion) (Table 6).

Table 6: FDI Stock by Major Sectors9

Rs. Million
Percent change
As of Mid-July
(%)
S.N. Sectors 2022 2020/21 2021/22
2020 2021 Share in
Amount
Total (%)
1. Electricity, gas, steam
54,660.9 70,147.3 86,815.0 32.8 28.3 23.8
and air conditioning
2. Manufacturing 56,066.8 67,352.0 77,928.7 29.5 20.1 15.7
3. Financial and
54,288.4 61,399.5 67,780.5 25.6 13.1 10.4
Insurance Services
4. Accommodation and
11,846.4 12,975.9 13,884.1 5.3 9.5 7.0
food services
5. Information and
12,618.5 10,858.2 12,733.0 4.8 -14.0 17.3
Communication
6. Education 1,877.0 1,926.4 2,074.7 0.8 2.6 7.7
7. Human Health and
365.2 338.9 735.4 0.3 -7.2 117.0
Social Work
8. Construction 470.1 492.0 660.9 0.3 4.7 34.3
9. Agriculture, Forestry
220.5 240.9 267.9 0.1 9.2 11.2
and Fishing
10. Mining and Quarrying -1.2 -2.9 36.1 0.01 141.9 -
11. Transport and Storage -2,772.2 -6,515.9 -7,678.8 -2.9 135.0 17.8
12. Other 8,880.4 8,734.7 9,092.1 3.4 -1.6 4.1
Total 198,520.8 227,946.9 264,329.5 100.0 14.8 16.0
Source: Field Survey,2023

9
The classification of major sectors is based on International Standard Industrial Classification, Fourth Revision
(ISIC Rev. 4).
9
3.5. FDI stock of transport and storage decreased as a result of the significant decline in
the reserve position of the companies within the sector. The sector-wise composition
of FDI stock in further detail is presented in Appendix III.

FDI Stock by Countries

3.6. Country-wise, India remained in the top position with Rs.88.6 billion FDI followed
by China (Rs.33.4 billion), Ireland (Rs.20.9 billion), Singapore (Rs.16.1 billion), and
Saint Kitts and Nevis (Rs. 15.1 billion) (Table 7).

3.7. In terms of paid-up capital, India also ranked top position with Rs.53.4 billion
followed by China (Rs.24.3 billion), South Korea (Rs.10.5 billion), and Ireland (Rs.9
billion) (Table 7). Further detail of country-wise FDI stock is presented in Appendix
IV.

Table 7: FDI Stock by Major Countries

Rs. Million
As of Mid-July 2022 Share in
S. N. Country Paid-up Total FDI
Reserves Loan FDI Stock
Capital Stock (%)
1. India 53,395.2 31,535.9 3,661.5 88,592.6 33.5
2. China 24,341.2 -8,718.2 17,825.6 33,448.6 12.7
3. Ireland 9,010.3 11,886.3 0.1 20,896.7 7.9
4. Singapore 5,388.4 10,332.7 352.9 16,074.0 6.1
5. Saint Kitts and Nevis 80.0 15,010.4 1.1 15,091.5 5.7
6. Australia 8,912.9 4,238.9 4.0 13,155.9 5.0
7. South Korea 10,529.1 -1,061.1 3,304.1 12,772.0 4.8
8. United Arab Emirates 830.9 9,342.3 473.5 10,646.7 4.0
9. United States of America 2,591.3 3,727.0 2,096.5 8,414.8 3.2
10. Netherlands 3,098.9 3,189.6 45.6 6,334.0 2.4
11. Others 23,784.2 4,302.3 10,816.0 38,902.6 14.7
Total 141,962.5 83,786.1 38,581.0 264,329.5 100.0
Source: Field Survey, 2023

3.8. The majority of India's FDI stock (96.9 percent) is concentrated in three sectors –
electricity, gas, steam, and air conditioning (42.9 percent), manufacturing (35.9
percent), and financial and insurance services (18.1 percent). In terms of paid-up
capital, the investment in electricity, gas, steam, and air conditioning (primarily the
hydropower sector) remains the highest (Table 8).
10
 Table 8: FDI Stock by Major Sectors (India)
Rs. Million
Share in India's
Paid-up FDI
Component Reserves Loan
Capital Stock FDI Stock (%)
Electricity, gas, steam, and air
35,584.2 706.6 1,671.4 37,962.1 42.9
conditioning
Manufacturing 4,648.9 25,640.9 1,537.3 31,827.1 35.9
Financial and Insurance Services 8,860.3 7,101.0 47.8 16,009.0 18.1
Accommodation and food services 963.5 2,883.6 171.5 4,018.6 4.5
Others 3,338.3 -4,796.1 233.6 -1,224.2 -1.4
Total 53,395.2 31,535.9 3,661.5 88,592.6 100.0
Source: Field Survey, 2023

3.9. China's FDI stock is mostly concentrated in hydropower projects and the
manufacturing sector (especially cement industries) (Table 9).

Table 9: FDI Stock by Major Sectors (China)

Rs. Million
Share in
FDI
Component Paid-up Reserves Loan China's FDI
Capital Stock
stock (%)
Electricity, gas, steam, and air
8,032.1 -2,149.5 17,495.1 23,377.7 69.9
conditioning
Manufacturing 12,801.6 2,111.9 74.9 14,988.4 44.8
Information and communication 1,004.6 346.4 254.5 1,605.5 4.8
Accommodation and food services 947.2 -4.7 1.2 943.8 2.8
Others 1,555.7 -9,022.3 - -7,466.7 -22.3
Total 24,341.2 -8,718.2 17,825.6 33,448.6 100.0
Source: Field Survey, 2023

Province-wise FDI Stock10

3.10. Bagmati province constitutes the highest share of FDI stock (55.4 percent) whereas
Karnali and Sudur Paschim Province account for less than 1.0 percent of total FDI
stock (Table 10).

10
Province-wise FDI are classified based on location of projects, production units and head offices.
11
 Table 10: Province-wise FDI Stock
Rs. Million
Province FDI Stock Share in Total (%)
Koshi 45,056.5 17.0
Madhesh 23,323.3 8.8
Bagmati11 146,428.1 55.4
Gandaki 44,437.9 16.8
Lumbini 2,711.0 1.0
Karnali 47.8 0.02
Sudur Paschim 2,325.0 0.9
Total 264,329.5 100.0
Source: Field Survey, 2023

Foreign Loans

3.11. As of mid-July 2022, the outstanding foreign loans (excluding direct loans from
foreign direct investors) of FDI companies stood at Rs.68.7 billion. Such loans were
Rs. 40.7 billion a year ago (Table 11). The companies in the hydropower sector have
utilized more foreign loans as the outstanding loan of this sector stood at Rs.28.4
billion in mid-July 2022.

Table 11: Outstanding Foreign Loan of FDI Companies

Rs. Million
Sectors 2020 2021 2022
Electricity, gas, steam, and air
20,921.3 20,427.3 28,428.4
conditioning
Financial and Insurance Services 3,497.5 7,508.5 22,034.4
Manufacturing 4,891.2 10,265.8 16,077.8
Transport and Storage - 1,866.4 1,998.5
Accommodation and food services - 139.4 140.2
Information and Communication - 530.6 2.9
Other 242.1 - -
Total 29,552.0 40,737.9 68,682.3
Source: Field Survey, 2023

11
Companies with foreign direct investment under service sector along with BFIs having corporate and head
offices in Bagmati province are included in Bagmati Province.
12
 Capacity Utilization

3.12. The survey also captures the capacity utilization of manufacturing companies with
FDI. The capacity utilization stood at 71.1 percent on average12 during 2021/22 which
was 64.9 percent a year ago.

Sales from Operation and Profitability

3.13. The survey also includes data on sales from the operation of FDI companies. The
total sales of surveyed companies during 2021/22 stood at Rs.445.4 billion which was
Rs.381.5 billion a year ago. Similarly, the average13 return on equity (ROE) of
surveyed FDI companies stood at about 14.3 percent for 2021/22, which was around
14.7 percent a year ago.

12
Weighted average is taken as reference where weights are based on sales of individual companies compared to
the total sales of surveyed companies.
13
Weighted average is taken as reference where weights are based on equity of individual companies compared
to the total equity of surveyed companies.
13
 Chapter IV: International Investment Position of Nepal

4.1. IIP is the statement that shows the value and composition of financial assets of
residents at a point in time which are claims on nonresidents and liabilities of residents
of an economy to non-residents.

4.2. As of mid-July 2022, the foreign assets decreased 10.2 percent to Rs.1,330.7 billion
against an increase of 0.9 percent in the previous year. The foreign liabilities increased
14.3 percent to Rs.1,602 billion compared to an increase of 15.4 percent in the
previous year (Table 12). Consequently, net IIP remained negative of Rs.271.3 billion
in 2021/22 in contrast to positive of Rs.80.1 billion in the previous year.

Table 12: Foreign Assets and Liabilities of Nepal

Rs. Million
As of Mid-July Percent Change
Description
2020 2021 202214 2020/21 2021/22
Assets 1,467,785.6 1,481,123.9 1,330,654.4 0.9 -10.2
Liabilities 1,214,285.6 1,401,003.4 1,601,991.7 15.4 14.3
o/w Direct Investment 198,520.8 227,946.9 264,329.5 14.8 16.0
Net International Investment
253,499.9 80,120.5 -271,337.2 -68.4 -
Position (IIP)
Source: NRB (2023)

4.3. The foreign assets are comprised of direct investment, portfolio investment, official
reserve assets, and other investments, which include other equity, currency and
deposits, loans, trade credit and advances, and other account receivables. Official
reserve assets constitute the highest share of foreign assets (86 percent) followed by
currency and deposits (6.5 percent) and other account receivables (5.4 percent)
(Appendix VI).

4.4. As of mid-July 2022, the official reserve assets decreased 11.9 percent to Rs.1,144.7
billion against an increase of 1.9 percent in the previous year. Currency and deposits
under foreign assets increased 14.2 percent while other account receivables decreased
6.7 percent in the review year (Appendix VI).

14
Revised
14
4.5. The foreign liabilities cover direct investment, portfolio investment, and other
investments, which include other equity, currency and deposits, loans, trade credit and
advances, other account payables, and special drawing rights. Loans constitute the
highest share of foreign liabilities (70.2 percent) followed by direct investment (16.5
percent) and trade credit and advances (7.4 percent) (Appendix VI).

4.6. As of mid-July 2022, foreign loan liabilities increased 13.7 percent to Rs.1,124.3
billion compared to an increase of 16 percent in the previous year. Direct investment
and trade credit and advances under foreign liabilities increased 16 percent and 1.4
percent respectively in the review year (Appendix VI).

15
 References

MOICS (2022). Industrial Statistics [2021/22]. Ministry of Industry, Commerce and Supplies.

NRB (2022). A Survey report on Foreign Direct Investment in Nepal. Nepal Rastra Bank.

NRB (2022). Current Macroeconomic and Financial Situation (Based on Annual data of
2021/22). Nepal Rastra Bank.

NRB (2023). Current Macroeconomic and Financial Situation (Based on Annual data of
2022/23). Nepal Rastra Bank.

OECD (2008). OECD Benchmark Definition of Foreign Direct Investment 4th Edition
Organization for Economic Cooperation and Development.

UNCTAD (2023). World Investment Report 2023. United Nations. United Nations
Conference on Trade and Development.

16
 Appendix I: FDI Inflows in South Asia
(US$ Billion)
% Change
Year 2017 2018 2019 2020 2021 2022
(2022)
South Asia 46.6 49.9 57.6 69.7 51.3 55.9 9.0
Afghanistan 0.1 0.1 0.02 0.01 0.02 0.0 -100.0
Bangladesh 2.2 3.6 2.9 2.6 2.9 3.5 20.2
Bhutan -0.01 0.01 0.003 0.001 0.001 0.01 -
India 39.9 42.2 50.6 64.1 44.8 49.4 10.3
Maldives 0.5 0.6 1.0 0.4 0.6 0.7 12.3
Nepal 0.2 0.1 0.2 0.1 0.2 0.1 -66.8
Pakistan 2.5 1.7 2.2 2.1 2.1 1.3 -37.6
Sri Lanka 1.4 1.6 0.7 0.4 0.6 0.9 51.7
Source: UNCTAD (2023)

17
 Appendix II: Foreign Investment Approval and Realization in Nepal
Rs. Million)
Actual Net FDI
as a percentage
Fiscal Year Approved FDI* Actual Net FDI**
of Approved
FDI
1995/96 2,219.9 388.0 17.5
1996/97 2,395.5 1,621.0 67.7
1997/98 2,000.3 685.0 34.2
1998/99 1,666.4 578.0 34.7
1999/00 1,417.6 233.0 16.4
2000/01 3,002.6 -33.0 -1.1
2001/02 1,209.7 -282.3 -23.3
2002/03 1,793.8 961.4 53.6
2003/04 2,764.8 - -
2004/05 1,635.8 136.0 8.3
2005/06 2,606.3 -469.7 -18.0
2006/07 3,186.0 362.3 11.4
2007/08 9,812.6 293.9 3.0
2008/09 6,255.1 1,829.2 29.2
2009/10 9,100.0 2,852.0 31.3
2010/11 10,053.2 6,437.1 64.0
2011/12 7,138.3 9,195.4 128.8
2012/13 19,818.7 9,081.9 45.8
2013/14 20,132.4 3,194.6 15.9
2014/15 67,455.0 4,382.6 6.5
2015/16 15,254.3 5,920.9 38.8
2016/17 15,206.5 13,503.9 88.8
2017/18 55,760.5 17,504.6 31.4
2018/19 25,484.4 13,065.2 51.3
2019/20 37,805.8 19,478.7 51.1
2020/21 32,172.8 19,512.7 60.6
2021/22 54,158.94 18,560.31 34.3
Total 411,507.29 148,992.72 36.2
Source: *MOICS (2022)
**NRB (2022)

18
 Appendix III: Sector-wise Stock of FDI
(Rs. Million)
Mid-July 2021 Mid-July 2022
Share Share
Sectors in Total in Total
Paid-up Reserves Loan Total Paid-up Reserves Loan Total
FDI FDI
(%) (%)
1. Agriculture 243.2 -2.3 - 240.9 0.1 289.5 -21.6 - 267.9 0.1
Agriculture, Forestry and Fishing 243.2 -2.3 - 240.9 0.1 289.5 -21.6 - 267.9 0.1
2. Industry 71,306.1 43,489.2 23,193.1 137,988.4 60.5 83,292.0 51,776.9 30,371.8 165,440.6 62.6
Construction 605.5 -113.5 - 492.0 0.2 701.0 -143.9 103.8 660.9 0.3
Electricity, gas, steam and air conditioning 49,167.9 752.8 20,226.6 70,147.3 30.8 59,391.3 -123.0 27,546.7 86,815.0 32.8
Manufacturing 21,512.7 42,872.8 2,966.5 67,352.0 29.5 23,129.7 52,077.8 2,721.2 77,928.7 29.5
Mining and Quarrying 20.0 -22.9 - -2.9 -0.001 70.0 -33.9 - 36.1 0.01
3. Services 51,336.2 28,495.2 9,886.2 89,717.6 39.4 58,381.0 32,030.8 8,209.2 98,621.0 37.3
Accommodation and food services 7,436.4 1,817.4 3,722.1 12,975.9 5.7 10,633.0 1,720.2 1,530.8 13,884.1 5.3
Education 937.3 415.5 573.6 1926.4 0.8 1,064.8 416.7 593.2 2,074.7 0.8
Financial and Insurance Services 30,445.2 30,160.4 794.0 61,399.5 26.9 32,915.5 33,598.8 1,266.2 67,780.5 25.6
Human Health and Social Work 385.0 -62.4 16.2 338.9 0.1 679.4 -125.4 181.4 735.4 0.3
Information and Communication 3,642.4 2,792.3 4,423.5 10,858.2 4.8 4,097.7 4,329.3 4,306.1 12,733.0 4.8
Transport and Storage 783.6 -7,299.6 - -6,515.9 -2.9 873.1 -8,551.8 - -7,678.8 -2.9
Other service 7,706.3 671.6 356.8 8,734.7 3.8 8,117.6 642.9 331.5 9,092.1 3.4
Total 122,885.5 71,982.1 33,079.3 227,946.9 100.0 141,962.5 83,786.1 38,581.0 264,329.5 100.0
Source: Field Survey, 2023

19
 Appendix IV: Country-wise FDI Stock in Nepal
As of mid-July 2022

( Rs. Million)
S.N. Countries Paid Up Reserves Loans Total Share in Total (%)
1 India 53,395.2 31,535.9 3,661.5 88,592.6 33.5
2 China 24,341.2 -8,718.2 17,825.6 33,448.6 12.7
3 Ireland 9,010.3 11,886.3 0.1 20,896.7 7.9
4 Singapore 5,388.4 10,332.7 352.9 16,074.0 6.1
5 Saint Kitts and Nevis 80.0 15,010.4 1.1 15,091.5 5.7
6 Australia 8,912.9 4,238.9 4.0 13,155.9 5.0
7 South Korea 10,529.1 -1,061.1 3,304.1 12,772.0 4.8
8 United Arab Emirates 830.9 9,342.3 473.5 10,646.7 4.0
9 United States of America 2,591.3 3,727.0 2,096.5 8,414.8 3.2
10 Netherlands 3,098.9 3,189.6 45.6 6,334.0 2.4
11 Hong Kong-China 2,385.3 -6.2 2,979.2 5,358.3 2.0
12 United Kingdom 2,811.8 2,306.2 171.5 5,289.4 2.0
13 Pakistan 2,601.2 1,808.3 - 4,409.5 1.7
14 Bangladesh 1,812.0 2,380.4 0.02 4,192.4 1.6
15 British Virgin Island 4,195.8 -187.9 184.4 4,192.4 1.6
16 Norway 1,603.0 2,412.5 34.2 4,049.7 1.5
17 Mauritius 1,899.1 52.4 1,893.8 3,845.2 1.5
18 Bermuda 300.3 2,478.3 - 2,778.7 1.1
19 Japan 2,190.1 -685.2 1,161.3 2,666.2 1.0
20 Sri Lanka 1,218.2 13.5 - 1,231.7 0.5
21 Malaysia 810.1 369.0 - 1,179.1 0.4
22 Brunei 94.3 - 461.7 556.0 0.2
23 Taiwan 132.6 - 387.2 519.9 0.2
24 Switzerland 294.6 -10.9 119.7 403.4 0.2
25 Cayman Islands 97.0 233.1 - 330.1 0.1
26 Denmark 143.3 142.0 - 285.2 0.1
27 Italy 139.1 60.0 - 199.1 0.1
28 Canada 212.3 -49.5 - 162.8 0.1
29 Sweden 104.7 -0.4 4.4 108.7 0.04
30 Russia 129.8 -41.8 18.7 106.7 0.04
31 Germany 84.1 -12.2 4.0 75.9 0.03
32 France 62.2 0.3 0.1 62.6 0.02
33 Turkey 44.9 7.0 7.6 59.4 0.02
34 Bahrain 53.2 -8.2 2.5 47.4 0.02
35 Belgium 51.4 -9.6 - 41.9 0.02
36 Bhutan 7.1 32.2 - 39.3 0.01
37 New Zealand 33.5 1.7 - 35.1 0.01
38 Tajikistan 14.9 - - 14.9 0.01
39 Samoa 145.0 -134.1 - 10.9 0.004
40 Cyprus 14.2 -4.0 - 10.3 0.004
41 South Sudan 10.2 -0.2 - 10.0 0.004
42 Malta 8.7 - - 8.7 0.003
43 Hongkong 7.5 - - 7.5 0.003
44 Cook Islands 6.3 -0.4 - 5.9 0.002
45 Azerbaijan 5.2 - - 5.2 0.002
46 Finland 5.0 - - 5.0 0.002
47 Israel 3.7 - - 3.7 0.001
48 Kazakhstan 3.7 - - 3.7 0.001
49 Philippines 3.7 - - 3.7 0.001
50 Poland 2.5 - - 2.5 0.001
51 Austria 2.3 - - 2.3 0.001
52 Belarus 2.3 - - 2.3 0.001
53 Belize 1.7 - - 1.7 0.001
54 Chile 1.6 - - 1.6 0.001
20
 55 Spain 7.7 -6.1 - 1.6 0.001
56 Brazil 1.6 -0.9 - 0.7 0.0003
57 Seychelles 25.6 -6,836.6 3,385.7 -3,425.3 -1.3
Total 141,962.5 83,786.1 38,581.0 264,329.5 100.0
Source: Field Survey, 2023
* FDI from IFC has also been included into United States of America

21
 Appendix V: Country-wise and Sector-wise Composition of FDI Stock
As of mid-July 2022
Rs. Million
Share in
S.N Countries Agriculture Industry Services Total
Total (%)
1 India 22.0 69,978.4 18,592.3 88,592.6 33.5
2 China - 38,618.9 -5,170.2 33,448.6 12.7
3 Ireland - - 20,896.7 20,896.7 7.9
4 Singapore - 15,054.3 1,019.7 16,074.0 6.1
5 Saint Kitts and Nevis - - 15,091.5 15,091.5 5.7
6 Australia -2.0 662.8 12,495.0 13,155.9 5.0
7 South Korea 51.9 12,214.7 505.4 12,772.0 4.8
8 United Arab Emirates - 10,628.9 17.8 10,646.7 4.0
9 United States of America 48.8 1,308.6 7,057.5 8,414.8 3.2
10 Netherlands 101.6 166.6 6,065.8 6,334.0 2.4
11 Hong Kong-China - 4,114.4 1,243.8 5,358.3 2.0
12 United Kingdom 7.6 391.8 4,889.9 5,289.4 2.0
13 Pakistan - 7.4 4,402.0 4,409.5 1.7
14 Bangladesh - - 4,192.4 4,192.4 1.6
15 British Virgin Island - - 4,192.4 4,192.4 1.6
16 Norway 5.0 4,037.5 7.2 4,049.7 1.5
17 Mauritius - 2,728.4 1,116.8 3,845.2 1.5
18 Bermuda - 2,778.7 - 2,778.7 1.1
19 Japan 24.9 666.6 1,974.6 2,666.2 1.0
20 Sri Lanka - 709.2 522.5 1,231.7 0.5
21 Others 8.2 1,373.4 -492.3 889.3 0.3
Total 267.9 165,440.6 98,621.0 264,329.5 100.0
Source: Field Survey, 2023

22
 Appendix VI: International Investment Position (IIP)* of Nepal
As of mid-July
(Rs.Million)
Share Percent Change
in
Description 2020 2021R 2022R
Total 2020/21 2021/22
(%)
Assets 1,467,785.6 1,481,123.9 1,330,654.4 100.0 0.9 -10.2
Direct Investment - - - - - -
Portfolio Investment - - - - - -
Other Investments 193,571.9 182,220.7 185,975.1 14.0 -5.9 2.1
Other Equity 11,529.9 13,193.7 12,809.3 1.0 14.4 -2.9
Currency and Deposits 87,628.2 75,391.7 86,132.1 6.5 -14.0 14.2
Loans 869.0 861.7 1,024.4 0.1 -0.8 18.9
Trade credit and advances 6,083.4 15,881.7 14,255.6 1.1 161.1 -10.2
Other Account Receivables 87,461.5 76,891.8 71,753.8 5.4 -12.1 -6.7
Official Reserve Assets 1,274,213.7 1,298,903.2 1,144,679.3 86.0 1.9 -11.9
Liabilities 1,214,285.6 1,401,003.4 1,601,991.7 100.0 15.4 14.3
Direct Investment** 198,520.8 227,946.9 264,329.5 16.5 14.8 16.0
Portfolio Investment - - - - - -
Other Investments 1,015,764.9 1,173,056.5 1,337,662.1 83.5 15.5 14.0
Other Equity - - - - - -
Currency and Deposits 69,764.7 55,851.2 58,217.3 3.6 -19.9 4.2
Loans 852,518.2 988,754.0 1,124,347.6 70.2 16.0 13.7
Trade credit and advances 82,238.3 116,853.4 118,482.6 7.4 42.1 1.4
Other Account Payables 44.6 35.3 53.6 0.0 -20.9 51.7
Special Drawing Rights 11,199.0 11,562.6 36,561.0 2.3 3.2 216.2
Net IIP 253,499.9 80,120.5 -271,337.2 -68.4 -
Source: NRB (2023)
* Based on residents and non-residents
**Direct Investment based on survey.
R
: Revised

23