Revisiting foreign direct investment in Nepal: problems and prospects

The concern of foreign direct investment (FDI) has been receiving remarkable attention from many developing countries such as Nepal, given the fact that economic development in these countries is largely reliant on FDI through the establishment of multinational enterprises (MNEs). The major challenges for a host country are to carry out effective measures that ensure a favorable investment climate to foreign investors. In recent years, Nepal has been devoting efforts for attracting inward FDI by offering a lot of lucrative investment incentives and benefits to MNEs. Though many attempts were taken to increase inward FDI to Nepal, the result achieved is not appreciable enough. This study investigates inward FDI established by MNEs since 1996 and addresses causes and reasons of low-inflow based on intensive analysis from the primary and secondary sources of data. The analysis is based on the typical four outcomes, which are policy analysis, comparative growth analysis, problems analysis, and potential analysis. The findings show that the political instability is the major driving force to disrupt the smooth flow of FDI for the last two decades. The findings also show that low inward FDI to Nepal might be caused by poor implementation of existing policy and subjective targeted business exploration. This study suggests a solid guideline for the practical amendment of the existing flaws in policy along with stable politics. This study further suggests that there are the tremendous opportunities to invest in Nepal for some targeted sectors.