Restriction for Foreign Investment in Nepal

February 2, 2025

Foreign Direct Investment (FDI) is considered as a major source of non-debt financial resource for economic development. FDI is not just the inflow of money, but also the inflow of technology, knowledge, skills and expertise/know-how. Nepal offers tremendous opportunities for the investors. It is still a virgin land for investment in every sector. Almost all the sectors including hydropower, manufacturing, IT, services, tourism, mining, herbal medicines, and agro-based industries are open for foreign investment.

Despite we have mentioned the list of industries of businesses those are not allowed or partially allowed for investment in Nepal.

Note:*Amended Through the Ordinance Act related to Investment (Nepal Gazette 2081/01/16)

3.4 Industries or Businesses Restricted for Foreign Investment

1. Industries, except the large Industries exporting at least seventy-five (75%) percent of their own products, in the sectors of animal husbandry, fisheries, bee-keeping, fruits, vegetables, oilseeds, pulses, dairy business and other industries or business-related to primary products of agriculture.

2. Cottage and micro industries,

3. Personal service business (hair cutting, tailoring, driving etc.),

4. Industries manufacturing arms, ammunition, bullets and shells, gunpowder or explosives, and nuclear, biological and chemical (N.B.C.) weapons; industries producing atomic energy and radioactive materials,

5. Real estate business (excluding construction industries), retail business, internal courier service, local catering service, moneychanger, remittance service,

6. Travel agency, guide involved in tourism, trekking, and mountaineering guide, rural tourism including homestay,

7. Business of mass communication media (newspaper, radio, television and online news) and motion picture of national language,

8. Management, account, engineering, legal consultancy service, and language training, music training, computer training, and

9. Consultancy services have a foreign investment of more than fifty-one percent.

10. Ride Sharing has foreign investment of more than Seventy percent*. 

For Micro-industry

- With the fixed capital not exceeding two million rupees, excluding house and land;

- The entrepreneur himself or herself is involved in the operation and management of the industry;

- With a maximum of nine workers including the entrepreneur;

- With annual transactions of less than ten million rupees;

- With the capacity of electric energy, fuel, or other oil engine to be consumed by the engine, equipment or machine, if any, used being twenty KW or less.

For Cottage industry

- Based on traditional skills and technology;

- Labor-oriented and based on specific skills or local raw materials and local technology, arts and culture;

With the capacity of electric energy to be consumed by the engine, equipment or machine, if any, used being up to fifty KW;

- any industry mentioned in Schedule-2 of FITTA ACT 2019, Nepal.

Legal Framework in Nepal

The Government of Nepal initiated economic liberalization three decades ago and remains strongly dedicated to fostering an investment-friendly environment while continually streamlining the legal framework. Here are some key acts and regulations pertaining to Foreign Direct Investment (FDI):

4.1 Acts

a. The Foreign Investment and Technology Transfer Act, 2019

b. The Industrial Enterprises Act, 2076 (2020)

c. Industrial Enterprises Development Institute Act, 2053 (1996)

d. The Companies Act, 2063 (2006)

e. Special Economic Zone Act, 2073

f. Public Private Partnership and Investment Act, 2019

g. The Environment Protection Act, 2019 (2076)

h. Private Firm Registration Act, 2014 (1958)

i. Bonus Act, 2030 (1974) j. Partnership Act, 2020 (1964)

k. The Patent, Design and Trade Mark Act, 2022 (1965)

l. Nepal Standards (Certification Mark) Act, 2037 (1980)

m. Nepal Petroleum Act, 2040 (1983)

n. Mines & Minerals Act, 2042 (1985)

o. Standard Measurement and Weight Act, 2025 (1968)

p. Accreditation Act, 2079

4.2 Regulations

a. Foreign Investment and Technology Transfer Rule 2021 (2077)

b. Industrial Enterprises Rule 2022 (2078)

c. Special Economic Zone. Regulations, 2074

d. Environmental Protection Rule, 2020

e. Private Firms Registration Rules, 2034

f. Bonus Rules, 2039

g. Nepal Standards (Certification-Mark) Rules, 2040

h. Minerals Survey (Allowance and Privilege) Rules, 2024(1967)

i. Standard Measurement and Weight Act, 2025 (1968)

j. Petroleum Rules, 2041 (1985)

k. Mines And Minerals Rules, 2056 (1999)

l. Industrial Reformation Fund (Operation Procedure) Rules, 2064 (2007)

m. Standard Measurements and Weights (Sealed Package Rules), 2076

Summarized by

Advocate Aavash Bahadur Pradhan

Legal Advisory and Expert Division

Rudolph Corporate Services Pvt. Ltd.

Disclaimer: Kindly seek the expert before taking any action based on the content here above.