A few years ago, representatives of the Nepalese government solemnly declared that they were fully prepared to establish new trade relations as well as to attract foreign investors from all over the world. The country’s policy has become much more loyal to foreign business. Nepal can now be seen as a potentially lucrative source of profit for foreign investment because after the parliamentary crisis, this South Asian state has become more mobile to economic changes and is developing much faster.
This article is designed to take a closer look at Nepal’s economy as a whole, as well as the political background of the country and its impact on the financial system. This will provide a more complete picture of the opportunities for profitable investment in Nepal from abroad. The article presents carefully selected factors influencing the development of the economy, as well as the possible positive and negative consequences of today’s trends in Nepal’s development. Examples of the most profitable economic sectors for investment are presented, with special attention paid to the development of the telecommunications industry.he most profitable economic sectors for investment are presented, with special attention paid to the development of the telecommunications industry.
Changes in the Economy
For years, this South Asian country had very low levels of FDI, and no increase in foreign cash inflows was expected until after the parliamentary crisis. Only recently, after a change of policy to encourage entrepreneurial activity, have these numbers begun to rise. Most of the time, the government held the development of economic and financial systems in its hands, so detailed five-year plans were drawn up, which more often than not failed to be fulfilled.
So what? Now it’s time for change in the country – fortunately, only for the better. These are better times than ever for entrepreneurship in Nepal, because the law has become much more accommodating to private business in the state. Also, the government itself is trying its best to encourage monetary investment and foreign capital inflows. All of this prompted Nepal to sign a $0.5 billion agreement with the ICS in 2017, which has had a positive effect on foreign investment inflows. In 2019, they are now at a minimum of $415,000. And this is taking into account the fact that literally in 2006 the level of FDI was -$7 million!
Thanks to this, the government of Nepal, we can say, gained courage and decided to attract to its territory representatives of various foreign organizations, including some major international corporations. FDI figures are increasing day by day, so the World Bank has legitimized Nepal’s third place in these figures among all South Asian countries. The Nepalese government has also become more loyal to domestic business, but in practice, words do not always match reality.
Reasons for Investing in Nepal
A number of reasons make it possible that Nepal as a whole is much more developed economically and politically than other Asian countries. Each section below elaborates on one of the many reasons to potentially benefit in the long run by investing in Nepal.
Geographic Position
Nepal’s location – between the two “dragons” of the East, India and China – plays into the hands of the country. By attracting foreign business to its territory, the state has the potential to become a center that brings together for cooperation the two leading economies of Asia. Here they can hold business meetings and conclude lucrative agreements without hindrance, which will, of course, have a positive impact on Nepal’s economy.
Not long ago India demonstrated its willingness to cooperate with Nepal for mutual benefit. This shows that Nepali export products are in demand even in developed countries. This has become possible due to favorable conditions of cooperation with Nepal: convenient transportation of goods, and the price is fully consistent with the quality. Nepal is of interest to China in another way, because it is home to Beijing’s multi-billion dollar Belt and Road Initiative.
Staff Resources
Nepal is one of the few countries in South Asia with untapped labor potential. Unfortunately, almost half of the potential workers do not have a job, although they would love to contribute to their country. By increasing the number of employed people by at least 30%, the state would soon begin to make dozens of times more profit. Therefore, it is more important than ever for Nepal to attract foreign entrepreneurs.
Strange as it may seem, the level of education in the country remains at the highest level. In Nepal, specialists graduate in a wide range of fields, from construction to IT and medicine. Such first-class workers are very valuable, but more often than not, they don’t find jobs in their home countries. That’s why their knowledge flows to other countries like China, Australia, and the Gulf states.
Nepal’s economy is not standing still, and new fields of work will soon be created that will require more and more new labor. This means that unemployment will no longer be a problem in the country. Profitable investments in the long run will pay off in relation to every sector of the state’s economy.
Natural Resources
Nepal’s hydropower and agriculture are based entirely on the natural resources and minerals of the area, so the country is nowhere without them. There are several thousand rivers in Nepal that supply more than 40,000 megawatts of energy to the country. This is a very economical solution, because all the electricity is generated by water. Due to a combination of geographical and climatic factors, this South Asian state is well positioned to take the lead in agricultural development.
Telecommunications Industry in Nepal
The development of Nepal’s economy does not stop at these sectors. For example, telecommunications is a new field that is growing rapidly every day. The demand for them is growing exponentially and keeps pace with global consumption. In Nepal there are some of the most favorable conditions for investing and developing their own business, as can be seen in the example of Romeo Abdo.
Born in Lebanon, Romeo quickly made his way into the ranks of successful people of his time. For example, he co-founded Nepal’s main mobile operator, Ncell. But Abdo doesn’t stop there, and plans to enter the market very soon with two new telecom projects. In Nepal, the demand for telecommunications and information technology is certainly growing and developing, which means that investing in telecommunications will always be a profitable decision.
Potential Barriers to Future Development
Nepal is currently dominated by a hybrid political regime. This state of affairs seems to suit the country’s supreme authorities, and thus does not pose a threat to the state’s inhabitants either. The fact is that this political system combines authoritarian features with democratic ones. Citizens are given far more rights and freedoms, and thus are free to dispose of their lives. Some Nepalis were concerned about their peaceful existence when the change first took effect, but now they are reassured because the change is very gradual and at times almost imperceptible.
Though some changes are making themselves felt. For example, the government of Nepal has decided to “take back” some powers regarding the implementation of the state’s economic policy. Fortunately, there is no objective reason for concern, because the country is still ready for new trade and other potentially beneficial for both sides relations with other countries, as well as to attract foreign investors.
Interestingly, Nepal’s economy stalled for a while not because of its lack of perspective, but because of the indecisiveness of some officials. Luckily, it all turned out well because the government drew conclusions from this situation and revised the policy of five-year plans. Now the state economy is developing from a different, more favorable angle.
Conclusion
The state of Nepal is a treasure trove for savvy investors, who should consider factors such as the country’s location, its areas of professional life, and the differences in development between sectors of the economy. In this South Asian state, hydropower, agriculture and the IT industry are predominantly developed, but new areas such as telecommunications are not lagging behind. All this creates a favorable environment for profitable foreign investment and investment, which continues to flow successfully into Nepal’s economy.
