Kathmandu. The total stock of foreign direct investment (FDI) in Nepal has reached about Rs 340 billion by the end of the financial year 2024-25. During the review period, FDI stocks increased by 2.1 percent compared to the previous year.

The total FDI inflow in Nepal was Rs 12 billion in the financial year. Out of this, the net FDI inflow was limited to Rs 7.5 billion after the withdrawal of investment worth Rs 4.7 billion.

The survey shows that foreign investors are reinvesting their income along with new and additional equity investments in the increase in FDI. Paid-up capital accounts for the largest share of total FDI stocks, while reinvested income accounts for more than one-third. Inter-company loans have also been used as a financial source for foreign-invested projects.

Regionally, the industrial sector has become a major destination for FDI. Foreign investment is more concentrated in manufacturing industries and in the power and energy sectors. In the service sector, financial and insurance activities have become the major investment recipients.

However, FDI inflows into Nepal are still concentrated in limited areas and locations. Bagmati Province has become the biggest beneficiary of the province. The report points out that there is a need to improve infrastructure, connectivity and investment facilitation to expand foreign investment to other provinces as investment is concentrated in large urban and industrial centers.

Domestically, India has become the largest source of FDI in Nepal. After India, China, Ireland, Australia and Singapore are the major investors. Overall, Asian countries have the highest share of FDI in Nepal.

Manufacturing industries with foreign investment have made good profits even though they operated at a moderate capacity during the review period. Foreign debt has played an important role in investment financing in the hydropower and manufacturing sectors.

Although the government has made efforts to make policy reforms, expand online and digital services and improve business environment to ease the investment process, lack of infrastructure, regulatory and procedural delays and problems in land acquisition have emerged as major challenges for FDI inflow.

The report states that the trend of FDI in Nepal is positive even amidst regional and global economic uncertainties. FDI is expected to further contribute to Nepal’s economic transformation and economic growth if it can improve project implementation and diversify investment to new regions and provinces in the coming days.