Rule & Regulation
Overview of Global Investment Trends
Nepal has adopted a liberal foreign investment policy and has been working to create a conducive investment environment to attract foreign direct investment (FDI) into the country. The sectors open to investment include industrial manufacturing, services, tourism, construction, agriculture, minerals, and energy. Nepal encourages joint venture operations with Nepalese investors and 100% foreign-owned enterprises. A few sectors are not open to foreign investment to promote small local enterprises and protect indigenous skills and expertise for national security reasons. The government of Nepal must approve foreign investment in all sectors. Foreign investment is not allowed in cottage industries, but there are no restrictions on technology transfer in these sectors.
Many investment experts believe agriculture and mining will provide the best returns worldwide in the next 20-30 years. Food prices are expected to rise due to the growing middle-class population in emerging markets demanding more expensive food, including meat and more jewelry. Global inflation will be higher than expected, so holding precious metals will be better than holding cash.
Nepal is located near India and China, which will experience the most significant surge in the middle-class population in history. As families become smaller and wealthier, they will start consuming more meat. It will take more agricultural resources to produce more meat. These families will also be more interested in travel. Nepal is a prime destination for Chinese and Indian tourists due to its proximity.
1. Investment Opportunities in Nepal
Land, Land, and More Fertile Land
Although land prices in the Terai and rural areas in Nepal are starting to rise, they are still relatively inexpensive. Land can provide dividends in the form of crops while you wait for the value to increase in a few decades.
Jeremy Grantham, a renowned investor who predicted the 2007 financial crisis, believes that state-of-the-art organic farming is the best investment in the world. The soil in the US and developed countries is depleting due to large-scale unsustainable practices, and we are approaching a global food crisis. In Nepal, we can combine traditional and modern organic farming techniques to grow food in anticipation of the rapid increase in food prices.
Growing food requires a lot of work and dedication. Most of the younger men in Nepal have migrated to Gulf countries for manual labor, resulting in a shortage of farmers for large-scale agribusiness.
2. Tourism Investments
Nepal is located between the two fastest-growing large economies, India and China. Both countries will experience a significant increase in the middle-class population eager to travel. Nepal can tap into the growing tourism market by anticipating what Chinese and Indian tourists might want to do.
Buying shares in tourism-related companies such as hotels, airlines, or restaurants is a passive way to tap this potential. You can also open a resort or travel agency in anticipation of the boom. If you start your venture, the key to success is to stand out from the thousands of small-scale tourism businesses in Thamel.
Tourism is a seasonal business at the moment. Becoming an active investor also requires a lot of time and dedication. Media coverage of protests and violence during political turmoil can impact the business in the short term.
Everyone is aware of the potential for hydropower in Nepal. While investing in large-scale hydropower plants may not be feasible for most of us, it is possible to buy shares in related companies when they go public.
Several hydropower projects are underway in Nepal. In the next ten years, several of them will become publicly traded companies. Buying shares in these companies can provide excellent returns in the long term.
Investing in hydropower requires a long-term horizon, as it takes several years for projects to be completed and generate revenue. There is also a political risk as the government must approve projects, and there can be delays due to issues such as land acquisition or environmental concerns.
4. Infrastructure Development
Nepal has a huge infrastructure deficit, and the government invests heavily in infrastructure development. This includes the construction of roads, bridges, airports, and other transportation projects. Foreign investors can participate in these projects through joint ventures or bidding on contracts.
Infrastructure projects can be capital-intensive and require a long-term horizon. There is also the risk of delays due to land acquisition or environmental concerns.
Nepal has a large labor force, and labor costs are relatively low compared to other countries. This makes Nepal an attractive location for manufacturing. Foreign investors can start manufacturing operations or participate in joint ventures with Nepalese companies.
Manufacturing requires a significant capital investment and a long-term horizon. There is also the risk of labor disputes and changes in government policies.
In conclusion, Nepal has numerous investment opportunities in various sectors. It is essential to carefully evaluate the risks and potential returns before making investment decisions. It is also advisable to seek professional advice and conduct thorough research before investing in Nepal.