A Diaspora-Led Foreign Direct Investment Framework Towards a Prosperous Nepal
Nepal has hosted multiple Nepal Investment Summits with the objective of branding the country as a promising destination for Foreign Direct Investment (FDI). These initiatives have primarily targeted multinational corporations, development finance institutions, and large foreign investors. However, the actual outcomes have remained modest.
Despite policy liberalisation over the past three decades, Nepal’s FDI inflows remain structurally weak. According to Nepal Rastra Bank (NRB), annual FDI inflows have generally fluctuated between USD 150–300 million—insufficient for a developing economy with large infrastructure gaps, rising unemployment, and declining productivity growth.
In stark contrast, remittance inflows exceeded USD 10 billion in FY 2023/24, accounting for more than 22 percent of GDP. Nepal is now among the most remittance-dependent economies globally. This imbalance reflects a deeper economic problem: Nepal successfully attracts foreign-earned income but fails to convert it into productive investment, employment, and industrial capacity.
From a macroeconomic perspective, excessive reliance on remittances fuels consumption, imports, and real estate inflation, while contributing little to long-term capital formation. The urgent policy challenge, therefore, is to transform remittance-driven inflows into investment-led growth.
I am trying here in this write up that the most credible solution lies in systematically mobilising the Global Nepali Diaspora as a strategic source of Foreign Direct Investment.
Why the Nepali Diaspora Matters: An Economic Case;
The Global Nepali Diaspora, Who lives outside of the Country say even in India and SAARC Nation Can contribute in economic spectrum, from an economics and finance standpoint, diaspora investors offer many structural benefits,
Diaspora Investors typically,
– understand Nepal’s institutional realities, labour markets, and informal practices, reducing transaction costs and investment failure risks.
– Emotional, familial, and social ties translate into higher tolerance for political, regulatory, and currency risks.
According to census and recent estimates, More than 8 million Nepalis live abroad, yet unofficial, excluding second-generation diaspora. This includes migrant workers, professionals, entrepreneurs, and business owners across the Gulf, East Asia, Europe, North America, and Australia.
If just 1 percent of this population invested NPR 1 million each, Nepal would mobilise NPR 80 billion (approximately USD 560 million) almost equivalent to the MCC compact. Unlike aid, yet again, this capital would be privately driven, employment-oriented, and fiscally sustainable.
Diaspora Based Framework – One Nepali, One Investment, One Employment
The One Nepali, One Investment, One Employment framework is intentionally simple, decentralised, and measurable.
It proposes that:
One member of the Nepali diaspora invests in one enterprise in Nepal, and
That investment generates at least one full-time job.
Rather than focusing on mega-projects, the framework prioritises Small and Medium Enterprises (SMEs)—the most employment-intensive segment of the economy. Priority sectors include agriculture and agro-processing, hydropower, tourism, IT and back-office services, light manufacturing, healthcare, and education.
From a development economics perspective, SME-focused FDI has higher employment elasticity and stronger local multiplier effects than capital-intensive projects. Evidence from India, Vietnam, Israel, and China confirms that diaspora-led SME investment has played a critical role in job creation, technology transfer, and regional development.
Case Scenario I: Diaspora Investment in Agro-Processing
Investor: Nepali-origin entrepreneur based in Canada Investment: NPR 15 lakh equity Location: Terai region Sector: Lentil and pulse processing
Use of funds
Cleaning and packaging machinery
Small processing unit
Working capital for procurement from farmers
Employment impact
One full-time machine operator
One seasonal logistics worker
Economic impact
Stable market for 50–70 local farmers
Reduced post-harvest losses
Import substitution and value addition
Local tax and VAT contributions
This investment strengthens rural value chains while generating employment and taxable income. The diaspora investor provides capital and market access, while local partners manage operations using digital monitoring and transparent accounting systems.
Case Scenario II: Diaspora Investment in Small Hydropower
Investor: Second-generation Nepali professional in the UK Investment: NPR 20 Crore equity Project: 1–2 MW run-of-river hydropower Structure: Minority equity through a Special Purpose Vehicle (SPV)
Use of funds
Civil works and equipment
Licensing and early-stage development costs
Employment impact
One permanent technician
Multiple short-term construction jobs
Macroeconomic impact
Clean energy generation
Reduced fossil fuel imports
Improved balance of payments
Long-term royalty and income tax revenue
Nepal’s economically viable hydropower potential exceeds 40,000 MW. Diaspora participation can bridge financing gaps while spreading ownership and risk.
Foreign investment in Nepal is governed primarily by the Foreign Investment and Technology Transfer Act (FITTA), 2075. FITTA defines permissible investment forms, technology transfer mechanisms, sectoral restrictions, and investor rights.
Under the latest FITTA bylaw amendment, the minimum foreign investment threshold is NPR 20 million (approximately USD 150,000).However, certain sectors—especially IT services, software development, and back-office operations—may receive exemptions under the automatic approval route, recognising their low capital intensity and high employment potential.
While this revision is a positive step, the threshold still limits diaspora participation in micro and small enterprises unless accompanied by flexible sector-specific policies.
FDI Approval Process: Technicalities and Institutions
Nepal’s FDI approval process is institutionally structured:
Who grants approval?
The Department of Industry (DoI) approves foreign investments up to NPR 6 billion.
The Investment Board Nepal (IBN) approves larger investments and projects of national importance, including hydropower above 200 MW.
Once a complete application is submitted, the approving authority is legally required to issue an approval letter within 7 working days, as mandated by Section 15 of FITTA 2075. This approval confirms the legal acceptance of the investment.
In practice, however, procedural delays, multiple agency coordination, and documentation requirements often extend timelines—particularly for small diaspora investors.
Repatriation of Capital and Profits: A Financial Constraint
Nepal’s laws allow:
Repatriation of dividends
Repatriation of principal after disinvestment
Repatriation of interest, royalties, and fees
Yet investors frequently face:
Lengthy NRB approvals
Heavy documentation
Delays during foreign exchange shortages
From a finance perspective, uncertainty around repatriation raises the risk premium and discourages diaspora investment, especially at smaller scales.
Diaspora investors face fragmented processes across:
Department of Industry
NRB
Inland Revenue Department
Sectoral regulators
This fragmentation raises transaction costs and erodes confidence.
Nepal urgently needs a One-Window or One-Desk Policy for Diaspora Investors—a dedicated institutional platform that:
Fast-tracks approvals for diaspora-led SMEs
Coordinates across agencies
Provides time-bound repatriation support
Offers tax and regulatory clarity
Embassies in high-diaspora countries should function as Investment Concierges, not merely consular offices.
As Nepal prepares to graduate from Least Developed Country (LDC) status in 2026, concessional finance and trade preferences will decline. Sustainable growth will depend on domestic investment, productivity, and employment creation.
Nepal’s diaspora has sustained the economy through remittances for decades. Its true potential, however, lies in investment, entrepreneurship, and global market integration. The problem is not a lack of capital or goodwill—but the absence of efficient, credible mechanisms to convert both into productive outcomes.
The One Nepali, One Investment, One Employment framework offers a practical, employment-focused pathway to transform remittance dependency into investment-led resilience. When multiplied across thousands of diaspora investors, this model can generate jobs, broaden the tax base, and strengthen Nepal’s long-term economic fundamentals.
A prosperous Nepal will be built when a Nepali in Sydney invests in a software firm in Pokhara, and a Nepali in Toronto funds an agro-processing unit in the Terai – one enterprise, one industry, one job, at least 1 lakhs tax to the government of nepal at a time, how good is that, lets even plan and act now , if not now when? It’s now or never.
Thank you.
Writer / Author – Dila Kharel
Lecturer by profession, esteemed entrepreneur, and Influential NRNA leader
Founding President – Australia Nepal Chamber of Commerce and Industries (ANCCI)
