- Energy
- Tech Industry
- Agro based sector
- Tourism
- Startups & Business
Nepal recognises the energy sector as vital for its economic growth. As presented in the Table 2, energy sector’s share in Nepal’s total FDI is more than 35%. The government has taken several initiatives to promote private participation and investment, including FDI, in the sector. In the next decade Nepal will have both public and private hydro projects of 6,497 MW capacity that will require financing of about US $ 10.9 billion. The required investment in transmission and distribution will be around USD 4.4 billion (PEI, unpublished report). This level of financing is not possible through domestic resources. Hence, Nepal needs to develop strategies to attract FDI and funding from international institutions.
It services is one of the rapidly growing sectors in Nepal. Each year around 6,000 new IT graduates are joining the workforce. A recent study by the Institute for Integrated Development Studies (IIDS) finds that the IT service export (ITes) industry in Nepal is valued at approximately USD 515 million, with over 106 IT service export companies and 14,728 IT freelancers in software development and technology and 51,781 ITeS freelancers engaged in exporting IT services through various digital platforms. The total IT service export reached USD 515 million in 2022, representing a growth of 64.2% since 2021. Both IT companies and freelancers experienced substantial growth, with IT companies recording an 80.5% increase in service exports compared to the previous year, and freelancers achieving a growth of 55.2%.
Agriculture contributes about a third of the GDP and provides employment for two-thirds of the population. The country is rich in natural resources and biodiversity. The diverse topography and elevation – ranging from less than 100 meters above sea level in the southern plains to over 8,000 meters in the Himalayan region – has resulted in a diverse climate suited to various crops. Nepal also shares an open boarder with five adjoining Indian states with a population of about 350 million, which by treaty, translates into a large, duty-free market for agricultural exports. The government is giving high priority to modernise agriculture and increase productivity by using new technology, improved seeds, and fertilisers combined with initiatives to expand irrigation facilities and rural roads. It has also been removing various protections offered to national producers. The FITTA 2019 still has some restrictions for FDI in agriculture production in areas such as poultry farming, fisheries, beekeeping, fruits, vegetables, oil seeds, pulses, and dairy production. However, agricultural processing is open to foreign investment. Industries producing and processing exportable products like tea and textiles are entitled to 50 per cent income tax exemption.
Similarly, Nepal’s topography is suited for raising various types of forests, or opportunities for producing timber and non-timber products. Harvesting and export of Medicinal and Aromatic Plants (MAPs) are already a major source of income for people in rural areas. Handmade paper, which is made from the bark of the lokta plant, is already a growing export. Similarly, fabric from hemp and Allo (another plant) is also emerging as another export. Nepal does not allow timber exports but does allow handicrafts made of wood, bamboo and cane, etc. to be traded.
Nepal is one of the unique tourist destinations. Eight of the world’s 10 highest mountains in Nepal attract mountaineers and adventure seekers from around the world. It is also a compact zone for climatic and biological diversity, which has resulted in various tourist attractions including national parks, such as the Chitwan National Park, and Sagarmatha National Park which are UNESCO World Heritage sites. In addition to the high mountains and biological diversity, Nepal is also famous for religious destination for both Hindus and Buddhists. Notable among the sites of pilgrimage are the Pashupatinath Temple in Kathmandu for Hindus and the birthplace of Buddha in Lumbini, and the Boudhanath Stupa for the Buddhists – all in Kathmandu Valley another World Heritage site.
However, Nepal has been unable to fully harness and capitalise on its tourism potential. According to the World Economic Forum’s Travel and Tourism Competitiveness Report 2019, Nepal ranked 102 out of 140 countries on competitiveness of the industry, which is indication of the vast opportunities that remain to be tapped. The highest number of tourist arrivals in Nepal ever was 1,197,191 in 2019, which is still low compared to travellers arriving in the neighbourhood. For example, Tibet had received over 40 million tourists and the Maldives, 1.7 million the same year. The number of tourists visiting Nepal dropped sharply in 2020 (230,085) owing to Covid-19 related travel restrictions, which has also exposed the vulnerability of the sector to global shocks. Public investment in Nepal’s tourism has been very low. The sector is open for private investment, including, foreign investors.
In Nepal, young people (age group 16-25 years) account for approximately 20.8 percent of total population of the country, while 40.68 percent of the population lies in the age group 16-40 (this can be considered as the youth population of Nepal). This clearly reflects that Nepal is experiencing a demographic dividend - more specifically a ‘population dividend’ or ‘youth bulge’ which is a phenomenon where young people account for the largest segment of the population of a country. Moreover, each year approximately 500,000 young people are estimated to enter into labour force in Nepal.
This provides a unique opportunity for Nepal - an opportunity for young people to educate themselves, earn a sustainable living and contribute to the country.
If explored rightly, Nepal’s huge untapped trade and investment potentials could create huge number of employments within the country. Doing so will require proactive role of business leaders, but also the government agencies and other stakeholders like banking and financial sectors. The government is currently drafting its startup policy and a timely adoption of the policy and its honest implementation will have significant impact on Nepal’s private sector growth – specially young entrepreneurs.