KATHMANDU, October 30: The wave of protests and violence that swept the nation in the wake of the Gen Z movement has left a deep scar not only on the streets but also on investor sentiment. Once buoyed by signs of recovery, Nepal’s foreign direct investment (FDI) pledges have taken a sharp dive in the past month, signalling growing uncertainty among investors.
According to records at the Department of Industry (DoI), the first two months of the current fiscal year had painted a promising picture. Between mid-July and mid-August alone, Nepal secured commitments worth Rs 24.10 billion for 127 projects, followed by Rs 8.98 billion for 109 projects in the subsequent month — more than double the FDI amount recorded in the first quarter of 2024/25. It seemed the country was finally regaining investor confidence after months of stagnation.
But the optimism was short-lived. From mid-September to mid-October, FDI pledges nosedived to just Rs 2.04 billion for 75 projects, barely a quarter of the previous month’s figure. Of this, Rs 1.55 billion for 21 projects came through the paperwork approval process, while Rs 494.73 million for 54 projects was registered under the automatic route.
Rebuilding Trust of Foreign Investors
The violent turn of events during the September 8 and 9 unrest hit businesses hard, inflicting heavy losses on both private and foreign-funded entities. The fire at Hilton Kathmandu, one of Nepal’s high-profile FDI-based hotels, caused damages worth nearly Rs 8 billion, while another major chain, Hyatt Regency Kathmandu, also suffered extensive losses, forcing temporary closure.
“These incidents have sent a chilling message to the global investor community,” said Rajendra Malla, former president of the Nepal Chamber of Commerce. “The destruction of private and public property has discouraged both domestic and foreign investors. Unless the government guarantees safety and security for investments, it will be difficult to regain the previous level of FDI flow.”
The repercussions are already being felt in economic projections. While the government had initially forecast 5.5 percent growth for this FY, the World Bank has revised it down sharply to 2.1 percent, citing the Gen Z protests and subsequent instability as key factors behind the slowdown.
In total, Nepal received FDI commitments worth Rs 35.13 billion for 311 projects in the first quarter of this fiscal year, including 300 small, four medium, and seven large projects. Meanwhile, foreign investors repatriated dividends amounting to Rs 2.90 billion — a dramatic surge compared to just Rs 67.08 million during the same period last year.
For now, the numbers tell a story of shaken confidence and fragile recovery. Experts say the situation is likely to further deteriorate in the coming days if Nepal fails to rebuild the trust of the global investors who once saw promise in its potential.
