The wave of protests that swept Nepal in early September not only shook streets and neighborhoods but also rattled investor confidence. The Gen Z movement, which began as a call for change and an end to corruption, turned unexpectedly violent on September 8 and 9, leaving businesses, property, and public security in disarray. The economy, which had only recently begun recovering from the pandemic, suddenly faced an unprecedented level of uncertainty. Foreign investors who had shown renewed interest in Nepal quickly took note of the turmoil. Nepal’s foreign investment outlook, which looked promising just weeks earlier, has now entered a precarious phase. Between mid-July and mid-August, the country secured Rs 24.10 billion for 127 projects, followed by Rs 8.98 billion for 109 projects in the following month—more than double the pledges seen in the first quarter of the previous fiscal year. But from mid-September to mid-October, commitments fell sharply to just Rs 2.04 billion for 75 projects. Even approved projects under the automatic route and regular procedures dropped significantly.
Protect intellectual property rights to attract FDI
High-profile losses—such as an estimated Rs 8 billion in damage to Hilton Kathmandu and major setbacks at Hyatt Regency and other hotels and hospitality businesses—have raised serious concerns about Nepal’s investment climate. The scale of violence and destruction in early September made even large and established enterprises vulnerable. Such a situation naturally discourages foreign investors from bringing capital into the country. Repatriation of investment and dividends has also surged, indicating that some foreign investors have already begun withdrawing. The World Bank’s sharp downward revision of Nepal’s growth forecast—from 5.5 percent to 2.1 percent—further reflects the severe implications of recent instability for future investment flows and the wider economy.
Given these troubling developments, the government must act urgently to restore investor confidence. Authorities should prioritize reinforcing law enforcement and emergency response mechanisms to assure investors that their assets and operations are safe. Providing compensation to businesses that suffered losses during the protests and swiftly prosecuting those involved in violence and vandalism would send a clear signal of accountability. Ensuring policy transparency, proactive communication, and practical incentives will help demonstrate that Nepal remains committed to welcoming investment. Nepal once held strong potential to attract large amounts of foreign investment. However, after recent unrest, capital will only return if investors are convinced that Nepal can ensure law and order. The coming months will be crucial. If decisive action is not taken, the decline in foreign direct investment may accelerate, undermining the momentum Nepal had gradually built. Restoring investor confidence means proving that the country is capable of offering stability, security, and a reliable business environment. It is imperative to act now—before uncertainty leads to long-term withdrawal of investment.
