The Department of Industry has released fresh data suggesting that Foreign Direct Investment (FDI) commitments have surged to Rs 57.97 billion in the first nine months (mid-July to mid-April) of the current fiscal year. The increase in commitments certainly sounds encouraging, but the records indicate otherwise. In the past, the commitments have not translated into actual investments. Take, for example, the pledges made during the previous fiscal year (FY 2023/24): There were commitments worth Rs. 30.11 billion but the actual FDI that came to Nepal stood at Rs. 5.96 billion. That's only a fraction of what was promised. In 2021/22, the FDI commitments totaled Rs 54.15 billion, but the actual inflow was substantially lower. The gap between commitment and delivery is a matter of serious concern. FDI serves as a vital lifeline for a least developed country like Nepal. It promises capital infusion, employment opportunities, and transfer of technology.
Nepal has implemented a new automatic approval system introduced during the third Investment Summit, allowing potential foreign investors to receive approvals online. This system was intended to streamline the process and attract both serious investors. Of the total commitments, only Rs 2.89 billion came through this much-celebrated automatic route. The vast majority – Rs 55.77 billion – was funneled in through the traditional approval system. Besides, the commitments are heavily skewed toward small-scale industries. All of the 53 industries that received investment pledges in the past month (mid-March through mid-April) are small. Not a single pledge came in favor of medium or large-scale investments. Across the entire nine-month period, only 12 out of 480 investments fell into the medium or large-scale category. Such an underwhelming response from serious investors speaks volumes about lingering doubts in the minds of investors. Let's face it – Nepal does not have a very investment-friendly climate. The issue is further compounded by the gap between commitment and delivery. The government needs to address the root causes causing this gap, complicated by procedural inefficiencies, policy inconsistency, weak governance, and investor insecurity. Domestic and foreign investors have long voiced concerns about Nepal’s unpredictable regulatory environment, lack of transparency, and poor enforcement of contracts. These have made, and will continue to make, Nepal a difficult place to do business, irrespective of the potential to attract foreign investment in sectors, such as, tourism, energy, IT, and manufacturing.
Take holistic measures to boost FDI in Nepal
To attract serious investors, Nepal must address the structural inefficiencies. One viable path forward is the implementation of the recommendations made by the Rameshwor Khanal-led High-Level Economic Reforms Recommendation Commission. This panel has put forward key strategies to strengthen Nepal’s economic foundation. Another critical recommendation by the Khanal panel is stability in government appointments. Frequent transfers of secretaries and technical officials have disrupted policy continuity, making long-term planning difficult. Investors seek stability and predictability—both of which Nepal has struggled to provide. The country cannot afford to continue celebrating investment pledges while failing to translate them into real economic development. These reforms are critical not only for attracting new investments but also for converting existing commitments into real economic activity. This persistent gap between the pledge and delivery highlights the urgent need for structural reforms to create a truly conducive investment environment. The government cannot go on using FDI commitment figures as a measure of economic health and instead must focus on implementing tangible reforms that inspire investor confidence. If Nepal is to make real progress, it must advance beyond announcements. There are better things to do besides celebrating the mere commitments. Let's face it: despite the headline-making figures, Nepal’s foreign direct investment story continues to follow a troubling pattern: tall promises, short delivery.
