You can build a global business for the broader region in the heart of Asia
Why is Nepal one of the most attractive economies in South Asia for foreign investors? It is a country renowned for its tourism and natural beauty, but it also offers many economic advantages for overseas businesses looking to setup a base for growth in China and India. An international partner like Galvin International can help you unlock its potential and make Nepal a successful market for you.
Nepal Economy Snapshot
Nepal is a landlocked country in South Asia and is bordered by China and India. It is located in the Himalayas and contains eight of the world’s ten highest peaks. The government system is a federal democratic republic, the chief of state is the president, and the head of government is the prime minister.
Nepal has a traditional economic system in which the majority of the population engages in subsistence agriculture, and the allocation of available resources is made on the basis of primitive methods.
Nepal ranks second in terms of ease of doing business among South Asian economies, after Bhutan, on the World Bank’s Doing Business Report 2017. High ease of doing business ranking means the regulatory environment is more conducive for setting up and operating a local firm in Nepal than any other countries of it’s size in South Asia.
Nepal’s growth has further rebounded strongly and has reached 7.5 per cent (market prices) in this fiscal, says the World Bank in its recent publication Nepal Development Update.
This is the highest growth rate since 1994, and is a result, in part, of the constitution promulgation followed by political stability and local level election, best monsoons and weather condition in recent years, increased availability of electricity, strong remittance and credit flow, and greater investment as the earthquake reconstruction gathered speed.
Looking ahead, the economic growth will remain strong, but it is expected to moderate in line with the country’s potential, averaging 7% over the next two fiscal years. Inflation will remain below the central bank’s target of 7.5% in current fiscal.
The Nepal Advantage
Nepal is located between two of the world’s most populous countries, China and India, with easy access to other vibrant markets in South and East Asia including Pakistan, Bangladesh, Bhutan, Myanmar, Laos and Cambodia. Together they account half of the world’s population.
Nepal has significantly lower tariffs on imports as compared to other countries in the region including India, which makes Nepal an attractive destination even to Indian investors. Other advantages in Nepal are affordable labor, low land cost, high profitability and an accessible bureaucracy. Nepal is also entitled to preferential treatment in a number of developed-country markets and signatory to all regional and South-South cooperation agreements.
The natural as well as cultural assets of Nepal also offer a substantial opportunity to investors.
The country has a range of climatic conditions — from tropical to sub-arctic. The topography is generally mountainous in the north, hilly in the middle, and near sea level in the south. Nepal grows various agriculture products, medicinal herbs, and high-quality tea. There is also a huge potential for hydropower, approximately 43,000 MW is technologically feasible.
Nepal has long been pursuing a liberal foreign investment policy and striving to create an investment friendly environment. Nepal encourages foreign investment both as joint venture operations with Nepalese investors or as 100 per cent foreign-owned enterprises and net repatriation of profits.
The areas of investment include industrial manufacturing, tourism, education, health, ICTs, transportation, construction, agriculture, minerals, energy, retail, consumer goods and professional services.
Top 10 Reasons for Investing in Nepal
1. Location, location and location — The China India Proximity
2. Connectivity — Flight, mobile and media
3. Time zone advantage — GMT +5.45
4. Cost advantage — Low employee wages, high productivity
5. Coming out of a period of transition and political uncertainty — Exponential growth
6. Success stories — Lack of global companies competing so whoever enters will win
7. Strong education system, English primary language — 80% literacy among 15 to 24 ages
8. Rapidly growing urban population — 5% year on growth, 40th populous in the world
9. Friendly people, great weather, mountains and more
10. Plus, Shangri-La!
Doing Business Effectively in Nepal
Nepal is a fantastic country. It is also mind-crushingly frustrating in many ways. Doing business in Nepal probably tops the list in both senses and is easier said than done.
One might think doing business in Nepal would be relatively easy. English is the language of choice for business. It has a multicultural society that is open to many religions and beliefs. It is sandwiched between two of Asia’s juggernaut economic powerhouses. It has got a young hard-working educated population who for the most part are honest.
However Nepal can be a very difficult and frustrating place to do business unless you have good local partners. In Nepal contacts are sometimes worth more than your original business plan. Find your own gatekeeper and you have got access to the inside edge, more contacts, resources and answers.
Gatekeepers such as Galvin International provide you with contacts to decision makers, whom they will know through their own gatekeeper contacts. They will be your face in dealing with the initial problems of business in Nepal.
Our thanks for writing this article go to Dhiraj Karki, the founder and senior consultant at our Nepalese partner dkompany, a specialized economic consultancy providing strategic advisory services in the field of trade, investment and development, as well as law, regulation and compliance. Dhiraj is a Nepalese national and has worked on private sector development and inclusive economic growth issues in Kathmandu for the past ten years.