Nepal Government has been making a lot of policy updates in order to woo the foreign investors and evolve Nepal as an attractive hub for foreign investments. The Ministry of Industry, Commerce, and Supply recently amended the Foreign Investment and Technology Transfer Regulations, signaling a positive shift towards a more investor-friendly environment.

Key Changes in Foreign Investment: Nepal introduced the "automatic route" for swift approval of foreign direct investments (FDIs) up to NPR 50 crore. The primary sectors that benefit include:

1. Energy: Investments are welcome in enterprises that focus on wind, solar, biogas-based energy, and the manufacturing of related machinery.
2. Agriculture & Forest Produce: Greenhouses, processing facilities for tea, coffee, herbs, and rubber, and local storage for fruits and vegetables get the nod.
3. Infrastructure: Businesses ranging from vehicle parking to warehousing operations are included.
4. Tourism: A wide array of sectors, from hotels and restaurants to sports tourism ventures, is encouraged.
5. IT-based Industry: The focus is on technology parks, software development, BPOs, KPOs, web design, and cloud computing.
6. Service Industry: The healthcare sector, mechanical workshops, and construction businesses are highlighted.
7. Manufacturing: A diverse range of sectors, from bakery items and textiles to electronic appliances and traditional art items, are approved.

Quick Points:

• There's no minimum investment limit in the IT-based industry.
• This diversification underlines Nepal’s focus on diverse foreign investments and provides a roadmap for global investors eyeing South Asia's market.

What's New for Foreign Investors:

1. Starting New Ventures: Investors can either fully own or partner with local businesses without cumbersome approval processes.
2. Boosting Existing Businesses: More capital can be pumped into existing businesses sans complications.
3. Electronic System for Approval: A digital platform where foreign investors submit necessary documents.
4. Submission & Review: Investors have the facility to review and correct their submissions before final approval.
5. Instant Approval: Post digital submission, the foreign investment is deemed approved, eliminating tedious manual processes.

Is Nepal's "Automatic Route" Truly Automatic?

Here's a thought: is the term "automatic" an accurate representation? While digitized and designed for efficiency, this system isn't entirely free from human intervention. Quite contrary to the widely practiced system of automatic route of FDI, where foreign investors can set up the company or business entity first without obtaining any prior approval, the much publicized automatic route announced by the Nepal Government still requires the prior foreign investment approval. The essence of a genuine automatic system would be minimal input from the investor and instant approvals. In contrast, Nepal's approach requires digital submissions, detailed documentation, and active involvement. The only major shift is that the investor or it's representative need not be physically present here to obtain the foreign investment approval. 

Perhaps a more fitting term would be a "digitized expedited route." It's crucial for Nepal to employ transparent and precise language to set accurate expectations, ensuring potential investors feel welcomed and informed.

In wrapping up, while Nepal's efforts to ease the FDI process are praiseworthy, potential investors should be aware of the nuances of the so-called "automatic route." With a clearer understanding, they can leverage the opportunities that Nepal's evolving investment landscape offers. And if you have any questions regarding foreign investment and Nepal Market Entry, you can consult our founder through Khatapana App for FREE. Download Khatapana and stay informed & updated.