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NEPAL HAS a number it cannot stop fiddling with. The minimum amount a foreign investor must bring to do business in the country has been Rs1.6m, then Rs5m, then Rs50m, then Rs20m: four different answers to the same question across a decade, each revision presented as the key to unlocking the foreign capital Nepal so urgently needs. The current figure, Rs20m ($130,720) has been in place since 2022. It is too high for some, too low for others and almost certainly not the reason Nepal attracted only $57m in actual foreign investment inflows in all of 2024, down from $185m five years earlier.
The history of how this number has moved tells a story that the number itself cannot. Before 2012 the minimum was Rs1.6m, so low that foreign investors were commonly setting up restaurants, teashops and small retail operations that Nepali entrepreneurs would otherwise have started themselves. In 2012, alarmed by this crowding-out effect, the government raised the floor to Rs5m. Seven years later, in 2019, it raised it again to Rs50m—ten times in one move—specifically on the grounds that the country wanted serious, capital-intensive investors rather than small operators. The private sector protested immediately: $400,000 was too high a bar for the kind of mid-sized foreign entrepreneurs and regional businesses that Nepal had any realistic prospect of attracting.
Three years later, in 2022, the government cut the floor by 60% to Rs20m, where it currently sits. In February 2026, it separately removed the ceiling that had previously capped investment through the automatic approval route at Rs500m, opening the door, in theory, to unlimited inflows in approved sectors without prior government sign-off.
The one interesting move came with the technology sector, which has been exempted from the minimum threshold requirement entirely. A foreign investor wanting to set up a software company, a data centre or an artificial intelligence service in Nepal now faces no minimum capital requirement, and since a January 2025 ordinance, can own 100% of the company without a local partner.
That is a big reform in the right direction—removing a friction that had no obvious justification in a sector where the smallest teams can generate the most value—and it puts Nepal in theoretical competition for technology investment that was previously off-limits.
But in all other sectors, the Rs20m floor sits in the middle of a regulatory environment that makes the number almost irrelevant to the actual investment decisions of serious foreign investors. The reason is consistent across every analysis of Nepal’s FDI record: the problem is not the admission ticket. It is what happens after you buy it.
The gap between what foreign investors commit to and what they actually bring tells the story. Between fiscal years 1995-96 and 2023-24 (nearly three decades) actual net FDI inflows to Nepal amounted to only 31.9% of total approved FDI, according to the Nepal Rastra Bank’s own survey report. In the last fiscal year Nepal recorded its highest-ever FDI commitments: Rs64.9bn. Actual net inflows were Rs12.02bn—less than one fifth of what was pledged.
Nara Bahadur Thapa, a former executive director of the Nepal Rastra Bank, has identified the core problem with characteristic plainness: “Foreign investors will no longer show interest unless Nepal’s ‘licence rule’ ends.” What he means is not a single law but a system: a network of approvals, registrations, periodic renewals and permissions that a foreign investor must navigate after the initial investment approval.
Setting up a company requires separate sign-offs from the Department of Industry, the Office of the Company Registrar and the Nepal Rastra Bank. Remitting profits requires NRB approval on each transaction. Operating in some sectors requires sector-specific licences from additional ministries. And all of this sits within a legal environment where contract enforcement is slow; intellectual property rights are poorly protected; and the courts that would adjudicate commercial disputes are backlogged and unpredictable.
The West Seti Hydropower Project is the most instructive single case study. Over three decades, it attracted serious interest from Australian, Chinese and other international investors: each time progressing through approvals, conducting feasibility studies and then either walking away or being walked away from as contract conditions changed, government priorities shifted or the approval process produced new complications. The project remains unbuilt. It is the most prominent example of something that every foreign business lawyer in Kathmandu can name from their own client files: investment that cleared the minimum threshold and then failed at every subsequent step.
The Shah government has recognised the problem even if it has not yet solved it. The One Stop Service Centre, which is supposed to give investors a single point of contact for all approvals, was established to reduce the inter-agency friction that sends investors to multiple offices over multiple months. In reality, the OSSC co-locates officials from different agencies rather than replacing the separate approval requirements of each. It is one address with many queues rather than one address with one queue. Investment Board Nepal, which handles projects above Rs6bn, has its own separate process and track record of slow environmental clearances, as well as land acquisition disputes and political interference in large projects.
China consistently leads FDI commitments into Nepal—accounting for 44.77% of approved FDI in fiscal year 2024-25—followed by India at 19.55%. America accounts for 3.47%. Chinese commitments are concentrated in manufacturing, tourism and small retail; Indian investment is driven by the open border, shared language in the Terai and long-standing business relationships. Neither of these investments was heavily influenced by the Rs50m to Rs20m threshold change in 2022. Chinese investors come to Nepal for reasons related to market access and proximity; they leave, or fail to realise their commitments, for reasons related to land and the approval process, for example.
Even so, the Rs20m threshold is not meaningless. At Rs50m, it genuinely excluded a large category of mid-sized foreign entrepreneurs who might otherwise have brought technology, management practices and market connections to Nepal’s services sector. At Rs20m, that category is at least partially back in play. And the zero threshold for technology investment is the right model for an economy trying to build a digital services industry. But these are second-order adjustments to a first-order problem. Nepal’s total FDI stock (accumulated over decades) stands at some $2bn, or 4.8% of GDP. Vietnam, which is not a natural comparison but is a useful one, attracts more foreign investment in a single month than Nepal has accumulated in its entire recorded history.
The budget on May 29th is expected to carry further measures aimed at improving the investment climate. Finance minister Swarnim Wagle has spoken of tax-rate predictability over a decade as a goal. If delivered, that would matter more to foreign investors than anything the minimum threshold says. Investors decide where to put capital by asking whether their money is safe, whether they can get it back, whether the courts will enforce their contracts and whether the government that approved their investment today will still be in office—and still supportive—two years from now. Nepal’s answer to all four questions is uncertain enough to explain the gap between commitments and actual inflows far more completely than any minimum threshold ever could. ■
