ILLUSTRATION: SHUTTERSTOCK
EVERY FEW months a prominent Nepali who left for America twenty years ago returns to Kathmandu for a conference. He gives a keynote about Nepal’s potential. He announces he is exploring investment opportunities. He eats dal bhat in a rooftop restaurant in Jhamsikhel, posts photographs with the Himalayas in the background. And he flies home to California. This happens so regularly that Kathmandu’s conference calendar is organised around it. The investment does not follow. It has not followed for thirty years.
Nepal’s diaspora numbers around 3.5m people. A substantial proportion are educated and financially successful in ways that dwarf what they could have achieved at home. The country’s IT exports sector is built partly on skills developed abroad and repatriated.
Fusemachines, Lamina Labs and CloudFactory have Nepali founders whose international formation was essential to what they built. The diaspora has produced real things. The question is whether treating diaspora engagement as a development strategy, rather than a happy coincidence when it works, is a rational use of policy attention.
The true answer is no. The data makes this case more obvious than any argument.
Nepal attracted $57m in foreign direct investment in 2024, according to UNCTAD. In the same year millions of Nepali diaspora members voted with their feet by staying where they were. The investment summits that Nepal holds every few years, designed to attract diaspora capital among other foreign investments, produce commitments in the billions that convert to actual disbursements at a rate of 13 to 15 per cent. The diaspora professionals who announce they are “exploring opportunities” have been exploring the same opportunities for two decades. The exploration is not producing factories.
The reason for this is something development economists call the diaspora paradox. The same qualities that make a Nepali successful abroad—such as risk tolerance and international networks—make them acutely aware of what makes Nepal commercially unattractive. A Nepali software engineer in Seattle who has worked at companies where intellectual property is protected by functioning courts, where contracts are enforced predictably as well as where regulatory approvals take weeks rather than years, knows what Nepal lacks. They are not ignorant of the opportunity; they are informed about the risk. Their refusal to invest is due diligence.
The remittances that the diaspora does send home are big, at 28.2 per cent of GDP. But remittances are not investments. They are consumption smoothing: money sent to pay school fees, medical bills, wedding costs and housing construction.
Very little is deployed productively in a way that generates employment or builds export capacity. The family that receives $500 a month from a son in Qatar is not investing in manufacturing; it is surviving more comfortably than it would without the transfer. That matters enormously to that family and contributes almost nothing to Nepal’s economic development.
The brain circulation argument holds that returning migrants bring back skills networks that compensate for the brain drain. It has not materialised at the scale Nepal needs. The total number of Nepalis who return from significant international careers to build really transformative enterprises inside Nepal’s economy, in a given year, can be counted in the dozens. The total number who leave for equally significant opportunities, in the same year, is in the hundreds of thousands.
The flow is not bidirectional in any remotely balanced sense. Nepal loses ten and gets back one, and celebrates the one at a conference while the ten are boarding at Tribhuvan.
The political engagement of the diaspora is perhaps the most limited channel of all. Diaspora communities tend to engage with their country of origin through a nostalgic lens that is about the country as it was when they left, not the country as it is. The diaspora political debates in America and Australia about Nepal’s governance tend to be about identity and historical grievances: important things but not the things that determine whether a microfinance borrower in Kailali gets trapped in usurious debt or whether the BP Highway gets rebuilt in the same riverbed after every flood. The distance from the actual institutional problems of daily Nepali life makes diaspora political pressure theatrical and largely ineffective as a governance force.
None of this means Nepal should be hostile to its diaspora or discourage the engagement that does happen. Fusemachines is better for having Sameer Maskey’s Cornell PhD. Lamina Labs is an extraordinary story. The occasional returning entrepreneur who builds something real has value beyond their individual company because they demonstrate a possibility.
But demonstrating a possibility is different from being a strategy. A country that has been waiting for its diaspora to save it for thirty years has confused the exception for the rule. The factories that Bangladesh built came from policies that made domestic investment attractive to domestic capital, and not from waiting for Bangladeshis in London to come home.
The institutions Nepal needs will be built by people who have no option but to live with the consequences of not building them, rather than by people who live in California. ■
