The government of Nepal has reduced the minimum threshold for foreign direct investment (FDI), resulting in an increase in the establishment of foreign-invested restaurants across the country. The latest figures on direct foreign investment show that small industries in the tourism sector are seeing a significant concentration of foreign capital.
According to the Department of Industry, as of Kartik 2081, FDI commitments worth NPR 17.03 billion have been received. In the first quarter of the fiscal year 2081/82, 154 industries were registered. Out of these, 109 industries were registered via the automatic route, attracting FDI commitments of NPR 1.62 billion.
Data indicates that foreign investment is predominantly focused on small industries. In the first four months of the current fiscal year, two large, one medium, and 151 small industries were registered, with 113 of them being related to tourism. Most of this investment is concentrated in the restaurant business. Since Ashwin 2079, the government has lowered the minimum FDI threshold to NPR 20 million, and there is no upper limit. This easing of investment limits has led to an increase in investment in small and medium industries.
In addition, the government has introduced a system of automatic approval for foreign investment, which allows investors to apply for capital increases in existing foreign-invested companies. This system has made it easier for small investors to enter the market. As of the previous fiscal year, 407 industries were registered, of which 197 were in the tourism sector. Most of these industries were small, with many service industries also registering under the tourism category.
In recent years, several Chinese-invested restaurants have opened in tourist hotspots such as Thamel and Pokhara Lakeside. While the exact data is not available, hotel owners point to Kathmandu’s attractive market, growing modernization, and the popularity of restaurant culture as factors driving increased investment in the restaurant business. Despite the growth, the long-term sustainability of such businesses remains uncertain.
The Department of Industry reports that 2,147 industries have been registered under FDI in the tourism sector, with a total commitment of NPR 113.68 billion. The majority of FDI has come from China, which accounts for 44.33% of the total investment commitments. India follows with a 20.86% share.
However, the lack of regulation in small-scale investments remains a concern. Hotel entrepreneurs, including Binayak Shah, President of the Hotel Association Nepal (HAN), have called for effective regulation, including mandatory licensing for all hotels and restaurants. The absence of regulation has led to some businesses tarnishing the reputation of the sector, according to industry officials.
As of the previous fiscal year, FDI commitments in the hospitality sector totaled NPR 12.27 billion. The latest major foreign investment was in the Tiger Palace Resort in Lumbini, which faced several challenges, warning other large investors to carefully consider their investments in Nepal’s hospitality industry.
