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Foreign Direct Investment (FDI) plays a vital role in supporting economic growth for developing countries. For Nepal, which faces challenges such as limited domestic capital, infrastructure deficits and a narrow industrial base, FDI is particularly important. This essay outlines the significance of FDI in Nepal’s economic landscape, discusses the major obstacles Nepal faces in attracting foreign investment, presents relevant data trends and explores future opportunities along with policy suggestions to enhance Nepal’s economic progress through FDI.

Importance of FDI

Nepal’s economy is largely dependent on agriculture, which employs a majority of the population but contributes a smaller share to the GDP. The manufacturing and service sectors are still emerging, and domestic investment is insufficient to meet the country’s development needs. Consequently, foreign investment becomes a key source of capital infusion. FDI not only provides financial resources but also introduces modern technologies, expertise and access to international markets.

Through foreign investment, Nepal can improve productivity, diversify its economy and create jobs. Moreover, FDI helps alleviate foreign currency shortages by increasing exports and generating revenues, which are critical for sustaining economic growth. Hydropower, tourism, telecommunications, manufacturing and financial services are among the sectors receiving the most attention from foreign investors.

FDI trends: An overview 

FDI inflows into Nepal have remained relatively modest but stable in recent years. According to official data from Nepal Rastra Bank, FDI inflows hovered around $170m in 2018-19 and increased slightly to $182m in 2019-20. The pandemic caused a drop in 2020-21, with inflows declining to about $145m. Recovery signs appeared in 2021-22, with $160m, and early estimates for 2022-23 indicate a further rise to nearly $175m.

Cumulatively, the stock of foreign direct investment in Nepal is estimated between $1.2bn and $1.5bn. When compared to regional neighbors like India, Bangladesh and Sri Lanka, Nepal’s ratio of FDI to GDP is relatively low at around 0.44 percent, highlighting ample scope for improvement.

Hydropower projects dominate FDI inflows, making up approximately 40-45 percent due to Nepal’s large but underutilized potential in electricity generation. Telecommunications is the next largest sector, accounting for about 20 percent of FDI. Other sectors like manufacturing, tourism and banking attract smaller but significant shares, contributing to gradual economic diversification.

Challenges hindering FDI growth

Nepal faces several structural and institutional challenges that restrict its ability to attract and effectively utilize FDI:

• Political uncertainty: Frequent changes in government and inconsistent policies discourage long-term investments. Investors generally prefer stable environments where regulations are predictable and enforced.
• Inadequate infra: Poor road conditions, unreliable electricity supply and inadequate logistics infrastructure increase the operational costs for investors, reducing Nepal’s competitiveness compared to neighboring countries.
• Complex bureaucracy and regulatory barriers: Lengthy approval processes, lack of transparency and corruption add to the cost and time needed to establish and operate foreign businesses.
• Land acquisition and social resistance: Unclear land titles and local opposition often lead to project delays or cancellations, increasing uncertainty and risks for investors.
• Small domestic market: Nepal’s limited population size and low purchasing power restrict the market for products and services, compelling foreign firms to focus on exports, which face their own logistical hurdles.
• External shocks: Global events like the Covid-19 pandemic have disrupted global supply chains and dampened investor confidence, impacting FDI inflows.

Opportunities for boosting FDI

Despite the difficulties, Nepal has unique advantages and opportunities that can help attract more foreign investment:

• Hydropower development: Hydropower offers one of the most promising sectors for long-term foreign investment, both to meet domestic needs and to export electricity regionally.
• Tourism sector: Nepal’s diverse landscapes, cultural heritage and adventure tourism attract visitors worldwide. Investment in tourism infrastructure can stimulate FDI and create employment opportunities.
• Strategic location: Nepal’s position between India and China presents a potential hub for regional trade and manufacturing, especially if transport and border infrastructure are improved.
• Government reforms: Legislative measures like the Foreign Investment and Technology Transfer Act and the establishment of Special Economic Zones (SEZs) offer tax incentives and easier investment procedures.
• Public-private partnerships: PPP arrangements can mobilize foreign capital and expertise for infrastructure and social sector projects, sharing risks and benefits.

Maximizing benefits

To harness the full potential of FDI, Nepal should prioritize the following policy actions:

• Political and economic stability: Establishing a stable, transparent policy framework supported by all political parties is essential to build investor confidence.
• Investment in infra: Upgrading transport, power, digital connectivity and logistics infrastructure will reduce costs and improve Nepal’s attractiveness.
• Regulatory simplification: Streamlining administrative procedures through digital platforms, one-stop service centers and anti-corruption measures will ease the investment process.
• Land acquisition and community engagement: Developing clear and fair land policies and actively involving local communities will reduce conflicts and delays.
• Human capital development: Enhancing vocational education and training to match investor needs will improve labor productivity and attract higher-value investments.
• Sustainable investment practices: Aligning FDI with environmental protection and social inclusion will ensure long-term development benefits and community support.

In summary, FDI represents a vital source of capital, technology and innovation for Nepal’s economic development. While political instability, infrastructure gaps, regulatory hurdles and social challenges have limited Nepal’s ability to attract and fully utilize FDI, the country’s abundant natural resources and strategic location offer significant opportunities. By adopting consistent policies, investing in infrastructure, simplifying regulations and addressing social concerns, Nepal can create a conducive environment that encourages foreign investment. Such efforts will be critical to leveraging FDI as a driver of sustainable and inclusive growth, improving livelihoods and transforming Nepal’s economy over the coming decades.

Former President Bidya Devi Bhandari has formally returned to active politics, rejoining her old party, CPN-UML. After 10 years of party politics and seven years as Nepal’s ceremonial head of state, her comeback naturally raises questions: What role will she now play? Will her political approach evolve, or will she repeat her old style? While debates continue, her return deserves a simple acknowledgment: Welcome back to CPN-UML politics, Mrs Bhandari.

Legally and constitutionally, her return poses no barrier. Though some argue that a former ceremonial head of state should avoid re-entering active party politics, this is a moral debate, not a legal one. In today’s realist political environment, morality and principle seldom define political choices. Ultimately, the decision is hers, based on her confidence that she can still serve the nation.

This article, however, centers on the leadership of CPN-UML itself, especially KP Sharma Oli’s continued role. Is this the right moment to challenge Oli’s leadership? The answer is clear: No.

Still relevant and strong

As both Prime Minister and president of CPN-UML, KP Sharma Oli continues to lead effectively, directing internal and external challenges. Leadership must always be judged relatively. In comparison to other leaders, Oli remains Nepal’s most competent prime minister in recent times. His past tenure lists achievements crucial to national development and foreign policy.

Oli’s leadership is defined by rationality and conviction. He does not bend to populist trends or social media pressures. His decisions are grounded in logic, reason and what he perceives as the national interest. While populism tempts many leaders, Oli has largely resisted that path.

Importantly, he has defended Nepal’s national interests consistently, whether dealing with territorial disputes or resisting external influence. His governance style prioritizes sovereignty and independence. Even as foreign powers and domestic rivals target him, Oli stands firm. Weakening his leadership now would not only fragment the party but also undermine Nepal’s assertiveness on the global stage.

At a time when divisive forces seek to destabilize both the government and the party, CPN-UML leaders and cadres must stand united. Criticizing Oli for the sake of internal power struggles will harm the party more than it benefits anyone individually.

Strengthen the party

The Statute Convention of CPN-UML, scheduled for September 5-7 in Godavari, comes at a critical time. According to party rules, the General Congress must convene within a year of this convention. Therefore, this is not the time for leadership contests. Instead, the party’s focus should remain on strengthening internal structures, refining policies and fostering discipline.

Party politics is not about personal ambitions; it is about collective organization. The stronger CPN-UML becomes, the more its members benefit politically. Internal conflicts only weaken the party. This is evident in the example of Madhav Kumar Nepal. His breakaway Unified Socialist Party now faces marginalization and existential challenges. His past defiance against Oli earned short-term attention, but long-term irrelevance.

The priority for CPN-UML members should be clear: focus on making the party a decisive force in national politics. Strengthening the party as an institution will naturally open leadership opportunities for capable individuals over time.

Leadership pipeline

While Oli remains the party’s central figure today, the question of succession is valid. Fortunately, CPN-UML has no shortage of future leaders. Figures like Shankar Pokhrel, Bishnu Poudel, Pradeep Gyawali, PS Gurung and Yogesh Bhattarai represent the next generation of leadership. Each brings unique strengths and perspectives, ready to lead when the time comes.

However, succession planning must be strategic, not opportunistic. Oli might serve one more term, using that time to mentor and prepare younger leaders. If Bidya Devi Bhandari’s return strengthens the party, it should be seen as a unifying development, not the beginning of a rivalry. Oli and Bhandari are unlikely to compete against each other for leadership positions; rather, they could jointly support second- and third-generation leaders when conditions demand.

Leadership transitions should emerge from consensus and institutional processes, not factional contests.

In the current context, targeting Oli weakens both the party and Nepal’s political stability. Undermining him serves only adversarial interests, both domestic and foreign. Constructive criticism within the party is essential, but it should be grounded in facts, strategy and long-term goals.

Ultimately, while Oli will not lead forever, it is neither the right time nor the right approach to force leadership change rashly. His rational, nationally focused leadership remains essential in steering both the party and the government.

In conclusion, the future will depend on how wisely the party cultivates its emerging leadership. The CPN-UML’s immediate task is clear: consolidate around its current leadership, strengthen party structures and prepare a new generation of leaders through unity and discipline—not internal fragmentation.

Criticizing Oli without strategic reason weakens the party and empowers adversaries. As long as Oli prioritizes national interests and rational governance, he deserves the party’s support—not unnecessary challenges.

For now, the question is not who will replace Oli, but how the party can become stronger under his leadership, ensuring a smooth and wise transition when the time is truly right.

Nepal’s financial system has disbursed loans totaling Rs 5.55trn to approximately 1.94m borrowers. Governor Biswo Poudel recently highlighted this trend while presenting new data on small borrowers—defined as those with loans under Rs 10m. On that occasion, the chief of the central bank, Nepal Rastra Bank (NRB), raised concerns about the concentration of large loans among a small group of individuals and whether such lending practices are contributing meaningfully to economic productivity.

Around 1.94m Nepali people have accessed loans from commercial banks, development banks and finance companies. Of these, approximately 1.869m small borrowers have taken loans totaling
Rs 1.99trn.

These small borrowers include lower-middle-class individuals who often borrow to start small businesses, send family members abroad for work or fund vocational training. Many also take loans to purchase land or vehicles, or to build homes. However, this group is financially vulnerable. According to NRB data, 28.8 percent—equivalent to Rs 549.85bn—of their loans have become non-performing, accounting for 4.34 percent of total lending.

Mid-level borrowers, defined as those with loans between Rs 10m and Rs 100m, are also under financial stress. This segment includes approximately 6,793 borrowers, holding Rs 1.254trn in loans. Roughly 11 percent of this amount is non-performing, indicating severe repayment challenges, especially post-covid, as many small and medium enterprises failed to recover.

At the other end of the spectrum are large borrowers—those with loans exceeding Rs 100m. This group consists of just 7,763 borrowers, who collectively hold Rs 2.39trn. Even more concentrated, 1,552 individuals manage over Rs 1.34trn in loans, highlighting a stark imbalance in credit distribution. Despite handling large sums, the rate of non-performing loans in this group is significantly lower.

The data indicate that the larger the loan, the lower the likelihood of it being classified as non-performing. Borrowers in the higher brackets often have the advantage of restructuring loans, accessing new credit to service old debt and leveraging networks within the banking system. This circular lending practice, often facilitated by banks themselves, poses systemic risks and raises ethical questions.

Loans in the Rs 10–500m range account for 95 percent of Rs 1.048trn in outstanding loans, with a non-performing loan (NPL) ratio of 22.14 percent (Rs 232bn). Notably, NPL ratios decrease as loan sizes increase. For loans between Rs 50–100m, the NPL rate drops to 4.83 percent, and for
Rs 100–200m, it falls to 3.01 percent, with the highest loan brackets seeing NPLs as low as 0.04 percent.

There is a stark contrast in Nepal’s loan distribution and associated credit risks across borrower categories. While small and mid-level borrowers (with loans below Rs 100m) collectively hold significant portions of the total loan portfolio—Rs 1.99trn and Rs 1.254trn, respectively—they also exhibit alarmingly high non-performing loan (NPL) ratios of 28.8 percent and 11 percent, indicating financial vulnerability and limited resilience. In contrast, large and very large borrowers (with loans above Rs 100m), though few in number, control disproportionately high volumes of credit—up to
Rs 2.39trn—with remarkably low NPL ratios (3.01 percent and 0.04 percent). This inverse relationship between loan size and credit risk reveals a systemic concentration of financial resources among a limited elite, raising concerns about financial equity and governance. The findings underscore the need for regulatory reforms to rebalance credit flows, safeguard small borrowers, and address emerging issues of financial inequality and systemic risk.

This disparity raises concerns over the governance and equitable distribution of financial resources. NRB data reveal that out of 1.94m borrowers, just 194 individuals—0.01 percent—have accessed loans exceeding Rs 2.25trn, or 3.9 percent of the total loan volume. On an average, each of these individuals has taken loans of over Rs 1.11bn. These statistics underscore a critical issue: a limited number of individuals control a disproportionate share of banking sector credit.

This concentration of financial power has drawn attention in parliamentary discussions. In a recent meeting of the Finance Committee of the House of Representatives, clause-by-clause deliberations on the amendment of the Banks and Financial Institutions Act (BAFIA), 2073, are underway. The proposed amendments aim to address conflicts of interest, ensure fair loan distribution and introduce stricter governance measures to prevent the undue concentration of credit.

The ongoing legislative review seeks to establish clearer guidelines on eligibility for loans and address the structural weaknesses that allow such imbalances. Key concerns include whether bank directors and affiliated individuals are receiving favorable treatment and whether existing legal frameworks are sufficient to prevent misuse of financial resources.

As the debate continues, it has become evident that financial inequality is deepening. There is a pressing need for reforms to ensure that credit distribution contributes to inclusive growth, supports small and medium enterprises, and reflects principles of transparency and social justice.

The author is a senior fellow and program executive at SNG Solution

This is a challenging time for legacy media. As an editor, I frequently encounter concerns about the financial health of media houses. It is evident that society is becoming increasingly aware of the problems that the media industry is facing. Traditional media outlets are in the midst of an existential crisis, as both advertisers and audiences are migrating to digital platforms. 

Historically, the media has weathered technological shifts. The rise of radio in the 1920s did not significantly impact print, and radio itself managed to survive the television era despite visual’s strong appeal. However, the emergence of digital platforms is different; it is pushing all traditional media to the brink. This is why legacy media are now desperately working to develop a viable blueprint for survival. At this point, the primary goal for legacy media is to survive, if not thrive. To this end, for better or worse, they are working on two broad areas.

First, they are restructuring newsrooms to reduce staffing and administrative costs. While most layoffs have already been carried out, the new model, referred to as the integrated newsroom, is still taking shape. At the same time, media houses are exploring alternative revenue streams, as income from traditional sources, particularly advertisement, is fast declining. The idea of integrating radio, television and print newsrooms into a single space has gained momentum since the 2000s. In principle, it holds promise, especially if the goal is to foster collaboration among journalists across platforms, thereby enriching content. However, if the integration is pursued purely to cut costs, it risks undermining the very strengths of radio, television and print in the long run.

We must recognize that radio, television and print each have unique characteristics that have enabled them to survive for over a century. While they may report on similar issues, each platform has its own style of storytelling, audience engagement and distinct target audience. For instance, radio content often caters to both literate and illiterate audiences. This is something print and television may not fully accommodate. Delivering the same content across all platforms may offer short-term financial relief, but it will ultimately weaken the media’s overall impact. In Nepal, some experiments have already been done and they have been proved harmful rather than good outcomes in terms of securing the advertisement. 

Consider this: why did radio survive in the age of television? Because it offered something television could not. It had unique strengths that remained relevant despite the appeal of video. Over sixty years ago, Marshall McLuhan introduced the ‘medium is the message’ concept, suggesting that the characteristics of a communication medium influence how messages are perceived. Applying this idea today, we must be cautious about full-scale integration which may reduce costs marginally but compromise content quality and diversity in the long term.

International experiences show that poorly executed integration often leads to generic, homogenized content, sacrificing depth and specialization. In reality, if a media house is committed to delivering quality content, integrated newsrooms offer limited cost savings; perhaps only in administrative overheads or rent. In some cases, integration has even led to revenue losses, as clients are unwilling to pay separately for nearly identical content across platforms.

In the pursuit of financial sustainability, media houses are now experimenting with new revenue models. However, they are still unsure which model works best in Nepal.  Globally, dozens of new models are being tested, but most are still in the experimental stage. One thing is clear: While no alternative has matched the scale of advertising revenue, these new streams are providing a crucial lifeline for media houses, at least for survival. The Nepali context is even more complex. While internationally available revenue models can be useful for academic discussions, they may not be practical in Nepali society. A copy-paste approach to these models risks losing existing readers and audiences, especially if implemented without a clear understanding of Nepali society and its media consumption patterns.

Since the late 16th century, advertising has remained the dominant source of income for media; first for print, and later for television, radio and digital platforms. In addition, the print industry has long relied on subscription and circulation models, while television adopted the pay-TV model. The late 1940s saw the rise of advertorial content—paid content blending advertising and editorial, which, while still present, now contributes far less to overall revenue.

Advertisement continues to be the main revenue source for both legacy and digital media. However, the advertising landscape has changed significantly. Ads are now spread across both journalistic and non-journalistic platforms, ending the long-standing monopoly of legacy media. As a result, advertising alone can no longer sustain either traditional or digital outlets. This is not just a crisis of legacy media; it also affects digital media. That is why media organizations are desperately seeking to adopt new revenue models already in use internationally. Let’s consider the current revenue crisis and examine the strengths and weaknesses of some emerging models. One income stream that Nepali media houses have increasingly embraced is organizing events focused on political, economic and social issues.

Both legacy and digital outlets have generated substantial revenue from these events. Many advertisers now prefer sponsoring such events over placing traditional ads. While this approach is not new or particularly innovative, it has become competitive, with media outlets vying to host high-profile events to generate income. Another growing trend is video advertising, particularly through social media platforms. The volume of digital advertisements is gradually increasing. Some outlets are earning respectable sums from platforms like YouTube and Facebook though some legal hassles remain. Even small revenue from these platforms is offering much-needed support to struggling media houses.

Over the past few years, there has been a debate about the feasibility of a paywall subscription model in Nepal. While the online news portal Setopati has implemented this model, another popular portal Onlinekhabar remains hesitant due to fear that it may lose readership. We, at Annapurna Media Network, are also considering this model. However, we have concluded that further preparation and deliberation are necessary before moving forward.

Broadly speaking, digital platforms offer two types of subscription models: premium where users pay to access content, and freemium where basic content is free and only select content is behind a paywall. The paywall model cannot succeed without ensuring consistent quality in both text and video content. Readers will not be willing to pay for content that is superficial or poorly produced. Without significantly scaling up our current content, this model is likely to fail. At the same time, we must avoid the mistake of comparing ourselves with international media. The fact is that only a small segment of the Nepali population is willing to pay for content, even when it is of high quality.

A close study of quality content produced by media houses shows that very few people are actually reading it. One major reason is that the private sector, intellectuals, academia and society as a whole have become highly politicized and polarized. As a result, a wider section of the population tends to consume partisan and biased news that reinforces their perceptions and views rather than content that is accurate, balanced and impartial. While Nepal’s population is not small, the country’s economic conditions limit people’s ability and willingness to pay for news content. In short, the first major challenge is to consistently produce high-quality content tailored to different segments of the population.

As mentioned earlier, there is no lack of revenue models; the real challenge lies in identifying which models are suitable for our context. Potential models include live streaming, monetizing content through social media, generating income from memberships and newsletters, corporate social responsibility (CSR) support from businesses and funding from international organizations, among others. Unlike in the past, no single platform or model now dominates the media landscape. The only viable way forward, therefore, is to adopt a mix of revenue sources. Doing so, however, requires a broad strategic plan and upfront investment in these diverse areas. Since advertising alone cannot sustain media houses, it is time to re-imagine how they operate.

One bold step could be to transform media houses into non-profit entities, which would enable them to seek contributions from various sectors of society to support media sustainability. However, the current ownership structure may limit the ability to implement all possible revenue-generating models. Over the past three decades, Nepali media have rarely embraced innovation or entrepreneurship, primarily because they could rely on steady income from advertising. They also did little to engage with or respond to readers’ preferences and feedback. Today, innovation, entrepreneurship and the ability to adapt to changing expectations of readers are not just optional; they are essential for survival.