Automatic Route of Foreign Direct Investment in Nepal

On 2 October 2023 (15 Ashoj 2080), the Government of Nepal streamlined the process for approving foreign investments through the automatic route. Section 42 of the Foreign Investment and Technology Transfer Act, 2019, enables the Government to introduce a simplified system for attracting foreign investment, by making the process of foreign investment simple, and easy.

 

Similarly, Rule 8A was added by amending the Foreign Investment and Technology Transfer Rules, 2077, on 20 April 2023 (7 Baisakh 2080), which established an online platform to automate the FDI approval process, known as the automatic route. The automatic route system has already been implemented by Department of Industry. The automated system grants automatic approval for investments applied through the online one-door system.

 

The government has identified seven specific areas where foreign investment will be allowed through the automatic route. Kindly note automatic route is allowed for below mentioned industry that has the capital investment up to 500 million Nepalese Rupees. 

 

1. Rule 8A(1) states that as per Sub-section (1) of Section 42 of the Foreign Investment and Technology Transfer Act, 2019 , the Government of Nepal may, by publishing a notice in the Nepal Gazette, allow the provision of services under the Automatic Route within the specified investment limit. he Government of Nepal can allow foreign investment services under the Automatic Route, such as: a.Setting up a 100% foreign-owned company or joint venture. b. Increasing capital in an existing foreign-invested company.
2. Rule 8A(2) states that an electronic system will handle submissions for services under the Automatic Route.
3. Rule 8A(3) states that foreign investors must submit required details and documents through the electronic system.
4. Rule 8A(4) states that iinvestors should review and correct their entries before final submission.
5. Rule 8A(5) states that verified details can be submitted electronically for approval.
6. Rule 8A(6) states that investors will receive a confirmation email with an application number and can download the approval letter.
7. Rule 8A(7) states that once confirmation is received, the investment is automatically approved under the Act.

 

The notification  on 2 October 2023 (15 Ashoj 2080) lists the following are industries as eligible for FDI Automatic Route.

 

3.1. Energy-based industry

S.N	Industries
1	Industries generating energy from wind, solar power, biomass, or other sources; industries manufacturing machines/equipment to be used for the generation of such energy
2	Energy based on bio-gas
3	Energy to be produced as a co-production of the sugar industry
4	Study of energy potential

 

3.2. Agriculture and forest product-based industry

S.N	Industries
1	Fruit and vegetable processing
2	Establishing and operating greenhouse
3	Silk processing
4	Tea and coffee processing
5	Medicinal herbs processing
6	Rubber processing
7	Cold store (storing local fruits and vegetables)
8	Natural fiber processing
9	Based on paper, resins, and other non-timber forest products
10	Plant production through new technology (including tissue culture)
11	Cotton processing

 

3.3. Infrastructure industry

S.N	Industries
1	Motor vehicle parking house
2	Export-related products processing zone
3	Polluted water purification industries (wastewater treatment plant)
4	Construction of film city, building film studio
5	Construction and operation of the warehouse

 

3.4. Tourism industry

S.N.	Industries
1	Motel, hotel, resort, bar, and restaurant
2	Funpark, water park
3	Seminar conference and sports tourism

 

3.5. Information Technology-based industry

S.N.	Industries
1	Technology Park
2	IT Park
3	Biotech Park
4	Software development
5	Data processing
6	Digital mapping
7	Business Process Outsourcing (B.P.O.), Knowledge Process Outsourcing (K.P.O.)
8	Data center, data mining, cloud computing
9	Web portal, web designing service

 

3.6 Service industry

S.N.	Industries
1	Mechanical workshop
2	Construction business
3	Hospital
4	Nursing home, polyclinic, rehabilitation home operation, physiotherapy clinic, ayurveda and other alternative hospital
5	Sports service, swimming pool
6	Garbage collection and sanitation, garbage recycling
7	Veterinary services
8	Health examination (services like X-ray, CT-Scan, MRI, ultrasound, and health testing lab)
9	International courier service

 

3.7. Manufacturing industry

S.N.	Industries
1	Livestock and fish feed production
2	Processing and packaging of poultry and fish
3	Manufacturing of oil fats etc. from basic raw materials
4	Manufacturing of starch, glucose etc.
5	Manufacturing of bakery items
6	Manufacturing of confectionery and biscuit
7	Sugar manufacturing
8	Beverage manufacturing (Non-Alcoholic)
9	Production and reuse of textiles, garments, and clothing
10	Manufacturing of electronic household appliances
11	Manufacturing of goods using plastic and rubber
12	Manufacturing of bags, sacks, suitcases, trolley bags and other carrying bags
13	Making wooden materials except items based on traditional and cultural arts
14	Manufacturing of toiletries such as toothpaste, soap and shampoo
15	Manufacturing of articles using glass
16	Production of bicycles, scooters, motorcycles, and motor vehicles and producing equipment used in them
17	Production of electric lights, switches, meters, meter fuses, wiring harnesses, compressors and others
18	Production of medical, surgical, and orthopedic products
19	Manufacturing of electrical wires

 

 

The same Gazetter has removed the requiredmed of investment threshold (current general threshold of NPR 20 million) for foreign investment for IT based industries listed on the same gazette. 

 

Date: 2024/12/30 

 

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