Nepal has hosted several Nepal Investment Summits with the objective of branding the country as a promising destination for Foreign Direct Investment (FDI). These initiatives have primarily targeted multinational corporations, development finance institutions, and large foreign investors. However, the actual outcomes have remained modest.
Despite policy liberalisation over the past three decades, Nepal’s FDI inflows remain structurally weak. According to Nepal Rastra Bank (NRB), annual FDI inflows have generally fluctuated between USD 150–300 million—insufficient for a developing economy with large infrastructure gaps, rising unemployment, and declining productivity growth.
In stark contrast, remittance inflows exceeded USD 10 billion in FY 2023/24, accounting for more than 22 percent of GDP. Nepal is now among the most remittance-dependent economies globally. This imbalance reflects a deeper economic problem: Nepal successfully attracts foreign-earned income but fails to convert it into productive investment, employment, and industrial capacity.
From a macroeconomic perspective, excessive reliance on remittances fuels consumption, imports, and real estate inflation, while contributing little to long-term capital formation. The urgent policy challenge, therefore, is to transform remittance-driven inflows into investment-led growth. I argue in this article that the most credible solution lies in systematically mobilising the Global Nepali Diaspora as a strategic source of Foreign Direct Investment.
Why the diaspora matters
The Global Nepali Diaspora, who live outside of the country, including in India and other SAARC nations, can contribute to the economic spectrum. From an economic and finance standpoint, diaspora investors offer many structural benefits. Diaspora investors understand Nepal’s institutional realities, labour markets, and informal practices, which can reduce transaction costs and the risk of investment failure. Their emotional familiarity with the country and strong social ties may also make them more tolerant of political, regulatory, and currency risks.
According to census data and recent estimates, more than eight million Nepalis live abroad. This includes migrant workers, professionals, entrepreneurs, and business owners across the Gulf, East Asia, Europe, North America and Australia. If just one percent of this population invested NPR 1 million each, Nepal would mobilize NPR 80 billion (approximately USD 560 million), an amount almost equivalent to the MCC compact grant. Unlike aid, this capital would be privately driven, employment-oriented, and fiscally sustainable.
The One Nepali, One Investment, One Employment framework is intentionally simple, decentralized, and measurable. It proposes that each member of the Nepali diaspora invest in one enterprise in Nepal and that each investment generate at least one full-time job, rather than focusing on mega-projects. The framework prioritizes small and medium enterprises (SMEs)—the most employment-intensive segment of the economy. Priority sectors include agriculture and agro-processing, hydropower, tourism, IT and back-office services, light manufacturing, healthcare, and education.
From a development economics perspective, SME-focused FDI has higher employment elasticity and stronger local multiplier effects than capital-intensive projects. Evidence from India, Vietnam, Israel, and China confirms that diaspora-led SME investment has played a critical role in job creation, technology transfer, and regional development.
For example, diaspora investment in agro-processing, investment in small hydropower, hospitality industry, software companies and other associated and viable projects can strengthen rural value chains while generating employment and taxable income. The diaspora investor provides capital and market access, while local partners manage operations using digital monitoring and transparent accounting systems.
From a legal perspective, foreign investment in Nepal is governed primarily by the Foreign Investment and Technology Transfer Act (FITTA), 2019. FITTA defines permissible investment forms, technology transfer mechanisms, sectoral restrictions, and investor rights.
Under the latest amendment to the FITTA bylaw, the minimum foreign investment threshold is NPR 20 million (approximately USD 150,000). However, certain sectors, especially IT services, software development, and back-office operations, may receive exemptions under the automatic approval route, recognizing their low capital intensity and high employment potential.
While this revision is a positive step, the threshold still limits diaspora participation in micro and small enterprises unless accompanied by flexible sector-specific policies.
Although Nepal’s legal framework explicitly permits the repatriation of dividends, principal, interest, and royalties, the practical execution of these rights remains a significant financial bottleneck. The discrepancy between statutory law and administrative reality—characterized by exhaustive documentation requirements, prolonged Nepal Rastra Bank (NRB) approval cycles, and liquidity-driven delays during foreign exchange shortages—introduces substantial institutional risk. From a finance perspective, this uncertainty functions as a hidden cost that inflates the risk premium of projects, effectively lowering the net present value (NPV) of potential ventures and deterring diaspora investors who lack the scale or legal infrastructure to navigate such complex bureaucratic hurdles. Despite legal provisions, Nepal lacks a dedicated diaspora investment facilitation mechanism.
What can be done?
Embassies in high-diaspora countries can function as investment concierges, not merely as consular offices performing normal day-to-day and administrative jobs.
As Nepal prepares to graduate from Least Developed Country (LDC) status in 2026, concessional finance and trade preferences will decline. Sustainable growth will depend on domestic investment, productivity, and employment creation.
Nepal’s diaspora has sustained the economy through remittances for decades. Its true potential, however, lies in investment, entrepreneurship, and global market integration. The problem is not a lack of capital or goodwill but the absence of efficient, credible mechanisms to convert both into productive outcomes. The One Nepali, One Investment, One Employment framework offers a practical, employment-focused pathway to transform remittance dependency into investment-led resilience. When multiplied across thousands of diaspora investors, this model can generate jobs, broaden the tax base, and strengthen Nepal’s long-term economic fundamentals.
A prosperous Nepal will be built when a Nepali in Sydney invests in a software firm in Pokhara and a Nepali in Toronto funds an agro-processing unit in the Terai. The vision is simple: One enterprise, one industry, one job, at least one hundred thousand as tax to the government of Nepal at a time. Let us plan and act on it now. If not now, when?
