Nepal has talked about FDI (Foreign Direct Investment) for a long time, and it has been an important source of capital for the economy. But as circumstances evolve, we also need to focus on Diaspora Direct Investment (DDI).
It is estimated that around six million Nepalis or people of Nepali origin live abroad. The number would be even higher if those residing in SAARC countries are included. This population has tremendous potential for Nepal if it is effectively integrated into national development initiatives through supportive policies and programs. A useful example is close at hand: some estimates suggest that more than 50% of Chinese investment comes from overseas Chinese communities.
Migration is as old as humanity itself; it is often said that humans are like migratory birds, moving in search of better lives and safety.
The World Migration Report 2024, published by the International Organization for Migration (IOM), notes that there are about 281 million international migrants worldwide, around 3.6% of the global population. The same report states that international remittance flows reached US$831 billion in 2022, of which US$647 billion went to low- and middle-income countries.
Similarly, according to the OECD, official development assistance (ODA) totaled US$214.5 billion in 2024, a decline of 6% from the previous year. This indicates that remittance flows are more than three times larger than ODA.
Remittances are often seen as “passive” because they flow directly to households, and a large share goes toward recurrent expenditure rather than capital formation. This is why the concept of Diaspora Direct Investment (DDI) has gained traction to make remittances more productive and better aligned with the development efforts of countries of origin. With the impact of the COVID-19 pandemic, rising geopolitical tensions, and global supply-chain disruptions caused by conflicts in various parts of the world, foreign direct investment has been declining, particularly in the Global South. In this context, DDI is increasingly viewed as a complement, and sometimes an alternative, to traditional FDI, by leveraging the diaspora’s role in the development agenda of their country of origin.
According to the Nepal Rastra Bank annual report, Nepal received Rs. 14.45 trillion in remittances in 2023/24. Meanwhile, the Ministry of Finance report 2023/24 shows technical and other assistance of only Rs. 21.85 billion through government channels and another Rs. 24.35 billion through INGOs (a total of Rs. 46.20 billion). This clearly shows how large remittance inflows are compared to development assistance. We need to transform the potential of remittances into direct investment.
A non-traditional approach is needed to mobilize remittances into productive investment. In this connection, policymakers need to adopt new approaches to channel diaspora resources into direct investment in the national economy, whether through the private sector or appropriate public-sector. The focus should be on DDI, not remittances alone.
Homecoming
The Non-Resident Nepali Association (NRNA) was established on 11 October 2003. Every year, 11 October is observed as NRN Day to mark the establishment of NRNA and recognize the diaspora’s contribution.
Beyond Article 14 of Nepal’s 2015 Constitution, which provides for citizenship with economic, social, and cultural rights, two legal frameworks specifically address NRN issues: the NRN Act 2064 (2008) and the NRN Rules 2066 (2010). Following recent amendments to the Citizenship Act, NRNs are now eligible for NRN citizenship, but the associated rights remain unclear. Further legal clarification and formulation are needed to define and operationalize the constitutional provisions on economic, social, and cultural rights. Nevertheless, it carries a symbolic message of connection and a sense of homecoming for the children of Nepal, who despite holding foreign citizenship, have not lost their shared identity.
The Promise of Return
Mahatma Gandhi is revered as the father of the nation in India and is arguably the most famous Non-Resident Indian (NRI). He returned to India after 21 years in South Africa on 9 January 1915. That date is observed as Pravasi Bharatiya Divas, reinforcing a sense of belonging. Nepalis around the world have also been “doing us proud.” We must recognize them and create an environment that encourages their return, through engagement as investors, entrepreneurs, and development partners of Nepal, where they feel ready to stand shoulder to shoulder.
Transaction Cost
As a remittance-recipient country, Nepal must advocate for reducing remittance transaction costs. Nepal is actively engaged in multilateral forums to reduce costs in line with SDG target 10.c, which aims to bring the transaction cost of migrant remittances below 3%. As of 2023, the global average cost remained high at about 6.4%.
Greater Liquidity
DDI could provide greater liquidity for a country like Nepal with limited exports and a high trade deficit, it could help ease recurring liquidity pressures.
Brain Drain to Brain Gain
Diaspora return, in the form of investment, strengthens the country’s human capital and helps reverse “brain drain” into “brain gain.” Returnees bring skills, capital, ideas, technology, and an entrepreneurial vision. Unlike in FDI, where profits often flow out of the country, DDI is more likely to recycle capital locally, with a larger share staying within the developing country. In that sense, it can be viewed as more “native” than “foreign.”
In Nepal’s context, this remains a missed opportunity. The reasons may be many, but we have to think differently. It requires greater flexibility and adaptability in the policy framework, and a move toward reasonable deregulation rather than excessive control through rigid tax regimes and red tape.
Homegrown Conditionalities
Let us develop our own organic, homegrown conditionalities. Now is the time to appeal for diaspora to come to Nepal. As the country approaches general elections and a new government is expected to form with a fresh mandate, this is an opportune moment for a policy shift in the investment climate. While some within the establishment, political actors, and segments of the local business community may see the diaspora as a challenge, the state should remove barriers and simplify procedures so that DDI can become an impetus for both public and private sector development initiatives.
