Agriculture and Foreign Investment in Nepal

7.5 billion invested in agriculture in 29 years, most investment from China

KATHMANDU: It is estimated that about Rs 7.5 billion has been invested in Nepal’s agricultural sector. According to the Department of Industry, Nepal has received Rs 7.43 billion from various countries in the last 29 years. Of the 36 countries investing in Nepal’s agriculture, China has the largest investment of Rs 4.97 billion.

Controversies have begun after the government opened pathways to re-allow foreign investment. Some believe that this move by the government to bring in foreign investment in agriculture is beneficial, while the other side said it is not in the country’s best interest.

The government had banned all foreign investment in Nepal’s agricultural sector through the Foreign Investment and Technology Transfer Act, 2075 BS. However, on 17 December 2020, the Ministry of Industry decided to open up to foreign investment by publishing a notice in the Gazette.

Foreign investors will be able to establish industries such as livestock, fish and beekeeping, fruits, vegetables, oilseeds, pulses, dairy business and agriculture.

According to the Department of Industry, 75 percent of the total production of industries established with foreign investment will have to be exported.

When foreigners invest in Nepal’s agricultural sector, they can only establish it with investment of more than Rs 500 million. The Department of Industry believes that small and medium agro-industries in Nepal will not face any problems as industries can only be operated if they have a large investment, of more than Rs.500 million. 

The government had opened up foreign investment in Nepal’s agricultural sector through the Industrial Business Act, 2049 BS. According to the Department of Industry, in 2048 BS, for the first time in Nepal, a foreign-invested industry based on agriculture was registered. Although the government has opened foreign investment only from 2049 BS, the department has informed that the investment in Nepal’s agricultural sector came one year before that.

First of all, foreign investors from Germany had registered the industry in Dhading district for animal husbandry and fruit farming. It is mentioned that the industry established with 50-50 percent investment of domestic and foreign investors will provide employment to 13 people.

Although the government had stopped foreign investment in agriculture since 2075 BS, the department has given approval to eight foreign-invested industries since 2076 BS.

An earlier act had recognized industries to be set up with an investment of more than Rs 250 million as large-scale industries. However, the latest Industrial Business Act has recognized only industries above Rs 500 million as large industries.

Now, only large industries can be established in Nepal’s agricultural sector.

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