Automatic route to streamline and boost FDI further. Foreign direct investment (FDI) in Nepal has experienced a remarkable surge during fiscal year 2025, largely driven by the implementation of the automatic route for investment approvals. In the first nine months alone, Nepal attracted FDI commitments worth Rs 57.97 billion for 480 projects, with a staggering 97% of these investments flowing through the newly introduced automatic route system. This streamlined process has proven to be a game-changer, helping to nearly double foreign investment commitments compared to the previous fiscal year.
According to The Kathmandu Post, the automatic route brought in Rs 55.07 billion for 256 projects—a sharp increase that reflects growing investor confidence in Nepal’s evolving business environment.
What Is the Automatic Route?
Introduced on October 2, 2023, the automatic route allows foreign investors to secure investment approvals up to NPR 500 million (approximately $38 million) without going through lengthy bureaucratic processes. Instead, approvals are granted online, targeting sectors like energy, agriculture, infrastructure, tourism, IT, manufacturing, and services. The goal is to make Nepal a more accessible and competitive investment destination, particularly for small and medium foreign enterprises.
As explained by UNCTAD’s Investment Policy Monitor, this policy enables investors to apply remotely through a digital portal, receive confirmation via email, and move directly into company registration. This ease of entry has opened the floodgates for international participation in Nepal’s economic development.
FDI Commitments Almost Double
The effectiveness of this system is evident in the numbers. Compared to the previous fiscal year, FDI commitments surged by 92.65%, showcasing the powerful impact of a more investor-friendly system. Most of the capital is being directed into productive sectors like hydropower, agro-processing, and digital services, each crucial to Nepal’s economic growth and job creation goals.
The trend aligns with similar policy reforms seen in neighboring economies, where digital facilitation of FDI processes has led to dramatic increases in capital inflows. A report by LawBhandari breaks down how Nepal’s automatic route not only reduces time and cost for investors but also improves transparency and accountability in the approval process.
Broader Economic Implications
This jump in FDI holds broader significance for Nepal’s economy. First, foreign investment is vital for bridging the infrastructure gap and generating employment opportunities. Second, FDI often brings in new technologies, global expertise, and management practices that enhance domestic industry competitiveness.
Nepal’s Department of Industry has already noted notable improvements in processing speed and investor satisfaction, reinforcing the idea that policy innovation can spark real-world economic change. According to The Rising Nepal, investors have responded positively to the simplified approval system, particularly in energy and tourism-related projects.
Related coverage from The Informed Gazette includes “Nepal’s Infrastructure Boom: Fueling FDI Optimism” and “Digital Nepal: The Tech Edge That’s Attracting Global Capital”, both of which explore how these sectors are becoming magnets for foreign investors under the new policy framework.
Key Sectors Drawing Investor Attention
Investor attention is a significant factor in financial markets, with investors focusing more on market and sector-wide information than firm-specific details. While the automatic route is open to several industries,
The majority of FDI pledges have focused on:
- Energy (particularly hydropower and solar)
- Agribusiness and food processing
- IT-based services
- Tourism infrastructure
- Light manufacturing
These sectors not only align with Nepal’s development priorities but also promise high returns for investors willing to enter an emerging market.
Lawaxion’s analysis further supports that the automatic route helps reduce political risk and administrative hurdles—two factors that have traditionally discouraged foreign capital.
Challenges and the Way Forward
Despite the progress, challenges remain. Some stakeholders have raised concerns about sector-specific clarity, data protection, and post-investment monitoring. Regulatory bodies must now ensure that the speed of approval does not come at the cost of due diligence.
Moving forward, strengthening institutional capacity, enhancing legal transparency, and improving investor aftercare services will be essential to maintain momentum.
To explore related dynamics, The Informed Gazette has also covered “Can Nepal Maintain Investor Confidence Amid Rising FDI?”, a must-read for anyone tracking the country’s foreign investment trends.
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