Nepal has organized at least 6 major investment conferences since 2017. Commitments worth trillions of rupees have been announced in those conferences. Big numbers have been announced from the platform. Press releases have been printed and distributed. But only a very small part of this commitment is visible in the real economy. There is a wide gap between the numbers promised at the conference and the actual investment. The data says so.  

When examining the data of Nepal Rastra Bank, it is seen that very little of the foreign direct investment (FDI) committed over the past decade has flowed in. The World Bank's Business Red Profile shows this gap even greater. According to this profile, out of 100 numbers, Nepal has scored 61 in regulatory framework, 42 ​​in public services and 56 in operational efficiency. It has 24 points for business viability.  

Economies that have consistently received FDI tend to score 70 or above on the above dimensions within a decade of their reform. However, Nepal seems to be far behind. This situation is almost certain to arise from the hassles that genuine investors have to go through in the approval process. In Nepal, company registration, tax registration, environmental clearance, land acquisition, industrial permits and foreign exchange approvals are handled by separate offices. There is a lack of coordination and there is no clear deadline for completion. Files are languishing in different ministries for months. Investors are not given detailed information about any issue during the approval process. Therefore, the problem is not due to investors being reluctant. It is due to inviting them to enter such a cumbersome process.

It is not without reform efforts. To address this situation, Nepal has reduced the minimum investment limit. It has created a system to approve investments of Rs 500 million or more in a single day. Similarly, many tasks in the investment approval process have been made available online. But the environment for proper implementation of all the rules has not yet been created. Investors are also not convinced. In order to use legal ease in real capital formation, implementation capacity, coordination between relevant agencies, and punishment for those who do not follow the rules should be provided. At present, there is no such agency that has the authority to set a deadline for the approval cycle. This environment of uncertainty has a major impact on the investment decision-making process.

No matter how large the financial cost is, it is compared to the expected return. But uncertainty in the regulatory body can cause problems. Such uncertainty creates risks at every stage. For infrastructure funds, pension funds, and development finance institutions, such uncertainty often becomes a decisive obstacle. The question the Infrastructure Fund is asking is not whether Nepal's rivers can generate electricity or not, but whether the institution that approves its project will remain in the same form, with the same mandate, until the project is completed.

The process for investors to withdraw or exit from the project is also not clear. This has made the situation worse. Investors are forced to bring higher discount rates. Which weakens the project, reduces profits and forces capital to go to other countries with stable and clear rules and regulations. When the investment that is about to come is stopped, then the same problem becomes even worse.

The National Bank has made some improvements in the issue of taking profits out of the country and managing the foreign exchange rate. But as long as there are delays in every stage of work, there can be no improvement. The value of a capital commitment is not only the profit it makes. It also includes the confidence that investors will be able to withdraw the investment when they need it. The Investment Board was formed to coordinate all these problems. It was expected to play the role of a key support agency for large investments, from the approval process to the market, and to provide key support. However, it was not given the necessary tools to complete these tasks. It was not given effective authority to control land, permits, and resolve controversial issues.

When business stops, no body can step in to intervene. For more than 15 years, more than a dozen governments have kept the problem alive by obstructing policies. They have done their job of reducing investor confidence. The board became just a ‘reception desk’ for projects. Then those projects disappeared in the same ministry that the board was formed to ‘bypass’.

To solve these problems, the law enforcement side needs to be strong. A framework must be created that will produce results. The administrative structure must be prepared so that it can continue to do the same work, regardless of who comes in politically.

Similarly, the structural gap is also visible in the macroeconomic structure. The World Bank's Nepal Development Update of November 2025 showed economic growth of 4.6 percent, declining inflation and a loan interest rate of 8.7 percent.

The conditions were ripe for private capital mobilization. But capital was not mobilized. Non-productive loans continued to increase. And, banks tightened the criteria and demanded collateral and necessary documents. Most small enterprises cannot meet such criteria.

Capital was piled up on one side. On the other hand, it could not be used in the productive sector. The flow of available capital and the mechanism to mobilize it in the productive sector are weak.

Low interest rates have not increased credit flow, because banks are not lending based on how well the business is doing. Instead, they focus on how much collateral (land or building) the borrower puts up. Political 'connections' and influence also play a role in this. That is why loans go to the accounts of acquaintances instead of productive businesses.

The economy is trapped in such liquidity. Interest rates and monetary policy appear loose on paper. However, funds have not yet flowed into real productive projects. Banks are not truly assessing future cash flows, business models, or management capabilities. They are lending based on collateral and acquaintances. This situation will persist until a risk-based approach to lending is established. This means lending based on whether the company can earn income in the future and repay the loan, rather than examining the past assets.

If this does not change, the gap between macroeconomic conditions and weak investment will persist. In such a situation, even major policy changes can do little to increase investment. Nepal does not need to create another ‘task force’ to study the necessary interventions. These issues are clear –

First, a legally empowered coordination body is needed, not an advisory body. Such a body should be able to direct all ministries and departments to work in a timely manner.

Second, a legally mandated profit return deadline should be ensured, which should be considered as an obligation of the government to complete within the stipulated time.

Third, a ‘Project Preparation Facility’ should be created for priority projects. This would strengthen the projects through restructuring and resourcing. And, before going to the market, projects would be able to be loanable from banks, at a level where financial institutions can easily invest.

Fourth, sufficient capital should be invested in a credit guarantee fund with a commercial size and impact, so that banks can take risks on projects that do not have enough collateral but have commercial potential. Such a fund looks at companies in the ‘growth stage’, with good prospects.

Such proposals have been made in Nepal before. There was never a real gap in the plan. The real gap was in the institutions that were supposed to work on these plans.