Trade and Investment between UK and Nepal

Britain and Nepal are currently celebrating 200 years of diplomatic relations. However, due to various reasons the two countries have not seen enough growth in trade and investment despite having such an old diplomatic relation. Nepal has gone through so many challenges, from the Maoist insurgency to the new constitution. Doing business in such volatile circumstances is very challenging but a handful of British entrepreneurs, who love Nepal have not given up their hopes.

 

The former Chairman of Britain Nepal Chamber of Commerce (BNCC) Adam Gilchrist of Veedance Carpet, had made a huge investment in Nepal. He produces high quality carpets to export to Europe. He was not intimidated by the threats that he had received during the Maoist insurgency because he believed that he was doing something great for the country.

 

There are many other British and Non Resident Nepalese (NRN) entrepreneurs who are still making trade and investment successes in Nepal. In the big corporate sectors, results are quite exciting. Standard Chartered Bank and Unilever are two major British companies who have made a huge return from their investments in Nepal in the last 20 years. Standard Chartered Bank has made 21,000% profits from investment and Unilever had invested $1M but they have already taken over $100M profits and the company value is now over $250M. Another private sector telecom called Ncell is making over $900M annual net profit in such a small country. This clearly shows that there are plenty of opportunities in the country especially in the service sector.

 

The current bottlenecks of bigger flow of FDIs are bureaucratic hurdles and the mentality of politicians. Although they are paid by the taxpayers to do their job, they are not prepared to give you approval for the project until they see some personal benefits to themselves. You may have to either partner up with a local company who have good connections or appoint a very good PR person to manage all these difficulties. The Nepalese embassy in London finally has a fully-fledged ambassador after a number of years of vacuum. He has put economic diplomacy as his priority. Hopefully, he will also take his personal initiative to support any British or NRN business in Nepal from the UK.


Historically, embassies abroad have a crucial role to promote trade and investment of their country. In the beginning of the earlier century, embassies of Japan and Korea played such a good facilitation role despite their limited resources that they helped to increase the trade and investment in those countries.

 

Nepal is gearing up to attract foreign investment, it has also published an investment guide 2016. Nepal is ranked second after Sri Lanka in South Asia in the “Ease of doing business report” published by the World Bank. Similarly, Nepal allows 100% FDI companies and repatriation of income is also allowed. Nepal has signed the Bilateral Investment Promotion and Protection Agreement (BIPPA) with UK. Nepal and UK are now considering to sign Double Tax treaties. BNCC is also lobbying on this agenda.

 

The Nepalese government has a three-tier approval system for FDI. Below $20M is through the Department of Industries and more than $20M-$100M through the Industry Promotion Board and Over $100M through the Investment Board Nepal (IBN) for one window policy. The government has also identified eight sectors for FDI priorities: Hydropower, Transport, Agriculture, Tourism, Information Technology (IT), Mines & Minerals, Health & education and Financial Institutions.

 

The NRN Act 2008 has also opened up to many opportunities for Non Resident Nepalese to do business in Nepal. NRNs get extra facility in Nepal to open a bank account in a foreign currency and repatriate their income from Nepal.

 

Finally, Nepal definitely has a lot of opportunities and has less competition due to multi-national companies not reaching there yet. Investors should be extra prepared in order to manage the bureaucratic hurdles and challenges in Nepal. Once this is done then return in investment prospects are very good.

 

(This article is based on his speech at the Nepalese Embassy in London. He is the current Chairman of Britain Nepal Chamber of Commerce)


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