Nepal is emerging as a new hotspot for foreign businesses in South Asia. Company incorporation in Nepal is on the rise in 2025 as global firms seek fresh opportunities beyond the traditional hubs of India and Bangladesh. From tech startups to hotel chains and energy giants, a diverse range of industries are setting up in Nepal. What’s driving this trend? In short: a mix of investor-friendly reforms, competitive tax incentives, low-cost talent, and strategic market access. Below, we delve into why Nepal is attracting international companies, supported by 2025 data and real examples, and how it compares with other South Asian destinations.
Nepal has seen a surge in new business registrations and foreign investment commitments in the past year. In the first ten months of fiscal year 2024/25 alone, over 550 new firms were registered, with around NPR 200 billion (≈$1.5 billion) in proposed investments. Notably, about NPR 57 billion (over $400 million) of that came from foreign investors, earmarked for nearly 580 projects – a promising sign of Nepal’s growing international appeal. These new investments are expected to create almost 14,000 jobs for Nepali workers. The trend shows that while Nepal’s foreign direct investment (FDI) inflows have historically been modest (net FDI was about NPR 8.4 billion in 2024, or ~$64 million), the pipeline of commitments is growing rapidly. This indicates huge untapped potential as more commitments turn into actual projects.
Industries Embracing Nepal in 2025: A closer look at the data reveals that several key sectors are leading the FDI boom in Nepal:
Tourism and Hospitality: This sector saw the highest number of new foreign-funded projects – over 200 tourism and hospitality ventures were registered in the last year. International hotel brands are expanding in Kathmandu and Pokhara, drawn by Nepal’s rebounding tourism. For example, Marriott opened its first hotel in Kathmandu recently, and IHG (InterContinental Hotels Group) has signed deals to launch InterContinental and Hotel Indigo properties in Nepal in coming years. The hospitality influx reflects confidence in Nepal’s tourism potential, from adventure travel startups to luxury resorts in the Himalayas.
Information Technology (IT) and Outsourcing: The tech sector is another rising star, accounting for about 124 new companies in the past year. Many are IT services, software development, and BPO (Business Process Outsourcing) firms, often launched with foreign partnerships or investment. Global tech companies are tapping Nepal’s pool of English-speaking developers and IT graduates at lower costs. For instance, Fusemachines, a US-based AI company, operates a development center in Kathmandu, and UK-based CloudFactory employs hundreds of Nepali tech workers in cloud services. With no minimum investment requirement for IT startups under new rules (more on that later), Nepal is positioning itself as a budding South Asian tech hub for outsourcing, fintech, and software startups.
Manufacturing and Industry: Nepal’s manufacturing sector is attracting significant foreign interest, accounting for one of the largest shares of investment value. Nearly 100+ new manufacturing projects were registered recently, with committed investments of around NPR 65 billion (~$500 million). These include export-oriented industries like garment and textile factories, cement and construction material plants, and even assembly lines for electronics and vehicles. Real examples abound – a Chinese-Nepali joint venture, Hongshi Shivam Cement, invested heavily to open one of Nepal’s largest cement factories. In 2024, South Korean firm Motrex Co. Ltd. announced a $105 million project to set up an auto assembly plant in Nepal, aiming to produce 1,000 vehicles per year. Likewise, China’s Xiamen Golden Dragon is investing about NPR 3 billion (over $20 million) to establish an electric vehicle assembly facility in Biratnagar, in partnership with a local firm. These manufacturing investments highlight Nepal’s appeal as a production base – thanks to lower labor costs and the ability to serve both the domestic market and neighboring giant markets via favorable trade treaties.
Energy and Infrastructure: Perhaps the biggest magnet for FDI by capital size is Nepal’s energy sector. Nepal registered fewer energy projects (just 23 last year), but they drew a whopping NPR 95 billion (~$720 million) in pledged investment – by far the highest per-project investment, mainly in hydropower. Nepal’s vast hydropower potential (rivers cascading from the Himalayas) has caught the attention of energy companies from India, China, and beyond. For example, India’s state-owned SJVN is constructing the 900 MW Arun-3 hydropower project – one of the largest FDI projects in Nepal’s history – to export electricity to India. Agreements have been signed for other mega projects like West Seti (now involving India’s NHPC) after a Chinese firm withdrew, and multiple mid-sized hydropower plants involve Chinese engineering firms and financing. The Nepali government’s recent deal with India to potentially develop 10,000 MW of hydro capacity by 2030 has further bolstered investor confidence. In addition to hydropower, foreign investors are eyeing infrastructure projects like roads and airports under public-private partnerships. The boom in clean energy investment not only helps Nepal meet its own power needs (Nepal has moved from chronic power cuts to surplus electricity in recent years) but also positions Nepal as a future energy exporter in South Asia.
A major driver behind the rush of global companies into Nepal is the pro-business reform agenda the government has implemented in recent years. Nepal has made it simpler and faster for foreign investors to incorporate companies and start projects in 2025 than ever before. Key reforms and policies include:
Digital Incorporation & One-Stop Approvals: Nepal introduced online platforms that allow foreign investors to apply for FDI approval and register companies digitally. Through a new automatic approval system launched in late 2023, foreign investors can now apply from abroad and get initial approval online for investments up to NPR 500 million (around $3.8 million) in most sectors. This means if you plan a project in IT, tourism, energy, agriculture, services or manufacturing under that threshold, you receive instant pre-approval via the online portal – a dramatic improvement over the old bureaucratic process. This “single window” approach streamlines company incorporation: you can reserve a company name, submit incorporation documents, and get your business certificate electronically. Overall approval timelines have shrunk – standard Department of Industry approvals are now processed within about 30–45 days, and even large projects (over NPR 6 billion) handled by the Investment Board Nepal are targeted at 45–60 days. The emphasis on transparency and predictability (with application tracking and investor grievance mechanisms in place) has boosted foreign business confidence. In short, Nepal’s government is actively cutting red tape to welcome overseas companies.
Lower Capital Requirements: Until recently, a big hurdle for foreign SMEs and startups was Nepal’s minimum capital requirement for FDI. The law mandated bringing in at least NPR 50 million (roughly $400,000) to incorporate a foreign company, pricing out smaller investors. In a bid to attract more diverse investment, Nepal slashed the minimum FDI threshold to NPR 20 million (~$150,000) in 2023. Even more encouraging, it removed the minimum altogether for information-technology ventures under the automatic route. In practice, this means a foreign tech startup or a venture capital investor can now start a Nepali IT company with relatively small seed capital (for example, $50k or $100k) – something that was not possible before. This reform under the Foreign Investment and Technology Transfer Act (FITTA) has opened the doors to startup-scale investments and is spurring a wave of new tech entrepreneurship in Nepal.
100% Foreign Ownership & Fewer Restrictions: Nepal has gradually liberalized its policies to allow up to 100% foreign ownership in most industries. Under FITTA, sectors like manufacturing, IT, services, tourism, agriculture, and energy permit full foreign equity. There are only a few exceptions where joint ventures or local shareholding caps exist – for instance, foreign banks can own up to 75% of local banks, foreign insurance companies up to 51%, basic telecom services up to 80%, and domestic airlines up to 49%. But compared to many developing countries, Nepal’s negative list is short – most business activities are open to wholly foreign-owned companies. There are no local partner requirements for retail, trading, or consulting businesses above the FDI minimum, which means global companies can retain full control of their Nepali subsidiaries. Profit repatriation is guaranteed under the law (foreign investors can freely remit dividends, profits, and capital gains after taxes), and Nepal has improved the process for approving repatriation through its central bank. These liberal ownership rules and protections give foreign companies confidence that they can operate securely and exit with their earnings when needed.
Investment Incentives and Tax Breaks: The Nepali government offers various incentives to attract FDI, particularly in priority sectors. Investors in certain industries or less-developed regions can avail tax holidays, custom duty waivers, and discounted utility rates. For example, exporters and industries in Special Economic Zones get a full income tax holiday for 5 years and 50% tax concession for several years thereafter. Hydropower projects enjoy extended tax exemptions (often 10 years tax holiday from operation, then 50% for the next 5 years) as well as customs and VAT relief on equipment imports. Similarly, IT parks and agri-business zones offer subsidized facility rents and tax rebates. The Foreign Investment and Technology Transfer Act (FITTA) also allows special incentives on a case-by-case basis for large projects of national interest. In 2025, Nepal announced additional incentives in its budget to encourage manufacturing: for instance, reductions in excise duties for assembling electric vehicles locally, which helped clinch deals like the Motrex and Golden Dragon EV plants. Combined with existing perks, these sweeteners enhance Nepal’s appeal by lowering the cost of doing business for foreign companies willing to invest in Nepal’s development goals.
Tax Regime: Nepal’s corporate tax rates and tax policy have become quite competitive in the South Asian context. The standard corporate income tax rate in Nepal is 25% of profits, which is on par or lower than many neighbors. In fact, Nepal offers a 20% reduced tax rate for export-oriented industries, underlining its push to become an export hub. Banks and financial institutions pay a higher rate (30%), but most normal businesses enjoy the 25% rate. By comparison, corporate tax in Bangladesh was recently raised to around 32.5% for private companies, and Pakistan’s effective corporate tax can exceed 30% (especially for large firms, once surcharges are included). India’s headline corporate tax is around 25% for domestic companies (with special 15% rates for new manufacturing units), but many foreign firms in India face effective rates closer to 30% after various surcharges and compliance costs. Sri Lanka, amid fiscal reforms, increased its corporate tax to 30% in 2023, up from a low of 24% earlier. This makes Nepal’s 25% base rate relatively attractive, especially since Nepal also has a modest 5% withholding tax on dividends (which is final, meaning no double taxation on distributed profits). Furthermore, Nepal has signed Double Taxation Avoidance Agreements with over 10 countries (including India, China, and many European and Asian nations), ensuring that foreign investors don’t get taxed twice on the same income. Tax incentives like holidays and accelerated depreciation in priority sectors can effectively lower a company’s tax burden well below the standard rate in initial years. Overall, Nepal’s tax policy sends a strong signal that it wants to reward investors, not over-tax them.
Labor Costs and Workforce Quality: A significant advantage of incorporating in Nepal is the affordable yet capable workforce. Labor costs in Nepal are among the lowest in the region for comparable skill levels. For example, Nepal’s minimum wage is roughly NPR 15,000 per month (around $115–120), and even skilled professionals like IT engineers or accountants command considerably lower salaries than their counterparts in India’s metro cities. The average software developer salary in Nepal might be one-third of that in India’s Bangalore or Pune, and a fraction of costs in the West – which is exactly why IT outsourcing companies are flocking here. English proficiency is relatively high in the educated urban population, thanks to widespread English-medium schooling, making it easy for foreign managers to communicate with local staff. Nepal produces thousands of engineering and IT graduates each year, and many Nepali professionals have international exposure (there is a large diaspora that often returns with skills). The workforce is known to be hard-working, loyal, and quick to learn. Companies also benefit from low employee turnover – Nepal’s nascent tech and BPO sector has less poaching and attrition compared to the cut-throat talent wars in India’s big cities, so firms can build stable teams. From manufacturing line workers to hospitality staff, Nepal’s labor force is cost-effective and trainable. This gives companies an edge in operational costs: for instance, running a 500-person textile factory or call center in Nepal can be substantially cheaper than in neighboring countries, boosting profit margins or allowing more competitive pricing.
Operational Costs and Infrastructure: Beyond wages, other operational costs in Nepal are relatively low or reasonable. Office rents, utilities, and land leases are cheaper than in crowded cities like Delhi, Mumbai, or Dhaka. Electricity, which used to be a concern, is now reliable and abundant – Nepal has largely solved its power shortage, and industrial electricity tariffs are competitive. Internet connectivity has improved with expanded fiber networks, and costs for bandwidth are coming down, enabling IT and BPO operations. Logistics costs are still higher than a coastal country (due to being landlocked), but the government is investing in better highways and trade facilitation with India and China. There are new international airports (like Gautam Buddha Airport in Lumbini, and Pokhara’s international airport) improving cargo and travel options. All these factors contribute to Nepal’s promise of lower cost of doing business while maintaining decent infrastructure for operations.
When foreign companies weigh Nepal against other South Asian countries for expansion, several factors come into play – from taxes and labor to policy environment and startup support. Here’s a quick comparison of Nepal with its regional peers India, Bangladesh, Sri Lanka, and Pakistan on key parameters:
Ease of Doing Business & Policy Reforms: Nepal has been steadily improving its business climate. In the World Bank’s last Ease of Doing Business report (2020), Nepal was ranked 94th globally – ahead of Pakistan (108th) and Bangladesh (168th), though slightly behind India (63rd) and on par with Sri Lanka (99th). While the exact rankings are outdated now, the direction is clear: India made big strides in cutting red tape, but it’s still a large bureaucracy to navigate. Bangladesh remains one of the tougher places bureaucratically, despite some progress. Sri Lanka traditionally had a more efficient business environment, but its recent economic crisis introduced some uncertainties. Nepal, with its new one-stop FDI approval system, online business registration, and FITTA reforms, is punching above its weight – it has simplified processes quicker than some neighbors. Importantly, Nepal’s government is proactively courting investors with reforms (like the automatic approval route and lower capital thresholds) at a time when some neighbors are distracted by internal issues. Political stability is also part of the equation: Nepal transitioned to a stable federal democratic system and, despite frequent changes of government, maintains a generally investor-friendly policy continuity. In contrast, Pakistan faces political instability and security concerns that worry investors, and Sri Lanka is rebuilding trust after debt troubles. Nepal, known for its peaceful environment and friendly people, offers a safe and stable base for operations in South Asia.
Corporate Tax and Incentives: As discussed, Nepal’s 25% corporate tax is competitive. India effectively offers around 25% as well (with 15% for some new manufacturing, which is very low), but India’s tax code can be complex with many conditions. Bangladesh currently has one of the highest standard corporate taxes (around 30–32.5%), though it gives special low rates to export industries (e.g., garments at 12%). Sri Lanka at 30% and Pakistan around 29% (plus surcharges) make Nepal look attractive in comparison. Moreover, the tax holidays and exemptions Nepal provides (especially to exporters, hydropower, and SEZ industries) are generally on par with or better than incentives in neighboring countries. For instance, India and Bangladesh also offer SEZ tax holidays, but Nepal’s blanket export industry concession (20% rate) and hydropower 10-year holiday are quite generous. Nepal’s VAT (13%) and import tariffs are moderate and being rationalized under WTO commitments. All told, on taxation Nepal is either equal or better than its neighbors, barring special cases like India’s 15% manufacturing rate.
Labor and Workforce: India and Bangladesh boast huge labor pools – India for skilled tech and services talent, Bangladesh for mass industrial labor (e.g., 4+ million garment workers). Nepal’s labor force is smaller (Nepal’s population is ~30 million vs. Bangladesh’s ~170 million and India’s 1.4 billion), but size isn’t everything. Nepal offers cost advantages – for example, manufacturing wages in Nepal are comparable to Bangladesh’s (both are low-cost centers), and well below wages in India or Sri Lanka. Bangladesh might edge out Nepal slightly in ultra-low manufacturing wages, but Nepal’s workforce has a literacy rate over 67% and many Nepalis have worked abroad, bringing back skills. Sri Lanka has a highly educated workforce (literacy over 90%) but also higher wages and now higher inflation. Pakistan has skilled people too, but security concerns can limit deployment in certain areas. In contrast, Nepal’s workers are considered reliable and the country has ample human capital willing to work – indeed, Nepal’s challenge has been underemployment, which foreign investment can alleviate. Notably, English skills are widespread in Nepal, giving it a leg up on Bangladesh where language can be a barrier in white-collar industries. Culturally, Nepali employees often have strong work ethics and hospitality ingrained – beneficial for service industries. While India may have a deeper talent pool in cutting-edge tech sectors, Nepal is rapidly developing its own talent through tech institutes and returning diaspora. For a foreign company, setting up a development office in Kathmandu or a factory in Nepal means access to dedicated workers at very competitive wages – a compelling combination that rivals what you’d find in Dhaka or Bangalore, with arguably less turnover than India’s big cities.
Startup Friendliness: India is the regional leader in startups – thanks to its massive market, venture capital influx, and government initiatives like “Startup India” which provides funding support and eased regulations for new ventures. However, India’s size also means a very competitive and saturated startup scene. Nepal, in 2025, is catching up with a brand-new National Startup Policy 2024 aimed at fostering entrepreneurship. The Nepali government has, for the first time, defined “startup” formally and is rolling out programs to support them. It launched a Startup Fund with NPR 1 billion (≈$7.5 million) to provide subsidized loans (3% interest) to innovative new businesses. Under this program, hundreds of Nepali startups can receive loans up to NPR 2.5 million each to kickstart their ideas. The government is also encouraging foreign venture capital and non-resident Nepali (NRN) investors to fund local startups by easing FDI rules in ventures. While Nepal’s startup ecosystem is still nascent compared to India’s or even Pakistan’s budding scene, it is growing rapidly – incubators, co-working spaces, and tech events are on the rise in Kathmandu. Bangladesh and Pakistan have fewer government programs for startups, focusing more on traditional industry, though their private startup scenes are emerging. Sri Lanka had some initiatives but is currently focused on economic recovery. For a foreign company or investor interested in startups, Nepal offers a less crowded field with government support and untapped niches in fintech, tourism tech, agri-tech, etc. The recent policy even allows Nepali startups to receive foreign investment more easily and for successful ones to expand abroad (a new reform lets Nepali companies invest overseas, which was previously restricted – helpful for startups looking to scale regionally). In summary, Nepal is shaping up to be surprisingly startup-friendly, leveraging its young population (over half under 30) and learning from neighbors’ successes and missteps.
Geographic Location & Market Access: Nepal’s location is unique – it’s sandwiched between two economic giants, India and China. While being landlocked presents logistical challenges, it also offers strategic opportunities. For one, Nepal enjoys preferential trade access to India, its southern neighbor. There’s a long-standing treaty that grants Nepali-manufactured goods duty-free entry into India (with some rules of origin criteria), giving manufacturers in Nepal a gateway to the vast Indian market next door. This is a key reason some companies are setting up assembly plants in Nepal – they can assemble products in Nepal and export to India with minimal tariffs, effectively using Nepal as a springboard into India. Likewise, as a least-developed country (LDC), Nepal currently benefits from schemes like the EU’s Everything But Arms (EBA), which provides tariff-free access to European markets for all goods except arms. Nepali garment and rug exporters, for example, can ship to the EU at zero duty, an edge that Bangladesh also enjoys (until LDC graduation). With Nepal scheduled to graduate from LDC status around 2026, it’s pushing to build export capacity now and negotiate favorable trade terms ahead. Comparatively, Bangladesh has similar LDC trade perks but will also graduate soon; India and Pakistan don’t have such duty-free advantages but have huge home markets. Nepal’s small domestic market (30 million people with a growing middle class) is not the main lure, but its proximity to North India (300 million people in neighboring Indian states) and the potential to serve as a low-cost production enclave for India and beyond is attractive. Additionally, Nepal’s northern border with China could open future possibilities – road and rail links through Tibet are under development as part of China’s BRI initiative, potentially giving Nepal an overland route to Chinese markets. Being in the GMT+5:45 time zone, Nepal also aligns well for outsourcing work with clients in Europe and Asia, similar to India’s time zone advantage for Western clients. In essence, Nepal sits at a crossroads of South Asia and East Asia, and companies incorporating in Nepal can leverage treaties and geography to access larger markets while operating from a business-friendly smaller base.
Workers in a garment manufacturing facility in Nepal. Low labor costs and duty-free export access make Nepal attractive for industries like textiles and apparel.
Nothing illustrates Nepal’s appeal better than the stories of foreign companies that have recently established operations there. Here are a few concrete examples from different industries, showing the breadth of Nepal’s FDI surge:
Technology & Outsourcing – Deloitte and IBM in Nepal: Global consulting and tech firms have noticed Nepal’s IT talent. Deloitte, one of the Big Four professional services firms, set up a delivery center in Kathmandu to leverage local consultants for international projects. Similarly, IBM partnered with Nepali IT providers to tap into Nepal’s software engineering pool. These moves follow the success of smaller foreign-led IT companies like CloudFactory, which was founded with international backing and now employs hundreds in Nepal delivering cloud services to clients worldwide. The message is clear – Nepal is on the outsourcing map for quality work at competitive costs.
Manufacturing – Motrex (South Korea) & Cipla (India): Motrex’s planned $100+ million investment in an auto assembly plant (mentioned earlier) is a landmark deal; it signifies that even high-tech manufacturing (automobiles) is viable in Nepal when incentives align. In pharmaceuticals, India’s giant Cipla acquired a stake in a Nepali pharma company to produce medicines locally, illustrating regional players expanding into Nepal to serve the local and Indian markets. Additionally, Unilever (the Anglo-Dutch consumer goods multinational) has long operated a Nepali subsidiary producing soaps and shampoos, and it has been expanding capacity to cater to growing demand in Nepal and North India. These examples show Nepal can host everything from vehicle assembly to FMCG manufacturing.
Tourism & Hospitality – Marriott, Hilton, and Beyond: Nepal’s tourism rebound has drawn famous hotel chains. Marriott International opened the plush Kathmandu Marriott Hotel and is introducing its trendy Moxy Hotel brand in Kathmandu by 2025. Hilton has signed on to manage a resort in Chitwan, tapping into Nepal’s wildlife tourism. Even specialized adventure tourism companies from Europe have incorporated local outfits to offer trekking, mountaineering, and paragliding experiences in the Himalayas. The presence of globally recognized hospitality brands signals confidence in Nepal’s market and the government’s openness – foreign investors can fully own hotels (with certain star-rating based investment minimums, e.g. $5 million for a five-star hotel) and repatriate their earnings. Nepal’s goal of welcoming 2 million tourists annually in the near future (up from about 1 million pre-pandemic) is fueling investment in hotels, restaurants, and travel services, many of which are joint ventures with foreign firms seeking to capitalize on the world’s love for Nepal’s natural beauty.
Energy & Infrastructure – Statkraft (Norway) & CGN (China): In the renewable energy front, Norwegian energy company Statkraft has invested in Nepali hydropower projects (such as the Tamakoshi project in the past) and continues to explore opportunities as Nepal liberalizes energy trade. On the Chinese side, China Guangdong Nuclear (CGN), better known for power projects, has been involved in solar farm proposals in Nepal, while Chinese contractors like Sinohydro are not only building dams but also taking equity stakes in some hydro ventures. These global players are drawn by Nepal’s promise of producing excess green energy that can be sold to energy-hungry neighbors. Meanwhile, foreign development finance institutions and construction firms have incorporated local subsidiaries to bid on infrastructure projects – from highways to telecommunication towers – as Nepal opens up infrastructure development to foreign participation under public-private partnership models.
Each of these success stories underscores a common theme: Nepal is no longer an isolated market, but a rising frontier for international business. Companies that once might have overlooked Nepal are now seizing first-mover advantage in a range of fields.
In 2025, Nepal is making a compelling case to the world’s investors and entrepreneurs. By incorporating in Nepal, foreign companies can capitalize on benefits that few other South Asian destinations offer in one package: political stability and safety, increasingly business-friendly policies, competitive taxes, a young and affordable workforce, and unique market access advantages. The Nepali government’s commitment to reform – from digitizing incorporation to updating investment laws – reflects a forward-looking vision to integrate Nepal into global supply chains and innovation networks.
Of course, challenges remain. Investors must navigate a smaller domestic market and landlocked logistics, and ensure they comply with local regulations and cultural norms. But the trajectory is positive, and success stories are mounting. The cost savings and incentives can significantly boost a company’s bottom line, while Nepal’s scenic and cultural allure provides quality of life perks for expatriates and local employees alike. In the competition for foreign direct investment in South Asia, Nepal has transformed from an under-the-radar player to an ambitious contender.
For foreign companies exploring expansion in 2025, Nepal is worthy of serious consideration. Whether you are a tech startup seeking a cost-effective development center, a manufacturer aiming to tap regional markets, or an investor looking at emerging economies – company incorporation in Nepal could be your gateway to new growth. With its doors wide open and reforms in full swing, Nepal welcomes global businesses to be part of its growth story. The Himalayas are no longer just a great place for adventure; they’re now an exciting place for business adventure too. Welcome to Nepal – the newest land of opportunity in South Asia.