Top 10 reasons for FDI in Agriculture in Nepal

Agriculture provided a living for 90 percent of the Nepalese population in the 1980s, but this figure is decreasing year by year. Agriculture’s reliance decreased by 60% in 2017. Nepali citizens are currently migrating to other countries in search of better opportunities, and the rural population is following suit.

Cultivable land in rural areas is currently fallow. Due to a lack of interest in agriculture among Nepali citizens, the Nepali government decided to open the agricultural sector to foreign investment on January 4, 2021. The decision became effective the moment it was published in the Nepal Gazette.

Agriculture is also appealing to multinational corporations in Nepal for this reason. Foreign investors can bring in 100 percent FDI, and they can also enter into joint venture agreements with Nepali investors to bring investment into the country.

Floriculture, Horticulture, Apiculture, Vegetable and mushroom cultivation (under controlled conditions), Seed development and production, planting material, Animal husbandry (including dog breeding), Pisciculture Aquaculture have all drawn foreign investors (under controlled conditions).

Services related to agriculture and related industries – Foreign Direct Investment in Agriculture in Nepal

According to the official statement, foreign investors in agricultural products such as wheat, rice, and maize must invest Rs 500 million in immovable capital and export 75% of their output. Investing in Nepal’s agriculture sector provides the benefits listed below, as well as investment security.

1. Suitable climate

Nepal is located in the Mid-Himalayan mountain range of Asia. It is a small landlocked country 500 kilometers from the nearest sea. The climate in Nepal ranges from subtropical to alpine in a short distance due to the tremendous variation in topography and altitude (60 to 8,848m).

These factors, together with the slope of the mountain, have resulted in a plethora of micro-environments. Nepal has alpine, cool temperate, warm temperate, subtropical, and tropical climates. Despite the fact that Nepal is a small country that stretches 193 kilometers from north to south.

Nepal has both a humid and cold climate. As a result, it can be used commercially and is suitable for a wide range of fruits from around the world.

2. Geographical Benefit

Nepal is an unusual country in terms of geographical diversity. Within a short distance in Nepal, you can see plains, hills, and the Himalayas. Mountains cover 28% of Nepal’s total land area, and agriculture is mostly livestock-based, with a little cropping.

 Foreigners can invest in livestock in mountainous areas to create jobs and earn a good return on their investment. Mountain regions in Nepal, with their vast open spaces and grazing lands, are ideal for foreign investment. This generates a good income for foreign investors. Nepal’s hilly terrain accounts for 55% of the country’s total land area.

The landscape is characterized by high ridges and steep slopes that surround numerous streams, resulting in a diverse range of microclimates. With foreign investment, citrus, apple, walnut, and juice factories can be established in hill areas. Similarly, the Terai region accounts for 17% of the country’s total land area.

3. Low-Cost Workforce

Nepal is classified as a low-wage country. The government of Nepal pays a daily wage of NPR 517, which is equal to $4 per day. This is very cheap labor in comparison to other countries. Foreign Direct Investment investment (FDI), combined with cheap labor, will result in low-cost production. This is extremely helpful.

4. Low-Cost Land

In Nepal, it accounts for 55% of the hill area. Mountainous areas account for 28% of the total. Since urbanization is increasing in Nepal, the population living in mountain and hilly regions is decreasing. For the time being, these lands are undeveloped and can be purchased at a very low cost.

Foreign investments in such lands, as well as advanced technology-based agriculture, will be extremely beneficial and profitable. Outright purchases or long-term leases are the most common forms of foreign land investment.

Long-term leases of agricultural land are more common than purchases in the case of foreign investment, owing in part to laws prohibiting the sale of land to foreigners in several countries.

Nonetheless, because lease contracts are typically for a long period of time, the economic and social consequences are similar to those of outright sale (typically 50 years and sometimes up to 99 years). In some cases, the purchase is facilitated by a local counterpart to the foreign investor.

5. Ecotourism in agriculture

Agricultural ecotourism refers to ecotourism that occurs on farms.

Nepal is a vastly different country that draws visitors for a variety of reasons. Foreign agricultural investment combined with the establishment of a hotel in the same location will yield enormous benefits.

Nepal is one of the most beautiful countries in the world. If you invest in agriculture while also building a nice villa, you will undoubtedly reap long-term benefits.

6. Seek additional assistance from Nepalese citizens

The Nepali are genuinely nice, warm, and compassionate people. They’d go out of their way to put you at ease. Nepali people will not complain. They will not moan, no matter who they are or what jobs they have.

They could be business owners, taxi drivers, waiters, or farmers. They do their jobs well and put in a lot of effort in their fields of expertise. People work hard to get what they want, and they are proud of what they do and their achievements. If you go to Nepal and invest in agriculture, you will not only make money, but you will also gain life-changing experiences.

7. A substantial market

If you invest in agriculture in Nepal, your products will be able to sell in India and the Middle East. In India, it has a sizable consumer market. The Qatari government had asked Nepal if it could export organic foods, particularly green vegetables and dairy products, for more than $2 billion per year on a long-term basis.

Organic vegetables and spices are in high demand in the Gulf Cooperation Council countries. According to a ministry official, demand is so high in Qatar, Bahrain, Kuwait, Oman, Saudi Arabia, and the United Arab Emirates, as well as India and Bangladesh, that small shipments will not be enough.

“It could greatly increase agricultural productivity in Nepal’s agriculture sector, which has performed poorly given its favorable geographic area.”

8. The fruit and juice industry has low risks and high profit margins.

By establishing a “company to provide seeds, technical services + peasant farmer’s association management + plant + company unified acquisition,” foreigners in Nepal intend to use organic farming methods in greenhouse and dairy farming, as well as in the fruit industry.

These types of businesses are extremely profitable. Businesses in the orange juice industry can be run in Nepal’s hilly areas. And that Nepal has the potential to be a world leader in citrus production. Advanced technology is required in the production and processing of vegetables and fruit juices.

9. Tax Breaks

Foreign investors who invest in agriculture in Nepal are tax-exempt.

• Implementation of an investment-friendly tax system
• Create a tax system more pro-growth.
• Tax policy to promote exports

10. Imported Agriculture Machinery Is Tax-Free

While foreign investment is made in agriculture and advanced technology is brought into the country, taxes are reduced in Nepal.

Conclusion

Since 2021, foreign agricultural investment is permitted in Nepal. Current relevant laws and regulations do not provide policies that are conducive to investment. There are no agricultural service laws in Nepal. If you want to invest in Nepal, Corporate Lawyer Nepal. Please do not hesitate to contact us at 977-9849517735 or email at info@corporatelawyernepal.com