Foreign investment in a least developed country: the Nepalese experience

This article aims to contribute to the literature on the developmental role of foreign direct investment (FDI) through an examination of the Nepalese experience. Despite significant liberalization of the foreign investment regime and the introduction of attractive investment incentives, Nepal's achievements, both in terms of the volume of FDI and its developmental impact, failed to match national expectations. Nepal obviously has intrinsic disadvantages arising from its geography and other typographical characteristics in attracting FDI. However, comparable international experience suggests that her lacklustre achievements as a host to foreign investors cannot be explained in terms of these factors alone. Policies that underpin the overall investment climate also seem to matter. Mere liberalization of the investment regime and the introduction of financial incentives are not substitutes for an all-encompassing effort to improve the investment climate.