Foreign Direct Investment (FDI) in Infrastructure Sector of Nepal

In the regard, FDI to Nepal’s infrastructure sector assumes an important function for the satisfaction of the development needs of the country and its better connectivity. Critical infrastructure was developed and upgraded in terms of roads, bridges, airports, and public utilities with the participation of international investors.

 FDI brings needed capital, advanced technologies, and experiences, accelerating the pace of project implementation and enhancing quality standards. The Nepalese government encourages FDI through incentives, including tax benefits and simplified procedures.

Not only does this investment provide fuel for infrastructure development, but it also enables the generation of employment and stimulates economic growth. Considering the fact that Nepal is still developing its infrastructure, FDI plays a leading role in the achievement of sustainable progress and improvement in the nation’s general competitiveness.

What is the Infrastructure Sector of Nepal?

The infrastructure sector of Nepal includes the development and maintenance of essential facilities such as roads, bridges, airports, water supply systems, and public utilities.

 It supports economic growth by improving connectivity, accessibility, and service delivery, playing a critical role in the country’s overall development and modernization efforts.

Which Law & Legal Authority governs the Infrastructure Sector in Nepal?

The infrastructure sector in Nepal is governed by the following laws and legal authorities:

1. Public Roads Act, 1974 (2031 BS): Regulates the development and management of public roads and highways.
2. Building Act, 1998 (2055 BS): Governs the construction and regulation of buildings and structures.
3. Land Acquisition Act, 1977 (2034 BS): Provides the legal framework for acquiring land for infrastructure projects.
4. Environmental Protection Act, 1997 (2053 BS): Ensures environmental protection and management for infrastructure development.
5. Urban Development Act, 2015 (2072 BS): Regulates urban planning and infrastructure development in urban areas.

Legal Authorities:

1. Ministry of Physical Infrastructure and Transport: Formulates policies and oversees infrastructure development.
2. Department of Roads: Manages road construction and maintenance.
3. Department of Urban Development and Building Construction: Oversees urban development and building construction standards.
4. National Planning Commission: Provides overall planning and coordination for large infrastructure projects.

What is the Initial Procedure of FDI in the Infrastructure Sector of Nepal?

The initial procedure for FDI in Nepal’s infrastructure sector includes conducting market research, developing a business plan, obtaining FDI approval from FITTA, registering with the Office of the Company Registrar, securing necessary licenses and permits, and complying with local regulations. Infrastructure development and operational setup follow these steps.

1. What is the Complete Procedure (in 7 Steps) for investment in the Infrastructure Sector of Nepal?

Investing in the infrastructure sector in Nepal involves a detailed process. Here’s a seven-step procedure to guide you:

1. Market Research and Feasibility Study:
   • Identify Opportunities: Research infrastructure needs, such as roads, bridges, airports, or urban development projects.
   • Assess Demand: Analyze the current and future demand for specific infrastructure types.
   • Feasibility Analysis: Conduct technical, economic, and environmental feasibility studies to evaluate project viability.
2. Business Plan Development:
   • Project Scope: Define the scope of the infrastructure project, including design, capacity, and timeline.
   • Financial Projections: Create detailed financial forecasts, including capital requirements, operating costs, and revenue potential.
   • Risk Management: Develop strategies for risk management and mitigation.
3. Regulatory Compliance:
   • Obtain Permits: Secure necessary permits and approvals from relevant authorities, such as the Department of Urban Development and Building Construction or the Ministry of Physical Infrastructure and Transport.
   • Environmental Clearance: Obtain environmental impact assessment (EIA) approval from the Ministry of Forests and Environment.
   • Land Acquisition: Acquire or lease land required for the project, ensuring legal compliance.
4. Funding and Investment:
   • Secure Capital: Raise funds through equity, loans, government grants, or public-private partnerships (PPPs).
   • Budget Allocation: Allocate funds for project development, including construction, materials, and labor.
5. Infrastructure Development:
   • Project Design: Finalize detailed project designs and engineering plans.
   • Construction: Oversee the construction process, ensuring adherence to timelines, budgets, and quality standards.
   • Technology Integration: Implement necessary technology and systems for efficient operation.
6. Operational Setup:
   • Hire and Train Staff: Recruit and train personnel for project management, operations, and maintenance roles.
   • Develop Procedures: Establish operational procedures, safety protocols, and maintenance schedules.
7. Commissioning and Launch:
   • Testing and Inspection: Conduct thorough testing and inspection to ensure the infrastructure meets all standards and regulations.
   • Regulatory Approval: Obtain final approvals and certifications from relevant authorities.
   • Official Launch: Plan and execute an official launch event or opening to mark the completion of the project and start operations.

Read More:

• Foreign Direct Investment (FDI) in Infrastructure Sector of Nepal
• Foreign Direct Investment (FDI) in Energy Sector of Nepal
• Investment Board Nepal

What is the allowed percentage of Investment in the Infrastructure Sector?

In Nepal, foreign investment in the infrastructure sector is allowed up to 100%.

This includes sectors like transport, roads, and utilities.

How long does it take to complete FDI in the Infrastructure Sector?

FDI in Nepal’s infrastructure sector usually takes 12 to 24 months to complete.

This includes obtaining necessary approvals, securing land, and meeting regulatory and environmental requirements.

What are the regulatory approvals required in the Infrastructure Sector?

Regulatory approvals required in Nepal’s infrastructure sector include:

1. Department of Urban Development and Building Construction Approval: For large infrastructure projects and building permits.
2. Environmental Impact Assessment (EIA) Approval: From the Ministry of Forests and Environment for projects affecting the environment.
3. Land Acquisition Clearance: For obtaining land use rights from local authorities.
4. Building and Construction Permits: For compliance with safety and construction standards.
5. Utility Permits: For connections and integration with existing utility networks, such as water and electricity.
6. Planning and Development Permissions: From local government bodies for urban and rural development projects.

What happens after FDI Approval in the Infrastructure Sector?

After FDI approval in Nepal’s infrastructure sector, several key steps occur:

1. Project Planning and Design: Detailed project planning, design, and feasibility studies are conducted.
2. Securing Financing: Finalizing financing arrangements, including securing loans or investment funds.
3. Regulatory Compliance: Obtaining additional necessary permits and approvals, such as environmental clearances and construction permits.
4. Contracting and Procurement: Selecting contractors and suppliers through bidding processes and signing contracts.
5. Construction and Implementation: Commencing construction or development activities according to the approved plans.
6. Monitoring and Evaluation: Regular monitoring of project progress and compliance with standards.
7. Operationalization: Finalizing and commissioning the project for use, ensuring it meets quality and safety standards.

What are the fees associated with Infrastructure Investment Approval?

Generally, the following fees may apply:

• Application Fee: For submitting an application for project approval or registration.
• Environmental Impact Assessment (EIA) Fee: Charges for conducting and processing an EIA report.
• Land Acquisition Fee: Costs associated with acquiring land for infrastructure projects, including compensation and administrative fees.
• Permit Fees: Fees for obtaining various permits, such as construction permits and operational licenses.
• Registration Fee: For registering the investment with relevant authorities.
• Utility Connection Fees: Charges for connecting to public utilities like water, electricity, or sewerage.

What are the benefits of investing in the Infrastructure Sector of Nepal?

Investing in Nepal’s infrastructure sector offers several benefits:

1. High Demand: Growing need for infrastructure development due to rapid urbanization and population growth.
2. Government Support: Favorable policies and incentives for infrastructure investments.
3. Strategic Projects: Opportunities in major projects like roads, bridges, and energy systems.
4. Economic Growth: Contribution to overall economic development and improved connectivity.
5. Public-Private Partnerships: Possibility to engage in collaborative projects with the government.
6. Long-Term Returns: Potential for stable, long-term returns from essential infrastructure services.
7. Untapped Opportunities: Room for innovation and development in emerging sectors.