Overseas Business Risk – Nepal

Information on key security and political risks which UK businesses may face when operating in Nepal.

Political and Economic

Located between India and China, Nepal is the 41st most populous country in the world. The Nepalese economy is ranked 108th globally. The World Bank put Nepal’s GDP at $19.41 billion in 2012. The annual average growth rate is 3-4%.

Nepal’s ten-year armed conflict ended in 2006 with the Comprehensive Peace Accord. This led to the monarchy being abolished and the Maoist Party joining Nepali Congress, the United Marxist Leninist (UML) and a range of smaller parties in a multiparty political system. Elections for a Constituent Assembly to draft a new constitution for Nepal were held in 2008. After four changes of government, the Constituent Assembly was dissolved in May 2012 having failed to agree a new constitution. Two interim governments followed the dissolution of the Assembly, and fresh elections were scheduled for November 2013.

Nepal’s economy is predominantly based on agriculture which contributes 35.68% of GDP and 75% of employment. Industry accounts for 14.02% of GDP. The mainstay of Nepal’s economy is remittances from the estimated 2m Nepalese working overseas. According to the World Bank, these accounted for 22% of GDP in 2012, making Nepal the world’s sixth biggest recipient of remittances as a share of GDP. The services sector accounts for almost 50.30% of GDP and is mainly driven by remittance income.

Infrastructure in Nepal is poor. According to the World Bank, only 43% of the population have access to all-weather roads. Power outages of up to 16 hours per day during the dry season (October-May) limit economic development. Nepal’s potential in hydropower is estimated at 42,000 MW, but current installed hydropower capacity is only 700 MW. Only 2 per cent of Nepal’s micro-hydro potential has been developed to date.

Localised strikes and general shutdowns (‘bandhs’) are a feature of the political and economic landscape in Nepal. Weak and tense labour relations between management and unions have also led to general strikes; lock outs as well as shut down of industries. There are over 200 Trade Unions registered with the Department of Labour. Many are affiliated to political parties.. The Federation of Nepali Chambers of Commerce and Industry (FNCCI) estimate that strikes, bandhs and other industrial action cost the Nepalese economy NPR 100 billion, or about £750m each year. 

Investment opportunities exist in various sectors, including infrastructure, energy, agriculture, manufacturing, services, tourism, construction, and minerals. High value opportunities including major infrastructure and hydropower projects are promoted by the Nepal Investment Board. All investment proposals worth less than NRS10bn (£65m) are managed by the Department of Industry. Nepal has preferential trade agreements in place with both India and China see http://www.tepc.gov.np/tradeagreement/ for further details.

More information on political risk, including political demonstrations, is available in the FCO Travel Advice

Human Rights and Business

Nepal has signed or ratified all the major international human rights treaties and conventions. The protection and promotion of human rights is written into Nepal’s Interim Constitution. Nepal is a broadly free and open society. But there are human rights concerns in Nepal, including discrimination, violence against women, allegations of torture and the lack of an appropriate mechanism to deal with human rights violations committed during the country’s ten year conflict.

Nepal has ratified 7 out of the 8 fundamental principles listed on the International Labour Organisation’s Declaration on Fundamental Principles and Rights at Work. Labour rights are enshrined in various acts, including Labour Act (1992), Trade Union Act (1992), Bonus Act (1973), Foreign Employment Act (2007), Child Labour (Prohibition and Regulation) Act (2000). Despite regulatory frameworks, child labour is still a very common practice. According to a report by the International Labour Organization an estimated 1.6 million children are said to be engaging in child labour in Nepal. Human trafficking and other forms of forced labour are also a concern.

Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

According to Transparency International’s Corruption Perception Index (CPI) 2012, Nepal ranks 139 among 176 countries surveyed. Nepal ratified the UN Convention Against Corruption in 2011. The Prevention of Corruption Act and Public Procurement Act 2007 and Anti-Money Laundering Act 2008 are the key elements of the legal framework criminalising corruption. The Commission for the Investigation of Abuse of Authority (CIAA) is tasked with investigating and prosecuting corruption in the bureaucracy. To meet the requirements of the Financial Action Task Force (FATF), Nepal adopted additional measures to tackle money laundering and counter terrorist financing in 2013.

Visit the Business Anti-Corruption portalpage providing advice and guidance about corruption in Nepal and some basic effective procedures you can establish to protect your company from them.

Read the information provided on our Bribery and corruptionpage.

Terrorism Threat

Read the information provided on our Terrorism threatpage.

Protective Security Advice

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses

Read the information provided on our Protective security advicepage.

Intellectual Property

Nepal’s intellectual property (IP) regime is still in a nascent phase. There are two laws that specifically deal with IP issues— the Patent, Design and Trademark Act 2006 and the Copyright Act 2002. The Department of Industry under the Ministry of Industry is the regulatory body responsible for patent, design and trademark issues. The Nepal Copyrights Registrar’s Office sits under the Ministry of Culture, Tourism and Civil Aviation and handles issues related to copyrights. Nepal is a signatory to most international IP conventions, such as the Berne convention, Rome convention and TRIPS Agreement.

Read the information provided on our Intellectual Propertypage.

Organised Crime

Read the information provided on our Organised crimepage.

More information is available on overseas business risk in a range of markets.

UK Trade & Investment Contact:

sanjeeta.pant@fco.gov.uk

Countries: Nepal
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