List of Abbreviation
BITs : Bilateral Investment Treaties
CRO : Company Registrar Office
FDI : Foreign Direct Investment
FPI : Foreign Portfolio Investment
FITTA : Foreign Investment and Technology Transfer Act
FY : Fiscal Year
Ltd. : Limited
MNEs : Multi National Enterprises
MNCs : Multi National Corporations
M&A : Merger and Acquisition
NRB : Nepal Rastra Bank
UN : United Nations
UNCTAD : United Nation Conference on Trade and Development
UNCITRAL : United Nation Commission of International Trade Law
WTO : World Trade Organization
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Table of Content
Introduction
S.N. Page No.
1.1 General Background 3
1.2 Statement of Problems 3
1.3 Objectives of the Study 3
1.4 Methodology of the Study 4
1.5 Review of Literature 4
1.6 Significance of the Study 4
1.7 Scope and Limitation of the Study 5
1.8 Organization of the Study 5
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CHAPTER-ONE
BACKGROUND AND INTRODUCTION OF THE STUDY
1.1GENERAL BACKGROUND
Foreign direct investment (FDI) is a concept attracting investments from foreign company,
person or entity in order to accelerate economic development or economic growth by proper
utilizing natural resources as well as resources available. It is one of the major sources of external
finance in which countries receives finance beyond national borders. Simply it means it is the
method of controlling ownership of business enterprise in one country by the business entity based
in another country. FDI can be seen as a long-term investment by an entity from country in an
entity in another country (host country) 1. In this arena of globalization a nation state cannot exist
independently. Rather Interdependence is one of the qualities which helps to sustain a nation
politically and economically both. Developing Countries as well as developed countries need
foreign assistance or investment for economic development. So they are engaged in +attracting
foreign investments or assistance, skilled man power, management as well as technology by
reforming their policies and legal environment.
Nepal is now in the process of overall social, political and economic transformation. It has
been believed that Nepal now is on the journey for economic development on the basis of its
tremendous natural resources. Nepal is being characterized by Country with huge natural resources
including water resources, Cultural Diversity, Country of Himalayas. Thus Potential of hydropower
generation, agricultural production, tourism is some marked field which can boost up Nepalese
Economy. Thus being a developing country proper utilization of these all resources will be based
on proper investment in order to carry out the utilization of available resources. Thus Foreign
Direct Investment is one of the bases for economic development. Despite the abundant natural
resources, comparatively cheap labor force and friendly people Nepal has failed to lure the Foreign
Investors. FDI is one of the most important factors of economic development in the contemporary
world. Today, FDI is a basic mechanism of capital flows in the globalized economy, and the key
factor for economic development in many countries. Foreign Investments are of substantial
importance for both the host country and foreign investors 2. FDI is a valuable and advantageous
source of new technologies, technical and managerial knows – how. Foreign Investments is, in the
country like Nepal, not only occupy as source of capital fund and foreign exchange but also
dynamic and efficient vehicle to secure that much needed industrial technology , managerial
expertise and marketing know-how and network to growth , employment, productivity and export
1
N. Mccloud,” Institution, Foreign direct investment and growth, a hierarchical Bayesian approach”, Journal of
the Royal statistical society A, 2012(175) part 1, p.83-84
2
UNCTAD, The Role of International Investment Agreements in Attracting Foreign Direct Investment to
Developing Countries, 2009
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performance with the given provisions . Nepal has to best try for the rearrangement of new policy
and legislation to attract the flow of FDI in more prospectus area.
To make economic attractions – key determinants of FDI – effective, many additional
conditions are needed, some common to all types of FDI, some specific to particular FDI types.
One common condition is that countries have to be open to FDI. Another key issue is the degree of
political stability determining the political risk of investing in a host country. Other key FDI
determinants include the physical and technological infrastructure of the host country, the cost and
quality of resources and other inputs and business facilitation measures, such as FDI promotion,
including incentives to foreign investors.
Nepal needs foreign capital and technology for economic development of Nation. Government of
Nepal is encouraging FDI in Nepal by providing attractive incentives and facilities within a liberal
and open policy framework. FDI legislation and policy plays important role for the inflow of
foreign capital. Therefore this research paper has focused for existing constitutional and legal
framework, plans and policies including their implementation status of FDI legislation and policy.
1.2 STATEMENT OF THE PROBLEM
The statements of the problems are as follows:
Whether existing Legal Provisions and policies of Nepal are sufficient to attract Foreign
Direct Investment or not?
Whether the implementation status of those Legal provisions and policies is satisfactory or
not?
Whether the judicial interpretation of courts are sufficient and lawfully implemented or
not?
1.3 OBJECTIVES OF THE STUDY
To study about the concept of Foreign Direct Investment and its probable role for economic
development in Nepal.
To highlight about constitutional and legal provisions, regulations, plans, policies and judicial
interpretation regarding FDI in Nepal.
To analyze effectiveness of legal and institutional arrangement and provide appropriate
suggestions in order to attract more FDI for economic development.
To analyze need and importance of FDI in hydro electricity in Nepal.
1.4 METHODOLOGY OF THE STUDY
This research study will be prepared with the application of the principle and method of
doctrinal research. It will follow analytical and descriptive method. The data information will be
collected from the both primary and secondary sources of authority. Acts, Constitution will be
taken as primary authority and various journal articles, research reports, article published in
newspaper, official websites will be taken as the secondary authority. Rules of citation in footnote
and in bibliography will be done by following a standard rule of APA style.
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1.5 REVIEW OF LITERATURE
In preparing this dissertation different article published by Nepali as well as international
authors in Journals, websites etc will be taken into consideration. Further report prepaid by WTO,
UNCTAD and Nepal Economic Forum will also be important part of research. Since research focused
on the National Framework of governing FDI so various National legislation and policy related to
FDI of Nepal will be reviewed and analysed. Majorly we will review The constitution of Nepal,2072 ,
major acts like Arbitration Act, 2055, Bank and Financial Institution Act , 2073 , Foreign Investment
and technology Transfer Act , 2075 and so on. Books like Bista, Raghubir, Foreign Investment in
Nepal (3rd edition)Centre for Integrated Development Studies and other various publishers will be
studied. As well as the various reports published by Ministry of Finance will also be studied
thoroughly. Additionally other various literatures and articles which are enlisted in bibliography will
be taken into consideration.
1.6 SIGNIFICANCE OF STUDY
Nepal has a huge prospect of inflow of Foreign Direct Investment. Hydropower, Tourism,
Agricultural, natural resources etc are main area of Investment in Nepal. Despite of being such
potential Nepal is not able to attract FDI as per the expectation. FDI legislation and policy of a
country also largely impact on inflow of Foreign Investment.
This dissertation focuses on study of existing legal provisions and policies of FDI in Nepal and its
implementation status. Thus, this Dissertation Paper is significant in the sense to review legal and
policy aspect of FDI, Institutional mechanisms set by legal regulations and also their
implementation status. Furthermore researcher intends to find out the loopholes of FDI policy. This
Study may help to legal scholars, lawyers, law students and also to those investors who are seeking
to invest in Nepal.
1.7 SCOPE AND LIMITATION OF STUDY
This dissertation paper will be limited within the study of existing National legal provision
and policies of FDI in Nepal and their implementation status. It will incorporate the concept of
Foreign Direct Investment and the existing legal provision and polices of FDI in Nepal. It will be
based on doctrinal research. This research will be for classroom purpose. Hence it will only include
general purpose suitable for academic.
1.4 ORGANIZATION OF THE STUDY
The dissertation under this proposal will be divided into following chapters:
i. The first chapter will be related with general introduction, statement of problem, objectives,
significance, limitation, methodology and organization of the study.
ii. The second chapter will deal with meaning, forms, motives and other basic concept of
Foreign Direct Investment.
iii. The third chapter will include historical prospective of FDI. In further it will include History
of FDI in global prospective and FDI legislation in context of Nepal.
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iv. The fourth chapter will incorporate the National Legal Framework Governing Foreign Direct
Investment in Nepal.
v. The fifth chapter will include the need and importance of FDI in hydroelectricity in Nepal.
vi. The last chapter will contain finding, conclusion and recommendation on the basis of the
previous chapters
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