Stakeholders have pointed out that British investment in Nepal has not seen significant growth, mainly due to the burden of double taxation and the complex process of repatriating dividends.

According to a study by Nepal Rastra Bank, as of mid-June to mid-July 2023, total Foreign Direct Investment (FDI) from the UK to Nepal amounted to Rs 6.85 billion, positioning the UK as the 11th largest investor in the country. The UK’s investments span across agriculture, industry, and services, with the service sector receiving the highest share of Rs 5.84 billion.

At the 'Nepal-UK Business Forum' held in Kathmandu, British Ambassador to Nepal Rob Fenn emphasized that the lack of a double taxation agreement between the two nations has hindered the growth of British investments.

"British entrepreneurs are interested in investing in Nepal," Fenn stated, "and such forums will further highlight investment and trade opportunities between the UK and Nepal."

Habib Yousuf, Regional Director for South Asia at British International Investment (BII), noted that British investors face the challenge of paying taxes both in Nepal and the UK, in addition to difficulties in repatriating capital.

While Nepal and the UK signed a bilateral investment agreement in 1993, a double taxation avoidance agreement is yet to be established. This absence has led to dual tax obligations for British investors. Nepal has signed such agreements with only 10 countries to date. Investors at the forum called for simplification of dividend repatriation procedures to encourage more investment.

Dr. Yubaraj Khatiwada, an economic advisor to the Nepalese government and an economist, remarked that despite the long-standing Nepal-UK relationship, British investment in Nepal remains lower than expected. He pointed out a significant investment gap in Nepal’s small and medium enterprises (SMEs) and suggested that investment could come not only through direct foreign investment but also via equity funds.

Rajen Kandel, Managing Director of Kandel Group, UK, which operates businesses in Britain, noted that investment opportunities exist in Nepal’s education, information technology, and high-value product manufacturing sectors. He also stated that as Nepalese consumers' purchasing power is increasing, the market for high-value products is also expanding.

Petra Lenihan, Head of International Strategy & Trade Relations (South Asia Team) at the UK Department for Business and Trade (DPT), emphasized the need for Nepal to further open up its foreign investment sectors. "After our continuous lobbying, India opened up 100% foreign investment in its insurance sector. Nepal can do the same," she suggested.

Krishna Bahadur Raut, Secretary at the Ministry of Industry, Commerce, and Supplies, informed that the Nepalese government has improved dozens of investment-related laws and policies in recent months. "Alongside private investment, Nepal is also seeking large-scale investments," Raut stated, adding that sectors such as information technology, clean energy, minerals, and infrastructure are open for investment.

He further mentioned that Nepal now allows online company registration and has removed investment limits in the IT sector.

Sushil Gyawali, Chief Executive Officer of the Investment Board Nepal, provided insights into ongoing policy reforms and efforts to attract private investment. He emphasized that Nepal is not only looking for investments in the energy sector but also in projects like non-energy cable cars and expressways.

Amlan Mukherjee, Managing Director of Unilever Nepal, shared his company’s positive experience of investing in Nepal, noting that the company expanded its product range from a single item to 164 over the past three decades.

“If we can invest in Nepal, others can too,” Mukherjee said.