Foreign Investors Show Growing Interest in Nepal’s ICT Sector

Foreign investors are showing growing interest in Nepal’s information and communications technology (ICT) sector, backed by business-friendly government policies and regulatory reforms.

In Fiscal Year (FY) 2022/23, only 16 foreign investment projects were registered in the ICT sector, with a total investment commitment of Rs 712 million. However, since then, both the number of projects and the committed investment amount have increased steadily, according to data from the Department of Industry.

Officials attribute the rise to several policy measures, including approval of foreign investment through the automatic route, the government’s declaration of the ICT sector as one of the pillars of the national economy, the announcement of an “ICT Decade” in the FY 2024/25 budget, and a 50 percent rebate on income tax for up to five years.

The surge became particularly visible in FY 2024/25, when the number of ICT projects rose sharply and total investment commitments reached nearly Rs 2 billion. The department said 384 ICT projects announced foreign investment commitments worth Rs 1.97 billion during the year.

Foreign investment commitments have remained relatively strong in the current FY 2025/26 as well. In the first five months of the fiscal year, investment commitments of nearly Rs 1 billion have already been received. A total of 236 ICT projects have received commitments amounting to Rs 998.9 million during this period.

Department officials said the removal of the minimum foreign investment threshold for the ICT sector and the approval of investments through the automatic route have significantly contributed to the increase. While foreign investors in other sectors must meet a minimum investment requirement of Rs 20 million, no such threshold applies to ICT-related industries.

Prashant Bohora, Director at the Department of Industry’s Foreign Investment and Technology Transfer Branch, said the government issued a notice in between mid-October and mid-November 2022 announcing a reduction in the minimum foreign investment threshold and the removal of the threshold for ICT investments. However, the regulation came into effect in between mid-May and mid-June 2024. Since then, both the number of ICT projects and the volume of foreign investment have increased steadily, he added.

Under the automatic route, which has been in effect since April 29, 2024, foreign investments of up to Rs 500 million can be approved automatically.

Santosh Koirala, immediate past president of the Nepal Association for Software and IT Services Companies (NAS-IT), said that while the ICT sector attracts a larger number of projects compared to other sectors, the investment amount per project tends to be smaller.

“ICT projects do not always require large capital,” he said. “That is why the number of projects is growing rapidly. With relaxed policies, companies with investments of even USD 5,000, 10,000 or 20,000 can enter the sector.”

The government has been continuously introducing reforms and liberal policies over the past two to three years to attract foreign investment into ICT-related industries. The FY 2024/25 budget announced plans to develop Nepal as an “ICT hub,” targeting Rs 3000 billion in ICT exports over 10 years, along with the creation of 500,000 direct and 1 million indirect jobs.

The government’s focus on the sector intensified after a survey by the Institute for Integrated Development Studies revealed that Nepal exported ICT services worth USD 515 million (Rs 73.71 billion) in 2022. Since then, various incentives have been introduced to attract investment into technology-based industries.

Koirala said the government’s policy reforms—from declaring an ICT decade to offering tax incentives—have sent a positive message globally. He also noted that members of the Nepali diaspora are increasingly reaching senior and decision-making positions in global ICT companies, which has helped attract investment into Nepal’s ICT sector.

Drawing a parallel with India’s IT growth in the 1990s, Koirala said Nepal is now entering a similar phase, with Nepali professionals serving as decision-makers and brand ambassadors in major global IT firms, encouraging investment back home.

A notice published in the Nepal Gazette in October-November 2022 further supports this trend, stating that non-resident Nepalis investing in Nepal through joint investment companies established with the Government of Nepal are exempt from the minimum foreign investment threshold.

Meanwhile, domestic ICT companies are also on the rise. Over the past two years, the number of IT colleges and students has increased, with more young people entering the sector. Koirala estimates that around 65 percent of foreign investment commitments in ICT are directed toward software development, engineering services and business process outsourcing (BPO).

He said clearer policies on connectivity and faster resolution of related issues could further accelerate the sector’s current growth momentum.

Government Incentives

The current fiscal year’s budget has announced several incentives for ICT-based industries. These include income tax and electricity tariff concessions equivalent to those provided to special industries, a 75 percent tax rebate on income from ICT service exports, and a final income tax rate of 5 percent for individuals exporting ICT services while residing in Nepal.