NEPAL - FOREIGN INVESTMENT OPPORTUNITIES

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INVESTMENT OPPORTUNITIES

Due to varied agro-climatic environment, Nepal is very rich in medicinal and aromatic plants with over 700 plant species. The collection of such plants from wild sources has been practised since ancient times. With the establishment of the Royal Drugs Research Laboratory in 1962 the commercial utilisation of medicinal plants has been encouraged. More than 300 species have been screened and studied and extraction of diosgenin, reserpine, alkaloids of belledona, glycosides of digitalis, lemon grass oil, rosin, turpentine and menthol has commenced. Nepal, a traditional exporter of crude herbs, is now gradually emerging as an exporter of processed herbs and aromatic plants. In recent times commercial cultivation of medicinal plants such as atropa belladona and aromatic plants such as palmarosa, lemon grass, citronela and mentha arvensis have assumed importance. Recent studies also indicate good prospects for the cultivation and processing of chrysanthemum cinerariaefolium (pyrethrum), claviceps purpurea (Ergot), digitalis lanata, eucalyptus camaldulensis, glycyrrhiza flabra, mucuna pruriens, piper longum and valeriana wallichi.
The medicinal and aromatic plants can be exploited for the production of following: essential oils from lemon grass, citronella, palmarosa and mint, oleoresin from ginger, large cardamons, timur and tejpat; turpentine oil and rosin from chir pine; medicines from valeriana wallichii, calamous acrous and nardostachye jatamanshi. In addition to traditional medicines and essential oils, herbs and essences also have a potential as a raw material for the production of cosmetics and perfumes, herbal teas and natural health products.

II. MUSHROOM CULTIVATION

Many varieties of edible mushrooms are found in a wild state in the Terai lowlands, the hills and mountains of Nepal. Two rare varieties similiar to European types known as "Guchchi" and "Varsha Gumba" are found in the hills and mountains under natural conditions. Among the cultivated varieties, agaricus bisporus, pleorotus spp and volvariella are important. The temperature and humidity conditions necessary for growing agaricus bisporus (button mushroom) are very satisfactory in the hilly regions during some seasons. The pleorotus spp. (oyster mushroom) and volvariella (paddy straw mushroom) grow easily during most seasons. The Kathmandu valley has temperature, humidity and other biological factors suitable for the cultivation of these two varietiesof mushrooms throughout the year.
The Plant Pathology section of the Department of Agriculture's research stations at Khumaltar (Kathmandu valley) is producing mushroom spawn. This unit has well qualified staff to undertake research, spawn production and for extension work.
The potential for mushroom production on a commercial scale is good speacially with a view to marketing overseas as fresh mushroom, dried mushroom and canned mushroom.

III. VEGETABLE SEED PRODUCTION

A wide variation in agro-climatic regions from tropical to temperate and alpine climates provides opportunities to produce seed of a wide range of varieties. More importantly, the pockets of micro-climates seperated by high mountains provide ideal environments where the risk of loosing parental lines of high value seeds is minimal. Vegetable seed production is undertaken in 15 different areas with the following 4 special areas highly successful in the production of a variety of seeds: Thak Marpha in the Western Development Region (elevation 2516 m.) - cabbage, carrot, cress, peas, turnip, broad leaf mustard; Mushikot in the Mid-Western Development Region (elevation 1460 m.) - onion, radish, cauliflower, peas, turnip, spinach, capsicum, knolkohl; Kathmandu calley in the Central Development Region (elevation 60 M.) - cauliflower, cress, spinach, turnip, radish, broad leaf mustard; sarlahi in the Central Development Region (elevation 60 M) - tomato, egg plant, cucurbits, capsicum, spinach, peas, okra.
Nepal has well qualified vegetable seed agronomists and vegetable seed breeders. The vegetable development division in the Department of Agriculture has many regional farms located in different agro-climatic regions with well equipped production, cleaning and storage facilities. The division can also provide technical supervision and quality control services through well equipped seed testing laboratories.
Very good potential exists in Nepal for the establishment of vegetable seed farms catering to both domestic and foreign markets. Potential markets in India, Bangladesh, Sri Lanka, Pakistan and Thailand could be developed successfully. The seed quality standards in these countries are close to Nepalese seed standards. Export markets in American and European countries too could be tapped with the participation of investors from these counntries.

IV. FLOWER SEEDS

Due to varying ago climatic conditions Nepal is in an unique position to produce a wide variety of flowering seeds which could be sold in international markets. In the summer season zinnia, marigold, gladiolus, salvia, dahlia, canna are grown extensively. In winter and spring most of the annual flowers such as bellies, dianthus, pansy, antirrhinum, helichrysum, aapaver, verbena, sun flower and so on are grown. The potential for seed production of the following varieties, in particular, has been identified as being very good: anemone sp., aster, chrysanthemum morifolium, elsholtzia californica (california poppies), lathryus odoratus (sweet peas).
The availability of varied climatic conditions and inexpensive labour provide Nepal a comparative advantage to produce flower seeds at low cost. Commercial production and export of flower seeds require maintenance of high technical standards and good supervision. Technology and expertise of foreign companies could be effectively employed to develop this profitable agro-business in Nepal.

V. VEGETABLE PRODUCTION FOR EXPORT

Due to the variety of agro climatic regions and fertile soils Nepal produces a wide variety of vegetables of good quality. The major items of vegetables grown on a commercial scale are cabbage, carrot, turnip, radish, cauliflower, peas, capsicum, egg plant, tomato, okra, knol kohl, beans and cucumber. The major centres of vegetable production are in the Kathmandu valley and in the Dhanusa, Sarlahi, Bara, Makawanpur and Chitwan districts. Almost the entire production of vegetables is consumed within the country, though some exports to India and Tibet are taking place. Recently the production of snow peas for export to Japan has got off to a satisfactory atart and other items like french bean are to be produced for export. This has clearly demonstrated the potential which exists for the production of a few special varieties of vegetables on a commercial scale for export. Foreign investment for the scientific cultivation of vegetables for export would be a profitable business.
VI. FRUIT PROCESSING

Nepal is endowed with good ecological conditions for the cultivation of a variety of fruits. At present citrus fruits, apple, banana, pine appple, mango, pear, litchi, guava, peach, plum and apricot are available in sufficiently large quantities. Plans are also underway to increase the area under cultivation through commercial fruit development programmes. The total quantity of fruits produced is estimated around 480,000 mt. Fruit processing industries consume a fair proportion of total production. Two important fruit processing industries are engaged in the produvtion of fruit squash, fruit juice, jams, jellies, marmalades and fruit salad. Some of these products are exported from Nepal. Opportunities exist for the setting up of industries to process fruits for sale in export market as fruit juices and squash, jams and jellies and fruit based special liquors.

VII. TEA DEVELOPMENT

Nepal has commenced commercial production of tea only in comparatively recent times. The Nepal Tea Development Corporation, a government agency owns seven gardens with a total area of around 880 hectares. In addition the private sector owns tea gardens with a total area of around 1250 hectares. These tea growing areas are in the Eastern districts of Ilam, Panchthar Tehrathum and Dhankuta, almost adjacent to the world renowned tea gardens of darjeeling in India.
The government has given high priority to increase tae production in the Eastern Districts with a view to achieving self-sufficiency in tea and to export high quality teas to overseas market. In order to encourage tea cultivation exemption from the land ceiling law has been provided.
Good prospect exist for the production of quality orthodox teas in Nepal similar to the Darjeeling tea produced in India. Improved cultural practises, latest technical know-how and efficient management systems are required to bring the tea industry in line with the other tea producing countries in the region.

VIII. SERICULTURE

The development of sericulture has been identified as offering very good potential for development in the mid-hills and Terai belt of Nepal by experts from Japan, Korea, China and India. Agro-climatic conditions in these areas favour the cultivation of mulberry and teh rearing of cocoons. The Government has set up a nucleus centre at Khopasi about 35 km. east of Kathmandu in 1975. The centre initially served as a demonstration centre and later expanded its activities to provide training, extension and reserach functions. In 1991/92 it will also function as a major silkworm egg breeding station. Nepal has developed six bivoltine lines and these will be used to produce hybrid silkworm eggs in the country. The preferred production technology in Nepal is the temperate bivoltine technology which is simple and easily asaptable by small farmers.
On a very preliminary assessment mulberry cultivation could be extended over an extent of 6000 hectares which could yield around 350 tonnes of raw silk and 85 tonnes of waste silk. The value of silk fabric from this level of production could exceed Rs. 1800 mn. Private investment to encourage mulberry cultivation and cocoon rearing by small farmers could be developed successfully in Nepal. Post cocoon activities involving reeling, twisting, weaving and production of items out of silk fabric could be developed as medium-scale industries.

IX. INTEGRATED DAIRY INDUSTRY

Nepal is a net importer of dairy products. The import of milk products - powder, condensed concentrate, butter, cheese - is estimated to exceed Rs. 120 mn. per annum. Despite these imports there is a severe shortage of fresh milk, infant milk and other milk products in the country.
Nepal has a long tradition in dairy farming. In fact Nepal has in the past exported milk products to India and Tibet in the form of ghee. She could develop the dairy industry to meet domestic demand as well as to renew exports to India and other markets. The topographical and climatic conditions are well suited to dairy development. An integrated dairy industry incorporating related activities such as improved livestock breeding, cattle feed production and processing of milk products would offer promising prospects for profitable investment. Such a project could build up on existing small dairy units spread around the country through a well organised programme of extension services to improve livestock breeds and an efficient collection system for processing in a central unit.

X. INTEGRATED POULTRY DEVELOPMENT

The production of eggs and chicken in 1988/89 was estimated to be around 274 million and 10.2 million respectively. Local production is supplemented by imports from India. The average annual yields of egg and meat are low being around 84 eggs 1.6 kg. of meat. Low production and productivity in poultry farming is due to poor foundation stock and feed, and dis-economies of scale due to small scale operations. Commercial poultry enterprises are concentrated in the urban areas, with 15 of the 18 major hatcheries located in Kathmandu valley.
Integrated poultry development projects using modern breeding techniques with high yielding foundation stock combined with a large flock would be profitable venture as it could achieve economies of scale and offer poultry products at a competitive price to serve the unsatisfied demand in the country. A poultry feed mill using raw materials readily available in the country such as grains, bran, oil cake, bone meal could form an integral part of such a project. The production of eggs and chicken from such a project would help to meet growing local demand and also offer opportunities for export to neighbouring countries.

XI. FLORICULTURE

Due to the variation in climate, topography and vegetation, Nepal has a diversity of ornamental plants which could be scientifically cultivated to promote export oriented business. The flower and orchid industry is presently concentrated in the Kathmandu valley. The commercial development of floriculture is still a very early stage of development. Out of nearly 25 flower growers, only 3 have entered export business in recent times. The development of tissue culture initiated by the National Herbarium and Plant Laboratory at Godavari is opening up opportunities for mass production of flowers which could be exported from Nepal. Already tissue culture method pf propagation has been successfully developed in the production of orchids and other cut flower species carnation and chrysanthemums have also been similarly developed.
Prospects for the development of floriculture business are excellent especially for the following species of orchids: cymbidiums, dendrobiums, calanthe, ceologyne. Similarly in other cut flowers carnations, gerbera, rose, gladiolus primulinus, iris polyanthes, chrysanthemum, narcissus tazella offer very good prospects. It is also feasible to introduce the following varieties for commercial development in Nepal: Exotic orchids - paphiopedilum, cattelya hybrids, arachris, epidendrons, mokara, oncidium and odontoglossums; exotic cut flowers - tulipa. anthurium, alstroemeria, freesia and gysophilila.
Foreign collaboration for the development of floriculture to provide technical know-how for cultivation of flowers is required to meet the standards demanded in international markets and to provide guidance in market identification and development. The availability of direct flight connections to Frankfurt, London, Dubai, New Delhi, Singapore and Hongkong offer good prospects for the development of a profitable export oriented floriculture business in Nepal.

XII. PROCESSING OF SPICES

Nepal produces a large variety of spices such as ginger, timur, large cardamon, turmeric, medicinal spicy herbs, himali cummin, cinnamon, garlic and a variety of chillies. Most of the spices cater to domestic demand and some items like chille, tumeric, garlic, ginger and cardamon are exported to India and other markets in a raw form. The estimated production of major spice items in 1990 was 92,000 metric tonnes. A breakdown according to major item is given below:

                        m.t/year
Tumeric                 29,085
Cummin and Pepper       15,229
Chillies                 5,332
Dried Garlic             5,258
Coriander                2,238
Other spices            20,798

                        Market          Value
                        potential       (US$ mn.)
Saffron                 33,000 mt.      12.6
Chille                   8,000 mt.      21.1
Cardamon oil                50 mt.      15.4
Coriander                5,900 mt.       6.5
Tumeric                  1,600 mt.       4.0

XIII. READYMADE GARMENTS

Nepal has recorded a significant increase in readymade garment exports from alow of rs. 10 mn. in 1982/83 to Rs. 1343 mn. in 1990/91. The main items exported from Nepal are cotton garments - skirts, blouses, shirts and trousers. The main market has been the United States accounting for over 90 percent of total exports. Nepal has an unique advantage to expand exports of readymade garments as quota restrictions have not been imposed by the major importing countries other than the US. Even in the case of US market quotas are limited to 3 categories (shirts, blouses and jumpers) and a 6 percent annual growth is allowed. The total permitted quota is also not fully utilised. Most garment exporters in the developing countries face quota restriction under the Multi-Fibre Agreement and they are therefore unable to expand readymade garment exports. Nepal on the other hand does not face such a problem in expanding garment exports. Nepal also has a competitive edge in the manufacture of ready garments due to the relatively low wage rates and low setting up costs of industry.
Given the above favorable position Nepal could increase readymade garment exports to over US$ 300-400 mn. within a short span of 3 to 4 years. This could be achieved by the diversification of both products and markets. Product lines could be expanded to include dresses, suits, sweaters, children's clothings, nightwear and T-shirts. Diversification into the manufacture of towels, bedlinen and similiar items would also enable Nepal to increase exports substantially. The markets have to be diversified with entry into the European markets, Japan, Australia and the emerging markets in the Newly Industrialised Countries and the Middle-East countries.
Foreign collaboration is necessary to tap to the fullest the potential for the expansion of the readymade garment industry. Foreign investors from the main marketing centres in the industrialised countries could enter into production arrangements for profitable business in this sub-sector.

XIV. CARPET WASHING

Nepal is an important exporter of hand knotted carpets. In 1990/91, 1.63 mn. sq. metres of carpets were exported with a value exceeding N. Rs. 3.7 billion. The carpet exported from Nepal are usually washed in European destinations in order to remove dirt and wool impurities, and then chemically treated to make them moth proof and open up the fibres. After washing and chemical treatment the carpets are more dense and lustrous. They also lose 20 percent of their weight due to the removal of dirt.
Due to low labour costs and saving in shipment costs due to loss of weight, carpet washing is a very profitable area for investment. Carpet washing plants could be set up in Kathmandu on a joint venture basis where prospective foreign investors could provide know-how and marketing outlets. Nepalese companies engaged in carpet production and export activities would provide the local facilities and the carpets for the washing operations.

XV. MINERAL EXPLORATION AND EXPLOITATION

The mineral resources which could be commercially exploited have been identified as limestone, magnesite, talc, dolomite, silica sands, clay, building and construction stone, iron ore and lead/zinc. Several major limestone deposits have been identified in Nepal and exploitation of some of these deposits for the manufacture of cement and agricultural and industrial lime is already underway. Prospects for the further exploitation of this resource for industry are considered to be very good especially for production of cement, agricutural and industrial lime and bleaching powder. Major limestone deposits are found in Okhara (10 million metric tonnes) Udaipur (51.4 million metric tonnes) and Surkhet (48.6 million metric tonnes). In addition to these major reserves sizeable deposits are found in Panaute, Dhankuta and other areas in Udaipur. Dolomite is known to exist in a number of areas and one large deposit has been quantified. This deposit has so far not been exploited. A large deposit of magnesite has been identified and exploited for the production of dead burnt magnesite. Talc deposits have been identified and one deposit is being exploited. Two large silica sand deposits are found in Nepal and these could be exploited for the production of sodium silicate. Large deposits of clay are found throughout the country and are being exploited mainly for the production of bricks and tiles and as raw materials for the cement industry. Stone used in the building and construction industry is available in large quantities. Exploitation is at present limited to the production of aggregates. An important marble deposit is being exploited for the production of slabs. A commercial deposit of lead/zinc has been identified and initial steps taken to exploit it. An iron ore deposit has been identified but not yet exploited. The Government has blocked land in the Terai belt for oil exploration and one foreign company was engaged in oil exploration activities.
Mineral exploration and exploitation in some of the areas identified above offer promising prospects for investments.

XVI. TEXTILE INDUSTRY

The textile industry has been identified as a basic needs industry and high priority is attached to investments in this sub-sector. Based upon a minimum per capita cosumption of 11 meters (low estimate) by the year 2000, the total requirement of textiles is estimated at 254.8 mn. meters. Installed production capacity at present is estimated at 70.5 mn. meters but capacity utilisation has been less than 50 percent. In order to achieve self-sufficiency in clothing it is proposed to encourage the establishment of several textile units, several of which would be integrated textile mills involving spinning, weaving and finishing of textiles. The production of cotton fabrics and sysnthetics and blends would be in high demand. In view of the high priority attached to this industry, investor are assured of very good conditions for profitable investment.

XVII. ELECTRICAL AND ELECTRONIC INDUSTRIES

The electrical and electronic industry sub-sector in Nepal is still in an early stage of development. According to the 1986/87 census of manufacturing industries, there were 27 firms operating in formal sector activities of which 25 were engaged in electrical industries and 2 in the electronic industries. Since the survey a few additional units have been established.
The domestic demand for electrical goods is expected to increase with the expansion of the electric power generation system, telecommunications and radio and TV broadcasting. According to the preliminary estimates significant demand is forcast for heaters, radio, TV and communication equipment and appartus, electrical appliances and house wares, batteries, wires, cables, plugs, switches, lighting fixtures and so on. Prospect for setting up industries to produce these items are therefore good.
Nepal offers very good prospects for the development of electronic assembly industries catering to esport markets. The low cost of labour would give Nepal a competitive edge over other locations in South and South East Asia. The labour force has the ability to master quickly assembly opeartions which involve use of hand tools such as screw drivers, pliers and soldering irons. In addition to the advantage of low cost labour, Nepal provides a stable environment which is conducive to dovetail assembly schedules with the production of finished goods in overseas locations on a planned basis. Assembly industries which use airfreight for import of components and export of assembled units would be feasible. The products would have a high value to weight ratio. Kathmandu, the capital has good air connection to Europe through Frankfurt, Londin and Moscow and to the Far East through Singapore, Bangkok and Hongkong.
Some of the electronic industries which could be established in Nepal are computer keyboards assembly, single and double side circuit boards, small ferrite core transformers for switching power, circuit board stuffing and test service, cable harness assembly industries requiring a high labour content.

XVIII. PHARMACEUTICAL INDUSTRIES

Nepal has a large and growing demand for drugs and pharmaceuticals which is currently being met by imports for nearly 85 percent of the requirements and the balance produced locally by 5 Nepalese producers, of whom the Royal Drugs Ltd., a public sector undertaking is by far the largest. A multinational company, Hoechst, has recently set up a plant and will be manufacturing and marketing pharmaceuticals throughout the country. The market for pharmaceuticals is estimated to be around Rs. 1000 million. Much of the demand is supplied by Indian based national and multinational companies. The demand for pharmaceuticals is expected to increase significantly over the next decade. Preliminary estimates indicate requirements of around Rs. 2000 million (1986/87 prices) by the year 2000.
Good prospect exists for the establishment of a few industries producing formulation drugs. The best areas for immediate investment are in the production of the major high volume product lines such as for anti-bacteria, analgesics, vitamins, anti-malaria, anti-pyretics, anti-biotics, anti-amoebic and anthelmintic drugs.

XIX. TOURIST HOTELS

Tourism has emerged as one of the dynamic sectors of the Nepalese economy making significant contribution to foreign exchange earnings, employment, income generation and regional development. The government accords high priority to tourism development and plans to create the necessary environment and infra-structure to strengthen the tourism industry. Tourist arrivals in Nepal have increased significantly during the past decade from a level of around 163,000 arrivals in 1980 to 255,000 in 1990. Recent projections made on tourist arrivals indicate a very steady growth to reach 475,000 in 1995, 625,000 in 2000, 761,000 in 2005 and 953,000 by the year 2010.
As against the projected arrivals and existing stocks of hotel rooms, it is estimated that there will be a short fall of nearly 1100 of 4 and 5 star standards in 1995 in Kathmandu and a few high class hotels in Pokhara which is becoming an important tourist destination. Smaller resort hotels in trekking routes in remote areas are also needed to encounter high spending tourists to visit Nepal.
A major strategy is meeting the demand for hotel rooms in Nepal is to encourage increased private investment, including private foreign investment for the development of tourist infra-structure such a s 4 and 5 star hotel and resorts. The construction and operation of hotels and resort offer very promising prospects for profitable investment.

XX. LEATHER GOODS INDUSTRIES

Nepal has 12 tanneries in operation with an installed capacity to process 7.7 million pieces of hides and skin equivalent to 30 mn. sq. ft. About 1/4 is hides (cattle and buffalo) and the rest skin (sheep and goat). The industry operates at a low level of capacity utilisation. A large percentage of the hides and skins are exported. The bulk of the production and exports are in semi-finished wet, blue and crust. In 1990/91, 2.83 mn. pieces valued at Rs. 221.5 mn. were exported. The potential availability is much higher than what is currently being utilised in Industry.
There are seven leather shoe factories in the organised sector which produce for the local market. Domestic production of leather goods such as belts, purses, wallets and jackets is still in the early stage of development.
Good prospects exist for the development of the leather industry based on exports of leather, leather goods and footwear. An important pre-condition for the development of this industry is to improve tanning technology. Already a joint venture with an Italian company is taking steps to modernise one large tannery. Another tannery is well equipped to produce quality leather required for industry. The production of shoes for domestic and export markets is a distinct possibility. Similarly, production of leather goods such as bags, belts, gloves and leather jackets are feasible with foreign technology and know-how.

XXI. TREKKING AND CAMPING EQUIPMENT

Nepal is an excellent tourist destination for trekking in the Himalayn mountains and for white water rafting in the rivers which drain down to the Terai lowlands from the Himalayan snow clad mountains. Tourist arrivals have been increasing steadily in recent years with the numbers visiting in 1990 exceeding 250,000 tourists. Projections made on tourist arrivals indicate a steady increase to 475,000 by 1995 and 625,000 by the year 2000. It is estimated that a fifth of the tourists visit Nepal to go on trekking tours. Most of the tourists who go on treks bring with them bulky gear required for trekking. Some hire them locally.
Good prospects exist to set up projects for the production of trekking and camping equipment such as sleeping bags, heavy down jackets, tents, rukshaks, ponchos, wind gloves and other related items. It would also be possible to export these products to overseas destinations as the cost of production in Nepal would be very low due to low labour cost.

XXII. DOMESTIC AIR SERVICES

The Royal Nepal Airlines Corporation (RNAC) had a monopoly of all civil domestic air services within Nepal. Domestic services are operated by a fleet of 10 twin otters and one HS 748 aircraft. There are 42 domestic airports some of which are all fair weather and some fairweather airports. Flights, especially on the most popular tourist routes, are frequently full with load factors of 70-90 percent.
The Government has recently opened up domestic air services to the private sector. Good prospects exist for the development of domestic air services by the private sector in collaboration with foreign investment especially to cater to the increasing tourist traffic to Nepal. The flight routes and their frequency will have to be negotiated and agreed upon with the Department of Civil Aviation and RNAC.

XXIII. COMPUTER SOFTWARE DEVELOPMENT AND DATA ENTRY OPERATIONS

The vast changes in computer technology and the mass production of very versatile micro-computers have made the use of computers very widespread. The particular needs of computer users are also becoming increasingly specialised creating a demand for customer designed software packages. The development of computer software has thus become a very promising and profitable business and current indications are that this trend will continue in the future. Due to costs involved in software development in many of the developed countries, there is an increase tendency among firms to purchase/develop their software needs in low cost locations in some developing countries as against in house software development. Nepal has well educated and trained manpower who could undertake the development of computer software packages to meet the special needs of individual clients. The cost of developing software in Nepal would be a small fraction of developing them in a developed country. Already one joint venture company is successfully operating such a system in Nepal. Prospects for setting up a few more software development houses in Nepal are promising. Computer software houses could undertake custom programming, tailoring software packages to operating systems of new machines and generating specialised software for various professional and manufacturing services.
In addition to software development, Nepal is also in a strong position to undertake data entry operations for foreign clients at very competitive prices. Personnel required for data entry operations are available at a relatively low cost. Facilities are also available to transmit information required for data entry operations with speed and at relatively low cost.

XXIV. JEWELLERY

The production of jewellery has been carried out in Nepal for several decades as a small scale industry. The traditional craftsmen have gain expertise and experience which have come down from generation to generation. Designs and motifs used in jewelery are influenced by Hinduism and Buddhism. The main materials used in the production of jewellery are silver, gold and semi-precious stones such as garnet, tourmaline, acquamarine turquoise, coral and amber. The jewellery industry has witnessed a steady growth in recent years. Exports of jewellery to USA, Canada, Italy, UK, Germany and Japan have shown significant increases. The value of exports however, is still very low and there is good potential to increase value several folds through increased production of silver jewellery and imitation jewelery. The availability of skilled traditional craftsmen at comparatively low cost would enable this industry to expand production with a view to export to the industrialised countries. Foreign investment is particularly welcome in providing expertise in the design and finishing of jewellery, in providing access to the market.