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Nepal is classified as a least developed country on account of a low per capita income of around US$ 170, low manufacturing in GDP (9.88 percent) and low indices in the social indicators of development. The landlocked nature and the rugged mountain terrain of a large part of the country add to the economic rigidities of Nepal.
Nepal has embarked on a programme of planned economic development as far back as 1956/57. Seven development plans have been implemented and the eighth plan covering the period 1992-97 is now in the final stages of preparation. In line with the philosophy of the new government which assumed office in 1991, the needs of rural areas and backward regions will receive the highest priorities in the Five Year Plan which is now being formulated.
The plan seeks to achieve a higher rate of susteained economic growth. Accordingly a growth rate of 5.1 percent per annum has been estimated for the eighth plan period. In working towards this target greater emphasis will be given to the participation of the private sector and the involvement of the people at the community level. Greater efforts will also be directed towards increasing the productivity of labour and efficiency of the capital.
The total investment outlay for the plan period is estimated to be Rs. 166,220 million, of which Rs. 106,323 million will be invested by the private sector and the balance of Rs. 59,897 million will be invested by the public sector. The share of agriculture in total investment is expected to be around 26 percent while industry will account for 8.8 percent.
Of the total gross investment of Rs. 166,230 million, 56 percent will be financed through national savings whilst the balance will constitute foreign assistance in the form of grants and loans.


The new Government elected to office on the basis of multi-party elections has expressed a strong committment to achieve optimum growth of national production and its equitable distribution. Several new policy measures have been adopted to stabilise the economy and pave the way for accelerated economic and social development. Monetary policy is being fine-tuned to increase domestic resource mobilisation, enhance efficiency of capital and provide credit to the priority and productive sectors. Steps are also being directed towards maintaining satisfactory balances in internal and external payments. In the field of industry and commerce government policy is aimed at giving the private sector a dominant role. Private initiative and enterprise is expected to increase efficiency and productivity in industrial and commercial operations. The government's role will be that of a facilitator providing infrastructure facilities and a conducive environment in which the private sector could perform effectively. Private foreign investment will be encouraged to supplement the efforts of local investors. The trade policy will be directed towards reducing the trade imbalance towards improved import management, export promotion and diversification. An export processing zone will be established to encourage 100 percent export oriented investments. In addition bonded warehouse facilities and duty draw back schemes will continue to be opearted to facilitate export oriented production. The overall thrust of trade policy will be based on a liberal market driven strategy.
The liberal economic policies are being further strengthened and reinforced by the implementation of the partial convertibility of the Nepali Rupee. Under this arrangement 75 percent of the foreign currency earnings through exports or services are converted at a market determined rate by the commercial banks and the balance 25 percentsold to the Nepal Rastra Bank at an official rate. Importers can obtain their foreign currency requirements at the market determined rate. Foreign currency for the import of petroleum products, life saving drugs and its raw materials and industrial machinery will be provided at an official rate.


Gross domestic product which increased at a very slow pace in the early period of modern development has picked up in recent years. GDP increased by 2.2 percent per annum in the 1975-80 period, 3.9 percent in the 1980-85 period and 4.4 percent in the 1985-90 period. In the fiscal year 1989/90, GDP at constant 1974-75 prices increased by 4.01 percent and stood at Rs. 30,745 million.
The population in Nepal in 1990 was estimated to be 18.9 million. Per capita GDP was Rs. 4746 at current prices and Rs. 1582 at constant prices (1974/75).


Nepal is still in a very early stage of industrial development. The contribution of the manufacturing sector to Gross Domestic Product is estimated to be around 9.88 percent. Industrial development received priority attention only in recent years. From 1950 to around 1980 industrial units which stood at 15 in 1950/51 increased to 4903 by 1981/82. However, most of these were engaged in traditional industries using simple technology. Over 94 percent of the industries enumerated in the 1981/82 census were categorised as cottage industries. Since the early 1980's several modern industrial enterprises in the medium and large scale categories have been established. The 1986/87 census of industry provides an overall picture of the state of industrial development in more recent times. The table below enumerates basic data on manufacturing establishments covered by the census: It is seen from this table that the total number manufacturing establishment were 9353, up from 4903 recorded in the 1981/82 census. It is however, important to note that in both census figures a large number of units in the grain milling sub-sector were ehgaged in service operations and cannot strictly be counted as manufacturing units. In the 1986/87 census the number of such grain milling units was estimated to be 5726. If adjustment is made for this the total number of manufacturing establishments would be 3633. The manufacturing activities are concentrated mainly in light industries. Intermediate and capital good manufacturer have so far made very limited progress. The largest number of industrial units are in grain milling, vegetable and animal oils, textiles and garments, carpets, wood products, printing, bricks and tiles, cement and metal products sub-sectors. In terms of gross fixed assets grain milling, textiles and garment, cement, chemicals, cigarette, sugar, wood products, paper products, printing, bricks and tiles, iron and steel, jute and dairy products assume importance. In the public sector large scale industries in cement, brick and tiles, cigarettes, leather, sugar, textiles, jute, paper & pharmaceuticals account for a large share of gross fixed investment and number of persons employed.
Since the industrial census of 1986/87, over 4000 new industries have been registered with an envisaged investment of Rs. 17.3 billion. Among those some of the large industries now in operation include bricks and tiles, acrylic yarn, canvas shoes, knitwear, vegetable ghee, stainless steel and beer. Other large industries under construction include spinning mills, pharmaceuticals, lead and zinc, cement. textile mills, rubber tyres and tubes and vegetable ghee.
The industrial policy has been greatly liberalised and made transparent. Licensing for the establishment, expansion and modernisation of industries is required only for industries concerning security, public health and environment. Industries involved in the production of conventional and modern weapons, ammunition, gun powder and explosives, security printing, currency and minting coins fall under the category of security industry. Industries which affect the public health and the environment include cigarettes, bidi, leather processing, beer and liquor, pulp and paper, cement, clothes, wahing and dyeing, bitumen, chemicals, fertiliser, lubricating oil, foam, carpet washing, soap, tyres and tubes, LPG gas, petroleum products and mineral and forest based industries. A decision on an application made to establish these industries would be given within 30 days. For all other industries a license is not required. However, all industries should be registered with the Department of Industry.


Nepal is basically an agricultural country with the agriculture sector accounting for 56 percent of gross domestic products and providing employment to 90 percent of the labour force. Agricultural production is very largely subsistence oriented with food production aimed at achieving self-sufficiency. The cultivanle land area is estimated to be 26,533 sq. km. roughly 18 percent of the total land area of the country. The major concentration of agricultural land is in the Terai region.
The principal crops grown in Nepal are rice, maize, wheat, millet, barley, cotton, sugar cane, oil seeds, tobacco, jute and potatoes. Food grain production in 1990/91 was estimated to be 5.8 million metric tonnes which is above the national requirements. Among the agricultural exports, pulses, niger seeds, cardamom, tea and medicinal herbs assume importance. Fruit and vegetable production are widespread throughout Nepal.
The annual production, productivity, number of holdings and area under cultivation of the principal crops are indicated in the table below.
Animal husbandry is an integral part of the Nepalese farming system. Cattle, buffalo, and goat are the common livestock. Others include sheep, pig, duck and chicken. The livestock population according to geographic zones is indicated in the table below.


The total trade turnover of Nepal has grown significantly in the recent past from around Rs. 14 billion in 1986/87 to Rs. 30.3 billion in 1990/91. The value of exports in fiscal year 1990/91 was Rs. 7.5 billion and imports Rs. 22.8 billion leaving a trade deficit of Rs. 15.3 billion. The major items of exports from Nepal continue to be carpets, readymade garments, hides and skins, pulses, niger seeds, handicrafts and silverware and jewellery. The major items of imports were machinery and parts, petroleum products, raw wool, fertilizer, thread, electrical goods, transport equipment, soyabean oil, steel billets and pharmaceuticals.
Statistical Information on the major trading partners and the major commodities traded is given in the tables which follow.


                                Rs. Mn
(hand knotted woolwn)           3701.99
Readymade garments              1343.57
Jute & jute products            1343.57
Hides and skins                  277.70
Pulses                           241.67
Vegetable oils                   215.00
Oil cake                          87.50
Niger seeds                       86.50
Catechu                           76.65
Ginger                            61.40
Handicrafts                       49.18
Silverware and jewellery          44.67


                                Rs. Mn
Machineries and parts           2657.54
Petroleum products              1602.63
Raw wool                        1226.18
Transport equipment,
vehicles, spares                1051.15
Pharmaceutical products          974.73
Fertiliser                       940.03
Thread                           802.83
Electrical goods                 651.73
Textiles                         633.19
Cement                           488.56
Soyabean oil                     440.88
Billets                          413.68

Source: Trade Promotion Centre


Nepal is a tourist's paradise with an infinite variety of interesting things to see and do. From the lofty snow capped Himalayan mountains of Everest, Kanchanjunga, Annapurna, Dhaulagiri and many other peaks, to the populated valleys, and the forested plains where the tiger and the rhinoceros roam, forest full of wild life, birds and flowers, to shrines, temples, and palaces with ageless sculptures and legend, the country provides the tourist with a fascinating mix of unparalleled natural beauty with a rich and ancient civilisation. Trekking, white water rafting and mountaineering are popular tourist activities.
Many tourists visit Nepal in ever increasing numbers. In 1980 around 163,000 tourists visited Nepal whilst in 1990 the number had increased to around 255,000. Tourist arrivals in 1991 had increased to 273,087. Western Europe countinues to be the prime tourist market followed by Asian region and North America. The tourism industry is an important source of foreign exchange earnings. In 1990/91 it is estimated that Rs. 2047 million was earned from this industry. It also generates employment opportunities for a large number of persons.
The government plants to implement a liberal tourism development policy aimed at attracting a larger flow of tourists who will spend more in the country by lengthening their average stay in the country.


Nepal has opened the doors to foreign investment in comparitively recent times. Within a short period, however, 109 foreign investment projects and 27 technical collaboration projects have been registered. The foreign investment projects are mostly in readymade garments, mineral exploitation, chemicals, tourist hotels and restaurants, specialised services, banking and in food and beverage industries. These investments have come mainly from India, USA, Switzerland, Germany, Japan, UK, Denmark, France, Phillipines and Australia. The technical collaboration projects are in electronics, chemicals and food and beverage industries and the collaboration has come mostly from Japan, Republic of Korea, China, India, USA, Hongkong, Thailand and Germany.


Nepal's development efforts are strongly supported by the international community. At the 11th meeting of the Nepal Aid Consortium held in Paris in 1992 donor countries and international finance agencies pledged over Rs. 19,000 million for 1992 to finance economic and social development programmes. The aid consortium meeting was attended by Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Switzerland, Sweden, United Kingdom, United States of America, the Asian Development Bank, European Economic Community, International Monetary Fund, United Nations Development programme, Organisation of Economic Cooperation for Development, International Fund for Agricultural Development, Kuwait Funf dor Development, Saudi Fund for Development, UNCTAD and the World Food programme.
The assistance extended by the donor countries and the international finance institutions is a strong measure of the confidence the international community has in the development efforts pursued by Nepal.


Theoretical waterpower potential of Nepal's rivers, based on average flows, has been estimated at 83,000 MW. Sites which are technically feasible for development could yield an estimated 45,000 MW of installed capacity and about 95% of this could, based on the experience of past evaluations, be expected to be economically viable. Furthermore, the regional electrical systems to which Nepal's surplus could be exported are likely to benefit more from development of the prime sites at relatively low capacity factors.
However, Nepal has so far been able to utilise only a small fraction of this potential resource. By the end of 1991 the total power generating capacity of the country reached 288.59 MW of which 81% is hydro-based.
Systematic and planned development of this major resource started only very recently. It was in the early sixties that Nepal started collecting data on surface flows. Since then surface water and clinatological records have been systematically collected, a master plan for irrigation and hydroelectric power for all of Nepal prepared, investigations on ground water potential of the country started, lan use surveys carried out to ascertain the potential irrigable land area of the country and a comprehensive regional hydrological study of Nepal completed.
Simultaneously irrigation facilities have been developed, supply of drinking water increased and flood control and watershed management projects initiated. A number of medium sized hydroelectric projects such as Kulekhani I and II, Trishuli, Devighat, Gandaki, Sunkoshi, Panauti, Marsyandi and Andhikhola have been completed and commissioned. Moreover, in the last few years a number of small and micro hydroelectric projects have also been increasingly supplementing the energy needs of the mountain and hill regions.
Preliminary studies have identified the potential for over half a dozen medium and large hydoelectric projects. Some projects are of such a size that their greatest value to Nepal will be from exporting hydroelectric power to neighbouring countries. In addition to power generation, some of the identified projects can bring enormous benefits in terms of irrigation, flood control and inland navigation beyond the Nepalese territory.
Typical of these projects id the Karnali (Chesapani) multipurpose project with an estimated capacity of over 10,000 MW and the ability to provide a high degree of regulation to the water flows of a major tributary of the Ganga River. HMG Nepal would encourage the development of the enormous hydro-power potential on the availability of financial and technical assistance from donor countries, multilateral agencies and private investors.


There are some economic deposits of mineral resources which are being exploited, some of marginal tonnage and grade and other mineral occurences which require further investigation.
Background information of the state of mineral resources exploration and exploitation is given below:-

    A. Mineral Based Industries

    i. Chovar Limestone Deposit Kathmandu District, Bagmati Zone 13.5 million tonnes of cement grade limestone exploited by Himal Cement Co. with a capacity of 400 tpd.
    ii. Bhainse Dhoban Limestone Deposit Makwanpur District, Narayani zone 8 million tonnes exploited by Hetauda Cement Industries Ltd. capacity 750 tpd.
    iii. Udaipur Limestone Deposit Udaipur District, Sagarmatha Zone High grade limestone reserve of 70 million tonnes to be exploited by Udaipur Cement Industries Ltd. 800 tpd plant.

Kharidhunga Talc Deposit Dolakha District, Bagmati Zone a reserve of 303,000 tonnes of talc is being exploited by Orind Magnesite Ltd.
Ganesh Himal Zinc-Lead Deposit Rasuwa District, Bagmati Zone 850,000 tonnes of proved and a total of 2.56 million tonnes of all category of sulphide ore containing 15.99% Zn and 1.29% Pb with 31.53 g/ton of silver have been established. Nepal Metal Co. Ltd. has started the development of a mine located at 13,500 ft. altitude.
Kharidhunga Talc Deposit Dolakha District, Bagmati Zone: A reserve of 303,000 tonnes of talc is being exploited by Orind Magnesite Ltd.
Jgimara Limestone Deposit Dhading District, Bagmati Zone: 0.95 million tonnes of chemical grade limestone is mined by Agriculture Lime Industry.
Godavari Marble Deposit Lalitpur District Bagmati Zone: A probable reserve of 625,5000 cu. m. od white, brown and pink marbles is exploited by Godavari Marble Industries Ltd.

Small Industries
- Mini cement plant (Triveni and Annapurna Cement Plants);
- Copper from Wapsa, Gyazi and Okhrabot mines;
- Semi-precious stones (Tourmaline, Beryl, Garnet etc.) from Sankhuwa Sabha, Jajarkot and Dhading Districts;
- Talc from various small deposits;
- Peat and gas in Kathmandu valley;
- Brine water (salt) from Narshing Khola of Thakkhola region;
- Slate, stone, boulder, gravel, sand and clay in various parts of the country.

B. Economic Deposits of Mineral Resources
Pulchowki Iron Ore Deposit Lalitpur District, Bagmati Zone: 10 mn. tonnes of reserve with 54.58% iron. Feasibility of a 54,000 tonnes per year capacity mini-steel plant has been completed. At present, the iron ore is being tested for its suitability to produce sponge iron.
Okhare Limestone Deposit Makwanpur District, Narayani Zone: 10 mn tonnes of cement grade limestone have been proved as a future resource for Hetaunda Cement Industries Ltd.
Surkhet Limestone Deposit Surkhet District, Bheri Zone: 30 mn. tonnes of cement grade limestone at Chaukune have been proved.
Dhankuta Limestone Deposit Dhankuta District Kosi Zone: 10 mn. tonnes of cement grade limestone have been proved.
Kanchikot Limestone Deposit Argakhanchi District, Lumbini Zone: 8.26 mn. tonnes of cement grade limestone have been estimated.
Natural Gas Deposit Kathmandu valley, Bagmati Zone: 47.6 mn. cu. m. reserved proved in 4 sq. km. area: Exploration in additional 22 sq. km. prospective area is underway.
Karra Khola Silica Sand Deposit Makwanpur District, Narayani Zone: About 3 mn. tonnes of silica sand suitable for ordinary glass have been proved.
Udaipur Dolomite Deposit Udaipur District, Sagarmatha Zone: 4.84 mn. tonnes of dolomite have been proved.
Construction Materials in rivers and terrace of southern foothills: a huge resource, practically inexhaustible of boulders, gravels and sand has been explored.
Polymetallic Pyrite Deposit 3 mn. tonnes of pyrite reserves with 0.3 to 0.7% Cu-pb-Zn and 12% S and minor quantity of gold occur at Bering Khola, Jhapa District.
Iron Ore: The prospecting work carried out at Thosay, Ramechhap District, Labdi, Tanajun District and Jirbung, Chitwan District, Chitwan District has revealed a reserve upto 8 mn. tonnes of 30 to 65% iron.
Magnesite: 20 million tonnes of medium to low grade magnesite reserve is found at Kampughat, Udaipur District.
Talc: 13,000 tonnes of talc reserves are estimated at Gaihat, Chitwan District.
Beside these, the mineral occurrences of copper, lead, zinc, cobalt, placer gold etc. of low grade and tonnage are reported from many parts of the country.

C. Mineral Exploration Projects
i. Petroleum Exploration. The geological and geophysical investigations, particularly the aeromagnetic and seismic reflection surveys carried out by the Department of Mines and Geology have indicated that the Siwalik range and the Terai belt are potential prospective areas for petroleum. Foreign petroleum companies were invited for exploration. Shell/Triton was awarded Block No. 10 in eastern Nepal in May, 1986 and drilling work has been completed by them without success. The remaining nine blocks are being upgraded with more seismic surveys under the assistance of Petro-Canada. Multinational companies are invited to participate in the exploration of the nine remaining blocks.
ii. Natural Gas of Kathmandu Valley. Methane gas is associated with the ground water of Kathmandu valley. The exploration carried out since 1980 has proved a reserve of 47 million cu.m. of natural gas upto a 300 m depth in an area of 4 sq. km. A model gas plant with a capacity of 500 cu.m./day is supplying gas on an experimental basis to some government organizations since 1983. Active exploration is continuing to assess the total prospective area of 26 sq. km. upto a depth of 600 m. A total of 500 million cu. m. of natural gas is estimated.
iii. Gold Prospects. For the first time, gold was located in the bed rock by the geochemical prospecting works carried out by the Department of Mines and Geology at Lungri Khola of Rolpa District. The potentially prospective bell is 30 km long. The gold bearing horizons are 3m to 4m thick with an extention of 30 km to 40 km. At places the grade may attain upto 40 g/t. More detailed exploration is continuing.
iv. Uranium Prospecting. Uranium prospecting is being carried out systematically in the Siwalik range. The uranium mineralisation observed in Udaipur, Sindhuli and Makwanpur Districts are confined to small lenses of 25 cm to 200 cm long and thickness of 2 cm to 40 cm. Final analysis of the various samples and intrepretation of data are to be completed in next two years.
v. Phosphorite. The prospecting works carried out in Far Western Nepal have revealed a phosphorite belt of 50 km long from Dhikgad of Baitadi District to Tarugad of Bajhang District. The phosphorite horizons of 70 cm to 4.7 m thickness contains 5% to 32% P.O. The phosphorite has low average phosphate content and less solubility. Laboratory tests are being carried to upgrade the phosphate content or to use as fused magnesium phosphate.
vi. Semi-Precious Stones. Semi-precious stones such as garnet, tourmaline, aquamarine, etc. are being mined by private entrepreneurs in Sankhuwa Sabha District. Prospecting works are underway for ruby occurence in Dhading District and semi-precious stones in Jajarkot and Taplejung Districts.
vii. River Boulders and Gravels. The Department has initiated systematic exploration of river boulders and gravels which are important and inexhaustible mineral resources of Nepal. The detailed survey completed from Jhapa District in the east to Banke District in the west has shown nine potentially productive areas of river boulders which are of exportable quality to neighbouring countries.
viii. Lead-zinc Prospect. The Department is carrying out prospective work since 1985 at Phakuwa, Sankhuwa Sabha District. The lead-zinc mineralization zone extends for 1300 m strike length with an average thickness of 1 meter. A reserve of 2.17 million tonnes is estimated with an average combined (pb and zn) grade of 4%. Further geochemical and geological survey and trenching work will follow.

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Ministry of Industry
Foreign Investment Promotion Division
Singha Durbar
Kathmandu, Nepal
Tel: 216692
Fax: 220319
Tlx: 2610MOI NP

Copyright 1996 by Foreign Investment Promotion Division, Ministry of Industry, HMG

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