Business Climate Profile

A healthy business and investment climate is essential for the success of private sector led
economic growth. There have been improvements in Nepals business environment with the end
of the ten year insurgency, and particularly the successful completion of elections in 2013 and
the subsequent formation of a constituent assembly. A review of the countrys performance in
global indices, as can be seen in Table 1, indicates a gradual improvement in its business
environment.
Table 1:
According to the Doing Business Report for 2016, Nepal is ranked 105 out of a total of 189
countries, a steady improvement from its rank in 2011. While the rank has dropped in
comparison to 2013, this is due to increased number of countries in the index and not due to
decreased performance.13 While Nepal lies below the global average in terms of doing business,
it has been on an improving trend and is steadily moving towards a better business environment.
Under the Doing Business Index, while Nepal is ranked well below global average in seven
areas, it is ranked above the global average in other areas such as registering property, getting
credit, and protecting investors, and is close to the global average in areas such as, starting a
business and getting electricity.
Nepals rank in the Global Enabling Trade Index,14 has improved to stand at 116 out of 138
countries in 2014 from 118 out of 125 countries in 2011. Similarly, there have also been
improvements in Nepals performance in other indices such as Corruptions Perceptions, Global
Competitiveness, Logistic Performance, and Global Peace, further indicative of an improving
business environment.
The Government of Nepals (GoN) steps to promote and facilitate Foreign Direct Investment
(FDI) by introducing appropriate policies and legal arrangements to create an enabling
environment for investors is also a step in the right direction. As of FY 2012/13, a total of 317
companies were approved for foreign investment in Nepal, bringing up the total number of
companies approved for foreign investment to 2,652 and total FDI to NPR 95.08 billion (approx.
USD 950 mill). Most of the investments are directed towards manufacturing, service or tourism
sub categories. The key trading partners for Nepal are India and China. With investments worth
NPR 1.13 billion (approx. USD 11 mill) up to the FY 2012/13, Norway ranks in the top fifteen
investors in Nepal.15 A review of foreign investment to Nepal in consecutive years, as shown in
Table 2, also show cases a growing trend. FY 2012/13 has shown a significant improvement in
the FDI flows to Nepal.
Table 2: Foreign Investment from FY 2008/09 to FY 2012/13
PESTEL Framework

A brief analysis of the business climate in Nepal using the PESTEL framework, which highlights
the positives as well as negatives in the business environment, has been provided below.
Political Factors
A certain level of political development has taken place in Nepal after the decade long conflict
and the political transition faced by the country. As can be seen through the Global Peace Index,
the countrys rank has seen a considerable improvement from 95 in 2011 to 76 in 2014. A few
key factors resulting in the improved business climate have been listed below:
i.

ii.

iii.

The Maoists, who were a part of the ten year insurgency, have come to the larger fold
of parliamentary democracy. Former fighters have either being integrated within the
National Army or compensated under different programs.
The successful conclusion of nation-wide elections in November 2013 and the
establishment of a new government and Constituent Assembly have sent a positive
message of stability to potential investors to Nepal. Post 2013 elections, there has
been a significant decrease in the frequency of strikes and demonstrations within the
country.
The current coalition government holds a positive attitude towards FDI, which is
considered an important aspect for economic development. Efforts are being made to
ensure an investment-friendly environment in Nepal, with the GoN ready to introduce
policy reforms and committed to ensuring the security of foreign investors in Nepal.
The current government in its bid to increase FDI in Nepal is considering to open
previously FDI restricted sectors. Some of these sectors, as identified in a draft of the
Foreign Investment and Technology Transfer Policy, are motion pictures, travel
agencies, trekking agencies, water rafting, pony trekking, horse riding, tobacco and
alcohol, internal courier services, atomic energy, tourist lodging, poultry farming,
fisheries and bee-keeping. In sectors such as multi brand retail stores, investment
above NPR 5 billion will be required with prior requirements of similar operations in
two other countries. These actions are also in keeping with the countrys
commitments to the WTO in 2004 where Nepal promised to open 11 sectors with a
maximum foreign equity condition ranging from 51 - 80 %.17

Economic Factors
Nepals GDP growth has been hovering around the 4% mark for the last few years. Although
Nepals GDP saw a sluggish growth of 3.85% in FY 2012/13, the Nepali economy is projected to
grow at 5.48%18 in FY 2013/14. The improvement in Nepals GDP growth can be attributed to
favourable monsoons, continued strong remittance flows, and the adoption of a full budget.19
Some of the factors that have contributed towards cushioning the Nepali economy are listed
below:

i.

ii.

iii.

iv.

Service sector: This sector attracts one of the highest amounts of foreign investment
in Nepal. A high growth rate in service sub-sectors such as transport, hotel and
restaurants, health and social services, and communication have also positively
influenced economic growth.
Remittances: Remittance is one of the largest sources of foreign exchange inflows,
comprising of approximately 26% of GDP in 2012/13, making Nepal the third highest
remittance recipient (in terms of percentage of GDP) in the world.20 While
remittance inflows have been on an incline, their contribution towards GDP will be
close to 23% in terms of projected GDP for FY 2013/14.21 Increased remittance
flows have led to higher disposable incomes among the Nepali population. Income
from remittance is mostly channelled into consumption and only 2.4% of remittance
inflows are used for capital formation.22
Financial sector: While penetration of commercial banks and financial institutions
has increased in the economy, the monetary growth stemming primarily from
remittances has led to excess liquidity for financial institutions. The financial sectors
underdeveloped capacities, and weak supervision and monitoring mechanisms, has
resulted in less than optimum translation of remittance influx into sound credit
opportunities, which can fuel further growth for Nepal.
Private sector: The private sector has been a major engine for economic growth in
Nepal creating job opportunities and facilitating employment. The private sector is
dominated primarily by small non exporting enterprises, with the two primary
industries being manufacturing, and hotels and restaurants. However despite its
significant contributions to the GDP, the private sector suffers from a significant lack
of transparency.

Social Factors
i.

ii.

Population: According to the census in 2011, over 57% of the population falls into
the 15- 59 age group category. This alludes to the abundance in workforce as a result
of a large active population. A comparison of labour force participation rate, which
identifies the percentage of the population aged above 15, and economically active,
indicates that Nepali has one of the highest labour force participation rates in the
world standing at 83%.23 The labour costs in Nepal are generally below regional and
global standards, whereas the literacy rate stands at 65.9%. As per the last Enterprise
Survey carried out in 2009 the percentage of skilled labour stood at 64% of the total
workforce.24
Migration: Migration to foreign countries, over the past decade, has increased to
5.42% of the active workforce. In spite of a significant migration, labour in Nepal is
still abundant. There is however a gradual decrease in the pool of skilled workforce.

iii.

Consumerism: There is a growing middle class as well as disposable income, a

result of the increase in remittances entering the economy.

Technological Factors
The Government of Nepal has initiated a number of efforts to strengthen the use and
development of information technology in the country.
i.

ii.

iii.

iv.

The National Information Technology Centre was established in 2002 to develop and
promote the Information Technology sector in Nepal, as identified in the GONs IT
Policy in 2000. Similarly, the IT Park envisioned in the GONs IT Policy for 2000 is
expected to come into operation in the current year. The IT Park has been established
with the aim of developing software, promoting IT based businesses, and providing
ITES (IT enabled services); however the IT Park has not been able to attract a good
number of IT companies and IT entrepreneurs.
With the IT sector becoming a vital and integral part of doing business, the GoN is
committed to develop its IT infrastructure. The E-Governance Plan was initiated in
2008 and covers e-health, e-agriculture, e-education, and other areas. While these
policies are in place implementation has still been slow.25
Due to the availability of skilled computer engineers, Nepal has a number of
outsourcing companies. There has been a tremendous increase in the number of IT
solution providers in Nepal like Verisk (earlier D2Hawkeye), Deerwalk, and Cloud
Factory which are engaging professionals in providing integrated IT solutions, risk
assessment, and decision analytics.
In recent years, there has been significant improvement in telecommunication
services in Nepal with a growing number of users and adoption of new technology.
As of May 2014, the total penetration rate for telephony services stood at 90.09%,
whereas the penetration rate for data and internet services stood at 31.88%.26 The
government also adopted the Telecommunication Radio Frequency Distribution and
Pricing Policy in 2012, which is aimed at bringing in four more operators for third
generation (3G) services.

Environmental Factors
Nepal is unique in terms of its geography which allows for incredible biodiversity. Because
Nepal relies heavily on water resources from snow and glaciers, climate change is a key issue.
Unfavourable climatic conditions and natural disasters often have far-reaching adverse effects to
the agriculture sector, which is a key sector in Nepal.
Nepal is sensitive to environmental impact. Most of the environmental issues faced have resulted
from unplanned urbanization and increased population growth, some of which are listed below.

i.
ii.

iii.
iv.

Water pollution resulting from sedimentation and discharge of industrial effluents

into rivers.
Traditional sources such as firewood being a primary source of energy in the rural
areas; this often results in deforestation as well as indoor air pollution and respiratory
diseases.
Land degradation resulting from increased population pressures, improper use of
agro- chemicals and unsustainable use of land holdings.
Rise in population levels has led to increased demand for wood, and therefore an
increase in deforestation. This has resulted in habitat degradation and threatened
biodiversity.

Additionally Nepal is prone to natural disasters such as earthquakes, soil erosion, landslides, and
glacial lake outbursts due to its geography; topography; climate and geology. Lack of
consideration of these factors in infrastructural development and planning therefore leaves the
country vulnerable to high environmental risk. While the Government of Nepal has taken a
number of steps for the protection of the environment such as the adoption of the requirement for
ISO 14001 for environment management, and Environment Protection Act 1997, effective
implementation is yet to be seen.
Legal Factors
While attempts to liberalize the investment policies in Nepal began in the 1980s, the
liberalization process gained ground only after the 1990s. Several acts and major reforms in
regulations have been introduced which has not only spurred growth across various sectors, but
has also opened up key domestic sectors for foreign investment opportunities in Nepal. However,
effective implementation and enforcement of these laws and policies remain a challenge.
In 2011, an Investment Board was established with the aim to create and promote an investment
friendly environment for both domestic and foreign investors. However, the functions and
authorities of the Investment Board have not been clearly laid down in the Investment Board Act.
Although the Government has adopted various policies,27 dispute resolution mechanisms, in the
case of labor disputes, tax policy and administration, are not satisfactory and in need of review.
Nepal has also taken numerous steps to promote foreign investment by creating favourable
conditions for investors. Some of the key institutional arrangements that have been achieved are
listed below.
i.

Nepal signed the BIPPA (Bilateral Investment Promotion and Protection Agreement)
with six nations.28 The Agreements seek to promote and protect investments from
either country in the territory of the other by treating investors from these countries at
par with Nepali investors and vice versa. Additionally, it also has an elaborate dispute
resolution mechanism to help settle disputes between investors and the Nepali

ii.

iii.

government, as well as between the two governments with a view of increasing

bilateral investment.
Nepal has also entered into the Double Taxation Avoidance Agreement29 with ten
countries to avoid double taxation. This treaty avoids levying of tax by two or more
jurisdictions on the same declared income, asset or financial transaction. In addition
to Norway, Nepal has DTAA with India, Qatar, China, Austria, Republic of South
Korea, Mauritius, Pakistan, Sri Lanka, and Thailand
Nepal is a signatory to the convention on the settlement of Investment Dispute
between the State and Nationals of Others States, and a member of the International
Centre for the Settlement of Investment Disputes (ICSID), which is associated with
the World Bank. This means that in case of a dispute, Nepal has agreed on the terms
of international dispute settlement mechanisms.

Overall, the business climate of Nepal is characterized by number of high risk factors, but
increased interest in FDI in Nepal alludes to the fact that Nepal also presents a good potential for
high investment returns. While there is sufficient regulatory framework in place to guide foreign
investors in Nepal, there are gaps in the implementation of these policies.
Table
Sectorial Analysis
Following is an analysis of seven priority sectors identified for Norwegian trade and investment.
These sectors have been based on high growth potential sectors as identified by the Norwegian
Embassy, sectors identified in Nepal Trade and Integration Strategy and Nepals sunrise sectors.
The sectors detailed below support synergies between the Norwegian and Nepali economies. The
following areas were analyzed to determine the above mentioned priority sectors.
i.
ii.
iii.
iv.
v.

Analysis of financial returns. All sectors record a Return on Investment (RoI) of

above 10%.
Analysis of market potential (domestic and export potential)
Analysis of enabling environment
Analysis of risk factors
Analysis of social impact

Telecommunications and Information Technology (ICT)

The liberalization of telecommunication and IT services in Nepal began in 1995, when the
government allowed the involvement of private actors in the development and expansion of the
sector. After liberalization, there has been a major growth in the telecommunication and IT
industry. While subscriber bases and tele-density were very low before 1995, when
telecommunication and IT sectors were monopolized by the government, there is a now greater
involvement of the private sector. In the last decade, there has been significant growth in mobile
subscribers and significant decrease in landline usage. Total mobile subscribers increased from

0.2 million in 2005 to 20 million in 2014 and the number of internet users has accelerated from
0.04 million to 8 million. As of 2014, the penetration rate of voice telephony service is at 90%
and internet penetration is at 32%. Nepal fairs better than India, where the voice telephony
service penetration is at 87% and internet penetration is 17%.
There are two main telecommunication providers: Nepal Telecom (NT) and Ncell, with market
shares of about 40% and 50% respectively. NT is a state-owned telecommunication service
provider with 85% of its shares owned by the government, whereas Ncell is a privately owned
mobile operator and the first to offer GSM services in telecommunications sector. The
Swedish/Finnish TeliaSonera Holdings, which owns 80% of Ncell, is currently ranked as the
largest foreign investor in Nepal. Other telecom companies that have foreign investments are
United Telecom, Smart Telecom, Nepal Satellite, and STM Telecom. Considering the telecom
sector in Nepal is at a mature stage, investments in ITC can be geared toward mobile
technologies in the form of software applications and mobile banking.
Business Process Outsourcing (BPO) is an emerging area in Nepal. These IT entities are often
referred to as ITES-BPO (Informational Technology Enable Services-BPO). The Government of
Nepal has identified IT and BPO as one of the most promising sectors for exports. It has
potential for high growth, investment, and significant profits in the coming years and is expected
to be one of the most significant growth contributors for the Nepali economy. There are
increasing scales of operation, expansion to new markets (previously only North America; now
to EU, Asia and Oceania), and a wide array of services offered to clients.
It is estimated that there are over 6,000 BPO companies in Nepal working for international
companies around the globe. Of these 6,000 BPO companies, however, only 250 companies are
legally registered. The IT and BPO companies offer highly skilled services such as software
development, data processing, map digitization, animation, medical transcription services, cloud
computing and mobile application development. Some of the renowned IT companies operating
in Nepal are Verisk Information Technologies, Javra Software, F1Soft, Incessant Rain
Animation, and Cloud Factory.
The legal framework of the telecom industry towards foreign investors is highly favourable.
Foreign investors are allowed to invest 80% of capital in a company. A minimum of 20%
domestic participation is required. According to the technology transfer agreement, investors and
suppliers are allowed to repatriate profits.
The return on investment for this sector stands at 40%.
Tourism
Nepal is well known for its exotic, serene and adventurous image all around the world. With the
highest and most famous mountain peaks in the world, unique landscapes and important religious

and cultural sites, Nepal attracts a growing number of tourists every year. Tourism is therefore
widely known as a sector with comparative advantage and high potential growth.
In FY 2012/2013, Nepal saw an influx of 803,142 tourists, an increase of 20.6% compared to FY
2011/2012.31 In FY 2013/14, the tourist inflow was estimated to be at 861,000, an increase of
7.9% compared to the previous year. Tourism is also the second largest employment-generating
sector after agriculture, contributing 8.2% to direct and indirect job creation (1.2 million jobs).
This figure is expected to rise by 7.1% to 1.34 million jobs by 2023. Tourism is one of the
highest contributors towards foreign exchange after remittances, with its total contribution to
GDP standing at USD 1.5 billion (8.2% of GDP) in 2013. The estimated growth in contribution
for 2014 is at 8.6%.32
In order to promote the image of Nepal in the international market, a Nepal Tourism Vision 2020
was recently introduced. In addition, the government also adopted a Nepal Tourism Policy in
2009, which emphasises the importance of rural tourism, community-based tourism and home
stays. The policy is closely integrated with the poverty alleviation policy and economic and
social development, as it aims to increase employment levels.
The government aims to double its earnings on tourism and has channelled significant
investments into the aviation sector in particular. The sector is growing both in terms of number
of tourists and spending. The daily expenditure of tourists was at a three year high of USD 42.80
in 2013, an increase of 18% compared to the previous year. However, the size of Nepals tourism
cluster is still small relative to other peer countries such as India and Bhutan and the industry is
increasingly showing signs of a slide towards a low-value, high volume model. There is
however great scope for further development of high-value services that can be established
around already existing products such as trekking services to religious and recreational purposes
to Mustang and Muktinath.
Although there are promising actions by the government to promote the tourism sector in Nepal,
there are a few hurdles that need to be addressed. There is little reliable information on the
structure of the tourism industry in Nepal, or analysis of the key players in the market. The
number of travel and trekking agencies has grown rapidly and is dominated by micro enterprises,
and there is still an over-capacity of tourist accommodations.
Norwegians are currently ranked as the longest-staying visitors to Nepal, with an average stay of
25 days. 3,280 Norwegian tourists came to Nepal in 2012, among whom 2,369 were first-time
visitors. Trekking, mountaineering and adventure tourism are important markets to Norwegian
visitors. There is therefore good potential for more collaboration between the tourism industry in
Nepal and Norwegian tour operators. The potential to engage in a diverse set of activities is an
attraction in itself, and also means that there is potential for developing a number of subsectors
within the industry.
Industrial Sector

The iron and steel sector is an important one in Nepal because of its prominence as supplier of
much in demand steel products. Iron and steel industry has witnessed an investment endowment
of USD 100 million till date. With around 50 plants running with a cumulative capacity of 2
million tons, Nepal is able to cater to the relatively vast needs of a domestic market, while still
allocating the output of around ten of its biggest plants to India (equivalent to USD 147,983,000
in 2008) and Bhutan (equivalent to USD 285,000 in 2008.) The production of these steel
products is dependent on the import of MS billets, hot-rolled coil, steel coils, steel sheets, zinc,
sponge iron, and wires, among several others. Most of these raw materials are imported from
India. As Nepal does not manufacture its own (steel) raw material, the added value of the
production is relatively low, although still greater in absolute terms when compared to other
industries within the nation.33
Nepals most prominent export destinations are India, Bhutan, Egypt, Japan and Tanzania. The
first ten months of the current fiscal year has seen a 2.1% increase in the value of iron and steel
exports from the 2012/13 period procuring USD 103 million (NPR 10.11 billion,) establishing
iron and steel the number one export item.34 The export value within this industry has tripled
since 2004, however this change is mainly due to the rise in prices rather than an increase in
quantity (as industry production has not increased significantly), especially due to the
appreciation of the dollar.35 The most essential import of raw materials of the industry, which
constitute roughly 75% to 83% of total production costs, is transported from exporters in South
Korea (Posco) Japan (Nippon Steel) and India (TATA Steel and Hindustan Zinc Ltd.). Thus far,
USD 537 million (NPR 52.43 billion) worth of MS Blades, one of the top import products of the
sector, have been imported into the country. 20% of the total cost of the industry has been
identified as the value added in Nepal.36
Despite the effect of changing prices (because of dollar appreciation), Iron and steel products,
which have experienced increase in export performance, from USD 55.16 million in 2004 to
USD 149.43 million in 2008, still demonstrate high export potential. The socioeconomic impact
of the sector is deemed to be good, as it creates employment and job opportunities for more than
15,000 workers in Nepal, 5% of which comprise of women. The industry has relatively little
negative impact on the environment in its production of goods (in terms of emissions).37 A
majority of production units are located in urban areas (of Terai) rather than rural regions.
Due to a large number of growing infrastructure projects and a burgeoning real estate industry in
the domestic Nepali economy, there are great investment opportunities in the steel and iron
sector of the country.
The return on investment for this sector stands at 15%.

Energy

Nepal is heavily dependent on traditional energy resources including fuel wood, animal and
agricultural residues. Fuel wood from the forest is the largest indigenous energy resource
available. Growing concern over deforestation, indoor air pollution, use of valuable forest
products and diverted use of fertilizer (cattle dung) makes it necessary to slowly replace this
resource with other sources of energy. The most environment friendly energy resources available
in Nepal are solar energy, wind energy, and hydro energy. Each of these sub sectors have sizable
potential, therefore, the sub sectors have been classified and evaluated individually below.
The average return on investment for the energy sector stands at 18%.
Hydropower
The steep gradient of Nepals topography makes the country one of the most promising for
hydropower development. Nepal has more than 6,000 rivers and rivulets with an overall average
annual run of 225 billion cubic meters of water flowing to the south. The country possesses 2.2%
of the world water resources and about 6000 rivers with an annual discharge of 174 billion cubic
meters. Sources of water include glaciers, snowmelt from the Himalayas, rainfall and ground
water. The current state of hydropower-generated electricity production is only about 700 MW,
while the theoretical potential is about 83,000 MW. It is estimated that the economically viable
hydro-electricity generation of Nepal is 42,000 MW.
Nepal has currently one of the lowest energy consumptions in the world. The population is
largely dependent on traditional sources of energy, such as fuel wood, agricultural waste and
animal dung (about 85% of all energy consumption). The heavy reliance on traditional energy
sources provides limited opportunities for economic development in the rural area but
contributes to environmental degradation and negative health impacts. Commercial sources of
energy include petroleum products (about 9%), coal (about 3%), electricity (on- grid, about
2%) and renewable energy (about 1 %). The use of petroleum products is on the rise, accounting
for 19.14% of total imports during FY 2012-13. Nepal itself has no production of crude oil and is
increasingly dependent on imports for the supply of petroleum products to meet a rapidly
growing national demand.
The unstable political situation over many years has impeded foreign investments in the sector,
leading to the current experiences of power shortages and a growing petroleum dependency.
Availability of electricity is highly seasonal, with daily power outages (load shedding) taking
place up to 16 hours a day during winter. The situation improves during the summer with the
monsoon and the melting of ice. Approximately 70 % of Nepal's households have access to
electricity (96 % in urban areas and 63 % in rural areas, which includes about 10% from off-grid
sources). Most of the beneficiaries of grid electrification are located around the greater
Kathmandu Valley. Demand for electricity is increasing at 7-9% per year, and according to
NEAs forecast, demand for electricity will reach 3600 MW by 2027. There will also be a sharp
increase in demand for electricity in the larger South Asia region.

Nepal is dependent on private sector investments in meeting the countrys energy needs.
Concerning the establishment of new power plants, the sector is open for private development,
including foreign ownership. The Ministry of Energy has announced a new Hydropower License
Management Procedure for projects above 10 MW, but investors must be prepared for a
cumbersome process in obtaining these. There are also certain challenges in the operation and
maintenance of hydropower plants. One of the major causes of financial losses is the erosion of
turbine parts due to high amounts of sediments present in rivers. Technological advancements are
needed to improve the feasibility of future hydropower development, and in particular, turbines
need to be designed according to the specific sedimentary composition in the river.
Currently, with more than 10 major hydropower stations and more than 80 small scale
hydropower stations, the supply of hydro-electricity by domestic generation remains at 3467.93
GWh, 83% of the total supply. The remaining 17%, 792.5 GWh, hydro-electricity is supplied by
India. Domestic supply includes 1,175.97 GWh (34%) from Independent Power Producers (IPPs)
while the remaining 2,291.96 GWh (66%) is supplied by the Nepal Electricity Authority (NEA)
power stations.
Hydropower has been identified as the one of the most lucrative areas for foreign investment in
Nepal. Although there is already significant FDI in hydropower more is expected as there is huge
electricity demand in the domestic market as well as export market.
NEA annual Report 2013.
Overall, there is a great scope for private investments in the energy sector by Norwegian
companies. As one of the worlds largest producers of hydropower energy, Norway possesses the
insight and expertise needed for successful investments in the sector. In particular, Norway has
significant technological and regulatory experience with small scale hydropower which is
relevant to Nepal. Good relations have already been established between Norway and Nepal in
the sector. Many Nepalese engineers have studied at NTNU in Trondheim, and Kathmandu
University has a close cooperation with NTNU and SINTEF Energy Research. Norwegianfunded hydropower and turbine laboratories have also contributed to capacity building.
Energy is a priority sector in bilateral relations between Norway and Nepal. The Embassy in
Kathmandu is currently managing a diverse energy portfolio amounting to about USD 11 million
in annual disbursements. Nepal is also one of the main partner countries for bilateral energy
collaboration within the framework of the Clean Energy Programme.
Health Sector
The health care sector in Nepal consists of publicly and privately run hospitals primarily in urban
areas, and health care centres in rural locations. There are 123 public hospitals, 366 private
health institutions, and 205 primary health care centress currently operating in Nepal. In recent
years, the trend of health spending by Nepalese has been increasing. The spending increased by

25% - 29% in the year 2007/08 and 2009/10. In the year 2010/11 the growth slowed to 12%. The
contribution of health services to GDP in 2012/13 was 6.95%, with CAGR of 2% in the last
decade.
Nepal is known for its gynecology services, cardiac care, and orthopedic surgery, which are
considered on par with international standards. For example, eye care treatment in Nepal has
been gaining popularity in other South Asian countries, particularly India. Patients are attracted
by the affordability and high quality of eye treatment in Nepal. It is estimated that annually more
than 200,000 Indian patients visit Nepal for eye surgery and more than 1.5 million for eye
treatments. Also, with the advent of partnerships between Nepali and Indian hospitals, Nepal has
benefited from technology transfer as well. For instance Norvic hospitals in Nepal and Medanta
Medicity in India have entered into an agreement for technology transfer in health care services.
Despite these positive developments, there are still significant challenges to be addressed in the
sector.
The return on investment for this sector stands at 17%