Foreign Investment in Nepal

The past two decades have witnessed a profound shift in the policy emphasis on foreign direct investment (FDI) in developing countries (DCs). In a significant departure from the scepticism about the developmental role of FDI that pervaded policy thinking for over three decades during the postwar era, more and more countries have become increasingly receptive to FDI as an integral element of outward-oriented policy reforms. Despite this notable policy shift, the literature on the role of FDI in developing countries still remains both sparse and lopsided. The few available analyses have focussed almost exclusively on the experience of the middle- and upper-middle income developing countries, in particular the high-performing countries in East Asia. Policy inferences coming from this literature are of limited value for latecomers because the role of FDI vary across countries depending on changes in the process of internationalisation of production and the nature and timing of policy shifts, and the initial conditions of the given host country such as the degree of industrial advancement and the stage of entrepreneurial development.