Nepal has adopted a pro-business and investment-friendly economic policy. This has been achieved through adopting liberal economic polices and introducing a range of attractions and incentives to the foreign investors.

Most sectors of economy, except defense, tobacco-related and alcoholicbeverages. are open to foreign investment.

The Industrial Policy (1992) contemplates to supplement the industrial production through flow of foreign capital, technology and skills, and though an increased access to international markets.

The Foreign Investment and Transfer of Technology Act (1992) allows transfer of technology is all sectors, save a few cottage industries.

There is a hassle free procedure for foreign investors. The investors shall be serviced through an "one window". The investment proposals are cleared within thirty days of application.

Foreign investors are permitted up to hundred percent equity participation. This can be in the formshare in cash or kind.

Security of investment is guaranteed. Nepal is a member of the Multilateral Investment Guarantee Agency (MIGA), which provides security against thenon-commercial risks. The statutory provisions of the Nepalese law also provide security to foreign investment. There are guarantees against nationalization and for full repatriation of profit in foreign exchange. Investors are allowed to repatriate the amount received from sale of the whole or any part of the equity, amounts received as payment of principal and interest in foreign loans, and amount received under the transfer of technology.

Tax incentives applicable to foreign investors include tax holdiays in certain sectors, a low corporate tax rate, no excise except in a few products, a moderate VAT instead of sales lax, low import customs duties and only 1% dtny on capital goods and industrial raw materials, no tax on export oriented industries, and duty drawback and bonded warehouse facilities.

There is a relatively well-developed infrastructure, such as in the telecom sector. Further, investment is allowed in infrastructure projects.

There are well-developed banking and financial institutions. There is also a relatively small capita) market, which allows stock t rading.

The currency regime is liberal. There is current account convertibility and the market determines the interest and foreign exchange rate. The pricing mechanisms have been completely deregulated.

Nepal has relatively cheaper, skilled as well as easily trainable human resources.

The overall industrial environment is very peaceful. There is a congenial relations between the workers and the owners.

Nepal liesin the middleofIndia and China, two of world's most populous countries, hence two of the most potential markets.