FOREIGN-INVESTMENT IN NEPAL IN THE 1980S - A COST-BENEFIT EVALUATION

During the 1980s, like many other developing countries Nepal attempted actively to attract direct foreign investment. This article reports t he results of a survey of the foreign-owned firms in operation at the end of the 1980s. The motives of firms for their investment decisions in Nepal are summarised. The impact of foreign investment is assessed quantitatively using both financial and economic cost-benefit criteria . In general, it appears that foreign investment has been beneficial t o both the foreign investors and the national economy. Foreign investo rs from India have played a particularly important role. However, much of the national returns from foreign investment is derived from the p ayment of taxes, so that an excessively generous policy of tax incenti ves may not maximise national returns.