Nepal faces multiple constraints to economic growth, including low levels of foreign direct investment and poor infrastructure. Around 28 per cent of Nepal’s GDP relies on remittances from migrant workers. Nepal’s economic growth has been adversely affected by political uncertainty and natural disasters. The focus on political transition to democracy and attainment of peace has meant that inadequate attention has been given to economic and other reforms that could improve the investment climate, stimulate growth and create more private sector jobs.
A durable political settlement is key to boosting investor confidence, spurring economic growth and supporting the Government of Nepal’s aspiration to transition from least developed country to developing country status by 2022.
Australia’s trade with Nepal is small, but there is potential for growth in hydropower, tourism and infrastructure development.
Other areas in which there are increasing commercial opportunities following deregulation include civil aviation and telecommunications. Two-way merchandise trade in 2014-15 totalled A$32 million, with exports to Nepal valued at A$25 million (Source: Department of Foreign Affairs and Trade (DFAT)).
Principal exports to Nepal are vegetables and refined petroleum. Australia also exports food and beverages including wine.
A flat rate of 10 per cent Value Added Tax (VAT) is levied on all goods and services, except exempt items.
