Nepal is a landlocked state, making accessing the market a challenge. Its primary seaport for exports/imports is Kolkata, India, approximately 460 miles from the Nepal-India border. Surface transport in and out of Nepal can be difficult. The shortest reliable road route from India to the Kathmandu Valley is 84 miles long and takes a minimum of five hours to traverse. Most cargo trucks travel a longer 175-mile, seven-hour route into the Kathmandu Valley.
The Nepali government continues to address its market access challenges, including the opening of two additional international airports, in Bhairahawa and Pokhara; however, services to both remain limited as they struggle to attract international airlines, which continue to prefer Kathmandu’s International Airport (TIA) as their main exit/entry point for Nepal. Pokhara International Airport (PRIA) has seen limited charter operations to destinations in China and other nearby destinations, but no regular international routes have been established. Sea access has improved with the addition of access via the Vishakhapatnam (Vizag) Port in India and the opening of an integrated checkpoint in Birgunj. In April 2019, Nepal signed a Trade and Transit Protocol with the People’s Republic of China, which grants Nepal alternative access to three Chinese seaports and four dry ports; however, these facilities remain unused.
The Government of Nepal (GON) claims to be open to FDI, but policy implementation is often hindered by bureaucratic delays, inefficiency, and uncertainty. Foreign investors frequently complain about complex and opaque government procedures and working-level attitudes that can be more hostile than accommodating to the private sector. Lack of government interagency coordination to address business climate issues is often another hurdle. Foreign investors must deal with a non-transparent legal system in which basic legal procedures are neither quick nor routine. The bureaucracy is generally reluctant to apply legal precedent, and businesses are often forced to re-litigate issues that have been previously decided. Legislation limits foreign investments in financial, legal, and accounting services, preventing potential efficiency gains and perpetuating regulatory red tape. The Nepali government registered a new intellectual property bill in the lower house on June 6, 2025, proposing reforms to prevent patent, trademark, and industrial property rights violations.
However, the bill remains pending following the dissolution of Parliament following the September 8 and 9 protests. The bill aims to protect well-known international trademarks by allowing original owners to file a case against violators. The existing law has a “first come, first-serve” policy for registering trademarks, which has discouraged established international/domestic brands from entering the market. The new bill under consideration also proposes penalizing companies that intentionally imitate trademarks to mislead consumers.
U.S. firms and foreign investors have identified corruption as an obstacle to maintaining and expanding direct investment in Nepal. There are frequent allegations of corruption by GON officials in the distribution and approval of permits, procurement of goods and services, and awards of contracts. Nepal’s ranking on Transparency International’s Corruption Perceptions Index (CPI) rose to 110 in 2023 from 111 the previous year, in a ranking of 180 countries.
Another hurdle is that qualified workers are in short supply. Nepal has technical manpower, but a lack of economic opportunity and low wages compel millions of workers to seek jobs overseas. Businesses often complain of having to constantly recruit and retrain new staff. Rigid labor laws make it difficult to terminate employees. Highly politicized unions commonly abrogate negotiated agreements to press new demands, adding to the challenge of retaining qualified staff. However, labor problems arising from trade unionism have subsided following the improvement in the political environment. A Labor Act enacted in August 2017 aims to make the employer-laborer relationship more systematic and ease some rigidities, including the ability of firms to fire workers in response to market demands. The Act has improved clarity on provisions related to occupational health and safety, collective bargaining, dispute resolution and reduced wages during strikes. However, it also added to the cost of doing business as many small and medium-sized enterprises (SMEs) struggle to meet the requirements of the new Social Security Fund introduced in 2018.
High customs tariffs imposed by the GON on most manufactured products increase the price of U.S. products in the Nepali market. Cheap consumer goods imported from neighboring countries also present market challenges for U.S. imports.
Nepal’s sovereign credit rating was affirmed at “BB-” with a Stable Outlook by Fitch Ratings on November 18, 2025, maintaining the second-highest credit rating in South Asia after India. In February 2025, the Financial Action Task Force (FATF) grey-listed Nepal due to insufficient progress in strengthening its anti-money laundering measures.