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Nepal is located between the two large economies, India and China. This strategic location offers unparalleled and preferential access to their markets. Nepal’s trade with India has grown in the last 10 years by around 17% per annum. The total volume of trade exceeded USD 5 billion last year.
Similarly, Nepal’s trade with China has also seen a steady increase. The trade between the two countries has increased by over 17% per annum in the last three years, reaching about USD 640 million in 2012/13. With both India and China’s economy outperforming the world economy, Nepal will focus on increasing trade volumes with these two countries in the years to come.
Nepal’s geographical location creates the potential for Nepal to become the transit point for Indo-China trade. The heads of states of both India and China have shown commitment to fostering trade and taking bilateral cooperation to a different level. Trade between India and China has increased significantly in the last decade and reaching USD 70 billion in 2014. Indo-Nepal trade via Nepal can result in time as well as cost savings. As China has already built the Lhasa-Sigatse rail line and has shown commitment to extending this line to Nepal and the Nepalese government has shown interest the North-South Highway, linking the Indian border to the Chinese border, a cargo exiting Guangzhou could reach India in as little as 10 days.
Nepal has recently emerged from a decade-long armed conflict, which concluded with the signing of the Comprehensive Peace Agreement in 2006. During the conflict economic fundamentals were weak and there was an unsatisfactory level of investment. The government, however, has been working hard to make Nepal investor-friendly. These include regulatory reforms, bureaucratic reforms, establishing business forums, tax concessions and other incentives, as well as the establishment of the Investment Board Nepal in order to fast-track investments.
In terms of reforms to attract investments, the Department of Industry (DOI) has successfully reduced the steps in the FDI approval process, the time taken to obtain the approval and the time to get a non-tourist visa. The current government is also working to amend legislation and policies to make them more investor-friendly.
Nepal's unique geography and tectonic activity allows for incredible biodiversity. This geographic diversity is favourable to a variety of metallic, non-metallic, and fuel minerals. About 63 minerals have been identified in Nepal so far (2010-2011) and the country’s reserves of limestone are estimated to be 1.25 metric tonnes of cement grade. Nepal is also endowed with dolomite, with experts estimating the reserves to be at 5 billion tonnes. Although very limited exploration has been done, experts believe that Nepal has decorative stones and gemstones such as marble, granite, quartzite, slate, tourmaline, aquamarine, ruby, and sapphire.
Nepal is also rich in natural herbs with there being in excess of 1,600 different species of medical and aromatic spices. These offer great potential for revenue generation due to the increasing demand for herbal remedies worldwide. The potential for energy generation is also vast due to the large number of perennial rivers and rivulets capable of generating electricity with an estimated electricity generation potential of about 42 GWs.