The Negative List: Sectors Closed and Capped to Foreign Investors

Most foreign investment questions in Nepal are questions of degree. This one is binary. Section 3(2) of the Foreign Investment and Technology Transfer Act 2075 (2019) says that no foreign investment may be made in the industries or businesses set out in the Act’s Schedule, and the Schedule is a list rather than a test. There is no screening body weighing national interest, no discretionary override, and no structure that turns a listed activity into a permitted one. A holding company in Singapore does not help. A minority stake does not help either, unless the item is a cap.

What the Schedule closes

The Schedule groups the restrictions under nine heads. The Department of Industry’s own investor guidance restates them in plainer terms, and the two together give the following picture.

Area	Position
Primary agriculture and its service businesses (poultry, fisheries, bee-keeping, fruit and vegetable growing, dairy)	Closed, except for large producers exporting at least 75% of output
Cottage and small industries	Closed
Personal service businesses: hair cutting, beauty treatment, tailoring, driving instruction	Closed
Arms and ammunition, explosives and gunpowder, nuclear, biological and chemical weapons, atomic energy, radioactive materials	Closed
Real estate (construction excluded), retail trade, internal courier, local catering, money changing, remittance services	Closed; retail admits international chain stores
Travel agencies, tourist guiding, trekking and mountaineering guiding, rural tourism including homestay	Closed
Mass communication media (newspapers, radio, television, online news) and motion pictures in the national language	Closed
Management, accounting, engineering and legal consultancy, and language, music and computer training	Restricted
Consultancy services generally	Open to foreign investment up to 51%

The tourism entry is the one that catches people. Hotels, resorts, cable cars, fun parks and sports tourism are all open, and several appear on the list of activities eligible for automatic approval. What is reserved is the agency and guiding layer: the entity that sells the trek, the entity that supplies the guide, and the household-scale accommodation regime. A foreign operator can own the lodge and cannot own the outfit that fills it. That pushes the commercial relationship into contract rather than equity, and makes the terms of that contract the whole of the deal.

Caps rather than bars

Two kinds of entry sit in the Schedule. A bar is absolute. A cap admits foreign money up to a percentage and leaves the harder question — who actually controls the company — to the shareholders’ agreement and the Companies Act 2063 (2006).

The consultancy cap of 51% is the oldest and most consequential. It applies to management, engineering, legal and accounting consultancy, which between them cover a large share of the professional services an international group might want to establish in Kathmandu. At 51% a foreign investor holds a majority of the equity and none of the comfort that usually comes with it. Reserved matters, board composition and management appointment all stay negotiable, and all stay subject to Nepali company law on minority protection.

Two newer caps have been added since the Act was passed. Ride-sharing was limited to 70% foreign investment, a change the Department of Industry attributes to a Nepal Gazette notice of 2081/03/24 and UNCTAD records as a 2024 measure. The two datings do not reconcile cleanly, and the notice has not been obtained. The omnibus act authenticated on 31 March 2025 then wrote aviation caps directly into FITTA rather than leaving them to the Civil Aviation Act: 80% for international air services, 49% for domestic air services, and 95% for aviation training and maintenance organisations. That placement is a small drafting decision with a practical consequence. The Department of Industry now applies those caps at approval, rather than the regulator applying them at licensing.

Constraints beyond the list

An activity that clears the Schedule can still be unavailable. Three unrelated reasons account for most of it.

Sectoral licensing sits on top. Banking, insurance, telecommunications, aviation and hydropower each have their own regulator, their own licensing statute, and in several cases their own limits on foreign shareholding or on the number of licences available. Clearing FITTA establishes that foreign money may go into the activity. It does not establish that anyone will hand you a licence to carry it on.

The minimum investment threshold sits underneath. An activity that is open but too small to meet the per-investor floor is, for practical purposes, closed to a foreign investor as a direct equity matter.

The automatic route is a narrower list again. Roughly a hundred activities are enumerated by gazette as eligible for online approval; everything else permitted still goes through the Department of Industry in the ordinary way. Absence from the automatic list says nothing about whether an activity is open.

Unclear boundaries

Two areas produce recurring argument.

The first is the line between a closed activity and an adjacent open one. Real estate is closed; construction is not. Retail is closed; wholesale and international chain stores are not. Internal courier is closed; logistics and freight forwarding do not obviously fall within the head as drafted. The Department of Industry draws these lines from the description of the proposed activity in the project report, so the drafting of that document does real work. Investors who write a broad, aspirational scope hoping for flexibility later often find that the breadth is what draws the objection.

The second is technology transfer into closed sectors. A named practitioner account reports that the Department has approved technology transfer agreements in activities where equity investment is barred, on the footing that the Schedule restricts investment while technology transfer is separately provided for. If that is right, a foreign brand or process owner has a route into parts of the negative list that a shareholder does not. We have found no departmental notice and no decided case confirming it. Treat it as reported practice rather than as a rule.

How the list has changed

The Schedule sits in an Act, so amending it takes legislation rather than a notice. That has made it slower to move than the minimum investment threshold. Two changes since 2019 are documented: the ride-sharing cap by gazette in 2024, and the aviation caps in the omnibus act of 31 March 2025.

Both admitted foreign capital with a limit attached rather than opening or closing an activity outright, which is a reasonable guide to how the list gets adjusted next. The pressure points are visible. Several of the closed heads describe activities that were small and locally owned when the list was first drawn and are now capital-intensive. Internal courier sits alongside a logistics sector that has attracted foreign interest. Retail is closed to everything except international chain stores at a time when Nepali retail is consolidating. Neither has changed, and neither should be assumed to be about to.

Anyone reading a secondary account of the negative list should check its date against 31 March 2025 and against the ride-sharing gazette. A description written before either gets the nine heads right and the caps wrong, and the caps are where the movement has been.

If the activity is closed

There is no appeal against the Schedule. Structuring around it invites something worse than refusal: an approval obtained on a description that does not match the business can be revoked, and the revocation lands after the capital has been spent. The realistic options are contractual rather than equity — a licence, a technology transfer agreement, a management or franchise arrangement priced within the royalty ceilings, or a supply relationship with a Nepali-owned operator. Each is a different regulatory file with a different approving body, and each is dealt with elsewhere in this cluster.

Sources

1. Foreign Investment and Technology Transfer Act, 2075 (2019)

   Government of Nepal (text published by the Department of Industry) · Authenticated 2019 — in force, as amended · Tier 1 — Primary legal instrument

   Supports: Section 3(2) and the Schedule of activities in which foreign investment is not permitted, including the 51% cap on consultancy services.

   Accessed 26 August 2026

2. Foreign Investment in Nepal 2024

   Department of Industry, Ministry of Industry, Commerce and Supplies · October 2024 · Tier 2 — Official publication

   Supports: The department's own restatement of the restricted list, the 75% export carve-out for primary agriculture, the retail carve-out for international chain stores, and the ride-sharing cap attributed to Nepal Gazette 2081/03/24.

   Accessed 26 August 2026

3. Nepal — Foreign Investment and Technology Transfer Act, 2019 (2075), Investment Laws Navigator

   UNCTAD · Database entry, accessed 2026 · Tier 3 — Multilateral institution

   Supports: The nine heads of the Schedule as reproduced from the Act, and the structure of section 3.

   Accessed 26 August 2026

4. Client Briefing — Act to Amend Some Nepal Acts Relating to Improving Economic and Business Environment and Enhancing Investment, 2081

   Pradhan & Associates · 6 April 2025 · Tier 6 — Professional or news source

   Supports: The airline ownership caps introduced into FITTA by the 2081 omnibus act: 80% international, 49% domestic, 95% training and maintenance.

   Accessed 26 August 2026

5. Investment Policy Monitor — Nepal

   UNCTAD Investment Policy Hub · Entries to February 2026 · Tier 3 — Multilateral institution

   Supports: That a restriction on foreign investment in ride-sharing was recorded as a 2024 measure.

   Accessed 26 August 2026

6. Technology Transfer Regime in Nepal

   Business 360 (Nepal) · 31 December 2023 · Tier 6 — Professional or news source

   Supports: Reported practice that the Department of Industry has approved technology transfer agreements in activities closed to equity foreign investment.

   Accessed 26 August 2026