Summary of CEAN Business Environment in Nepal 2024
The Chinese Enterprise Association of Nepal (CEAN) has recently released the third edition of The Business Environment in Nepal report in May 2024. The report outlines the potential and challenges Chinese entrepreneurs face in Nepal's business environment, particularly in the construction division. It incorporates examples from case studies as well as a SWOT analysis of business aptitude in Nepal.
This report focuses primarily on the challenges and possibilities that could further improve the bilateral relationship between Nepal and China. The first half of the report provides an overview of the Nepalese Business Environment while the latter half focuses specifically on Nepal’s energy and airline sectors and case studies.
PEST (Political, Economic, Socio-cultural, Tech) SWOT analysis
The report emphasizes Nepal’s potential for economic growth by highlighting factors such as streamlined approvals and policies to create a more FDI-friendly environment as well as its natural resources and a growing digitalization sector. It focuses on how sectors like technology, and green energy are underdeveloped but have the potential to be revolutionalized through investments and resources from Chinese businesses and Nepal.
Challenges faced by Chinese enterprises to grow and foster in Nepal have been summarized as follows:
Political landscape: a complex situation that can create uncertainty in investors
High poverty and equality: Income disparities may affect market dynamics
Capital formation: Limited capital formation due to trade imbalance
Inadequate infrastructure: Disrupts and poses obstacles for economic growth and investment
The stagnant nature of the Nepalese economy
Specific Business Environment
The report overviews two major industries in Nepal: Energy and Airlines industry. In the Energy sector, the stress is on hydrogen fuel as the future and utilizing surplus power and producing hydrogen fuel for Nepal. The report also highlights progress made in the double taxation avoidance agreement with China.
Compared to the 2023 CEAN business report, which heavily stressed on revising existing labor laws on flexible hiring and firing policies, this year’s report has provided a satisfactory reduction in challenges to labor permit and technology transfer.
You can read our summary of the 2023 CEAN Business Environment in Nepal report here
In the airline industry, the report states that the bilateral agreement between Nepal and China signed October 2023 CE prompts 98 flights per week between major cities such as Lhasa, Chengdu, Kunming, and Guangzhou to Kathmandu as compared to the previous 70 flights limit. It also stresses on completion of two international airports: Pokhara International Airport and Gautam Buddha International Airport.
However, it also highlights that Pokhara and Gautam Buddha airports are unable to operate at full capacity and have encouraged investors to explore opportunities to invest around these airports to promote the tourism sector. The report also provides specific challenges in the airline industry from political instability to high operational costs.
Case study
The final section of the report provides the case of a Chinese road construction company in Nepal where it outlines 10 major challenges faced by the company. These 10 challenges range from contractual risks, taxation risks, employee factors, road maintenance costs and so on. Miscommunication, between employees and employers or construction companies and government agencies, has been a recurring challenge for the Chinese company in all these challenges. E.g. when describing employee engineer factors, the report highlights:
“ A notable point of concern is the evident difference in management philosophies between foreign and Nepalese engineers. Disagreements in such cases often lead to delays in approval procedures and processes. Furthermore, frequent personnel changes among engineer staff exacerbate the situation. New engineers coming on board may choose to alter or reject existing approval procedures, introducing new ones. This dynamic introduces uncertainties and disrupts established workflows, resulting in delays in construction activities and overall prolonged completion timeline for the project.”
Overall, compared to last year’s CEAN business environment report, this year they have listed major opportunities and future direction for Chinese enterprises to seek opportunities in energy, more so in agriculture. There should be more developments made in this sector in the coming year.
** The summary is prepared by Lakshana Rana, a Research Intern at The Araniko Project and a current undergraduate student in Language and Culture at Chulalongkorn University.
** This is the summary of the report. You can download the full report here
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