The federal democratic republic of Nepal is among one of the land locked least developed country. Even though Nepal opened the market to foreign economy long time ago but still the foreign investment and economic transaction has been quiet less.
This paper has conducted a descriptive statistical analysis and an empirical analysis to establish the relationship between real gross domestic product and foreign direct investment stock. Using time series econometrics tests for the period 1980-2008, the empirical results indicate the existence of a long-run relationship between the determinants. Even though the relationships are positive the foreign investment has not been consistent through the years. That means definitely Nepal has lot of weakness to attract foreign investment. Some of the main reasons could be political instability, outdated foreign investment law, rigid labor regulation and poor physical infrastructure.
