In September 2012, Nepal government decided to establish an Industrial Security Force to provide security to industrial firms, particularly those operating in industrial zones.

The decision was taken after a rise in kidnappings, killings, threats and extortion targeting industrialists and businessmen by armed gangs in the post-conflict period.

At the time, militant labour organisations also posed a threat to the smooth operation of factories and industrial firms.

In early 2020, the government removed the permanent presence of Armed Police Force personnel deployed under the Industrial Security Force from several industrial areas. The personnel were redirected to border areas following concerns over the spread of the coronavirus along the borders and across the country.

They were never redeployed.

Again, in September last year, the Gen Z movement caused massive damage to industrial establishments and businesses across the country, with losses estimated at more than Rs84 billion.

The rise in vandalism, looting, arson and theft has discouraged potential new investors, while existing businesses have been compelled to operate in fear.

On July 30, protesters in Golbazar, Siraha, vandalised and set fire to several shops, including AB Mall, before security forces moved in.

The new government led by Balendra Shah has now revived the Industrial Security Force concept.

Last Friday, Nepal launched the Private Investment Protection and Promotion Strategy, which envisions establishing an Industrial Security Force to protect the physical assets of industrial and business establishments.

The strategy also calls for formulating a new industrial policy to guarantee industrial and business security.

Before the launch of the strategy, Prime Minister Shah held a marathon meeting with representatives of small and large businesses and industrialists.

Officials say that under the strategy, industrial corridors, industrial areas, special economic zones and industrial villages will be declared peace zones, with arrangements made to prevent any form of undesirable activity in industrial establishments.

“The strategy has been prepared and implemented following the damage caused to private-sector businesses during last September’s Gen Z movement,” said Netra Prasad Subedi, joint secretary at the Ministry of Industry. “The action strategies include protecting and promoting industries and businesses and attracting investment. Besides, the recent Tarai movement has also caused damage to businesses.”

The ministry has requested the relevant ministries and other government agencies to implement the strategy accordingly, he said.

“There are challenges to protecting private-sector properties,” Subedi added. “We have the strategy now to protect them. This is the beginning.”

The private sector’s morale remains low. According to a World Bank report, private investment has been weighed down by weaker investor confidence following the September 2025 unrest.

The report said private investment remained almost stagnant, expanding by just 0.2 percent in the last fiscal year 2025-26.

Weak investment reflects persistent weaknesses in the overall business environment, policy uncertainty and continuing challenges in channeling available liquidity into productive investment, according to the report.

The private sector, which contributes roughly 81.55 percent of overall national output and drives more than 86 percent of employment creation, however, remains unconvinced.

“We are the first target every time,” said Kamlesh Kumar Agrawal, president of the Nepal Chamber of Commerce. “The latest is the Tarai protest… We still can’t be fully certain that the incident will not repeat in the future.”

The Shah administration has set an ambitious target of expanding the national economy to nearly $100 billion and raising per capita income to $3,000 within five to seven years, while targeting average annual economic growth of 7 percent.

“Without taking the private sector into confidence, this is not possible,” said Agrawal, adding that the strategy is welcome and incorporates suggestions made by the private sector. “If there is anything lacking, it can be reviewed.”

To improve the industrial and business environment and increase investment, the government has made timely amendments to laws including the Industrial Enterprises Act, Foreign Investment and Technology Transfer Act, Companies Act, Special Economic Zone Act, and Public-Private Partnership and Investment Act, among others.

But effective implementation of these measures remains questionable, amid declining industrial capacity utilisation and a falling contribution of industry to GDP.

Manoj Paudel, founder and chairperson of Aadhyanta Fund Management, a Kathmandu-based private equity and venture capital firm, said the private sector has been targeted by protests for several decades, but there is no single instance in which the government has protected businesses or assured them that such incidents will not recur.

“Where is the action against the wrongdoers?” he said. “There is no single record.”

He said the introduction of the strategy was a starting point, but its implementation would determine its effectiveness in restoring the confidence of industries and businesses.

“The private sector needs the sense of security that if their business gets vandalised, the state will take strong action against it,” he said.

Adopting a zero-tolerance policy against attacks, vandalism and arson targeting the physical assets and businesses of industrial and business establishments is one of the strategies outlined in the government document.

The strategy provides for classifying industrial and business establishments according to their security risks and providing security accordingly. It also calls for mobilising quick-response or rapid-response teams based on the risk of damage to industries, businesses and private property.

The strategy also provides for designating a security focal or contact person at the nearest security unit to address the security needs of industries and businesses.

It provides for waiving applicable fees, penalties and fines, as allowed under prevailing laws and the annual budget and programmes, for industries, businesses, firms and companies that have not been renewed for a long time. The waiver would apply when they update their records, renew their registration, submit required details or deregister within a specified period.

The government also plans to amend environmental regulations and other prevailing laws to allow privately owned industrial and business structures damaged during protests or other movements to be relocated to new sites by requiring only an Initial Environmental Examination.

The government says it has formulated the Private Investment Protection and Promotion Strategy to encourage the private sector to invest with greater confidence and maintain an environment of trust, with the aim of accelerating economic development, attracting investment and generating employment.

A coordination and facilitation committee comprising government and private-sector representatives will be formed to ensure effective implementation of the strategy.

Implementation will be monitored by the Office of the Prime Minister and Council of Ministers and the Ministry of Industry, Commerce and Supplies.