March 22, 2019 Sujeev Shakya

Will the new Acts help—or hurt—foreign direct investment in Nepal?

‘Regulation is about controlling as well as facilitating’-  An Interview for the Kathmandu Post

It’s good to see that the government is serious about bringing the much-needed reforms in the foreign investment regime. However, in the midst of this hype, we must take a closer look to new changes being made and how it will make foreign investors’ entry and exit flexible and simplify administrative process while doing business in Nepal.

Why can’t Foreign Investment Technology Transfer Act be called Foreign Investment Facilitation Act? The choice of the word itself is wrong. The amendments are not progressive as they should have been. Why should there be a negative list in the FITTA?

Prioritise facilitation

The objective of amending these acts is to ease business and facilitate investments. But our focus has always been on regulation and control. Regulation is not only about controlling, it is also about facilitating. The regulators in the country–Nepal Rastra Bank, Securities Board Nepal, Industry Department–do not realise that one of their jobs is also to make conducting business hassle-free and investors comfortable.

There is a “no welcome” attitude for FDI in Nepal. That is why I often say FDI here means “foreigners don’t invest”. We never made foreign investors feel welcome. More than legal issues, we’re harassing investors through procedural issues. If we want to execute a larger project (hotel), we need technical manpower from abroad and that should be paid in foreign currency. As per the existing legal arrangement, their remuneration can be paid only after completion of the work. Who will come to Nepal if we continue to have this system? This is where we need intervention.

If Nepal wants to execute mega projects, international legal, accounting and consulting firms must come to Nepal. But we’re not seeing top class contractors, consultants coming to Nepal.

Any international company handling a project worth over $1 billion will trust none of the Nepali legal and accounting firms. Even if they have to hire Nepali firms, they will hire them under international consulting firms umbrella.  The practical issues–easy availability of working visa, remuneration–have become impediments of late. And this is something the government must look into.

The government has recently introduced new regulations to govern private equity and venture capital, but the document is in Nepali. How can foreign investors understand what is there in the regulations? This shows the narrow vision of Nepali stakeholders. We cannot dream of large scale FDI if we continue to have every document written in Nepali. or-hurtforeign-direct-investment-in-nepal.html

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