Call for rethink on Nepal foreign investment draft ordinance

IANS/Kathmandu

While the interim election government in Nepal is preparing to bring new Foreign Investment and Technology Transfer Ordinance 2013 in this fiscal year that will allow its citizens to invest abroad, experts and business leader said it needs more homework.

The experts from various quarters yesterday displayed their concerns regarding the ambiguity in various provisions of the draft ordinance.

The draft bill has provision to allow Nepalese companies invest up to$1mn at one time with the permission from the central bank. But there are many questions unanswered, Xinhua reported.

The first ever billionaire of Nepal, industrialist Binod Kumar Chaudhary is excited with the idea of paving the way for Nepalese investors to invest abroad. “However, there are many issues to be clear in the draft,” he said. “There are still some confusion regarding the minimum threshold and specific sectors to attract foreign direct investment in the draft bill such as provision to allow foreigners to open only the 3-star or better quality hotels seem unreasonable,” he said.

The minimum threshold of $200,000 for the foreign direct investment in Nepal will bar the foreigners to run small but innovative enterprises with newer technologies in the opinion of Chaudary, who is also the president emeritus of Confederation of Nepalese Industries (CNI).

Likewise the draft bill should have clear provisions to allow Nepalis to invest beyond the country and there should not be differentiation between resident and non-resident Nepali, he opined.

“We will certainly bring the ordinances to set provisions on foreign investment and technology transfer, industrial enterprises, accreditation and special economic zone by the end of 2012/13,” said Shankar Prasad Koirala, minister for finance, industry, commerce and supplies.

The government will also approve separate policies on foreign direct investment and intellectual property before bringing a number of ordinances.

The draft bill on foreign investment and technology transfer was prepared by a non-governmental organisation, NEAT, with funding from USAID.

“There is no clear statutory provision on what ground the central bank will evaluate the proposal of aspirant companies to invest abroad,” said Ramesh Chitrakar, project director of management at Centre for Economic Development and Administration (CEDA), a research wing of Tribhuwan University.

Senior economic adviser of the finance ministry, Chiranjivi Nepal said that proper revision of the existing foreign investment law should be done from time to time. But he expressed his reservation on some clauses of draft bill about foreign investment share allowed in the industry related with basic services like health, education and transportation.

The draft bill has proposed to allow foreign investment up to 51% in those industries whereas some 80% of foreign investment in the media sector.

“Without proper research, we cannot say how much foreign investment should be allowed in which sector and to secure the national interest, industry dealing with basic services and media should not be handed over to foreigners,” Nepal said.

Pawan Ojha, a senior lawyer, is hesitant about the proposed provision to allow foreign investors collect internal debt in Nepalese market issuing bond and debentures in foreign currencies.

“We need foreign investment to finance larger projects and productive industry rather than to collect debt from Nepalese market. This loophole will possibly be used to drain capital from Nepal,” he added.

He urged the government not to increase the minimum threshold of foreign investment from existing $50,000 to proposed $200,000 owing to the possibility of hindering investment in small and medium enterprises.