Overseas Nepalis are not impressed

Learning from the success of overseas Chinese and Indians investing in their homeland, the Nepal government hurriedly passed two foreign investment related bills recently. But non-resident Nepalis are not impressed.

The Public Private Partnership and Investment (PPPIA) Bill was passed by Parliament on 18 March, and the Foreign Investment and Technology Transfer (FITTA) Bill on 22 March, but investors say it does not go far enough in allying their concerns.

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Not only do the bills have contradictory provisions with an extended negative list, a minimum limit for investments, and requirements of multiple approvals, experts say they do not address the central concern of transparency, policy continuity and rule of law.

FITTA has extended the negative list (sectors in which foreign investment is prohibited) to include agriculture, horticulture, and dairy, sectors which many overseas Nepalis are eager to modernise and create jobs back home.

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“When you prohibit so many areas for foreign investment, you are giving the wrong message to investors, especially to non-resident Nepalis. Not only does it render some sectors completely off limits, it also scares investors that their current investments may become off limits in future,” says Siddhant Pandey of Business Oxygen. “Investment should be welcomed in all areas so as to help economic growth, technology transfer and to bring Nepal’s human resources up to speed.”

The Non-resident Nepali (NRN) Association is concerned about shortcomings in the Acts, and has said so through a document published by its policy research wing Nepal Policy Institute (NPI) which rues the fact that the Acts treat overseas Nepalis, foreign citizens of Nepali origin, and other foreign investors alike.

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Says Khagendra Dhakal of NPI: “The government says it needs the negative list to protect small-scale industries, but people of Nepali origins have special emotional ties to Nepal even if they may not have enough capital for large scale investments. NRNs and foreign citizens of Nepali origins should be given the same rights as Nepali citizens.”

The NPI report recommends scrapping the negative list and lifting restrictions on foreigners from investing in businesses worth less than $150,000 for overseas Nepalis.

“If a business worth $100,000 is employing at least 20 Nepalis and training them in new technology, it should be open to investment for NRNs and foreigners of Nepali origin too,” says Dhakal.

However, FITTA authorises the Industry and Investment Promotion Board to approve companies investing Rs5-10 billion, while PPPIA directs companies above Rs6 billion to the Investment Board Nepal (IBN).

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Amidst concern that PPPIA concentrates power in the IBN, which does not have much to show for itself, the real question at the Summit this week is whether these hastily-passed bills will remove misgivings of foreigners and NRNs about investing in Nepal.

Economist and former Nepali ambassador to the United States Shankar Sharma believes that the law itself is not the problem when it comes to attracting foreign investment, but its execution.

“We have good laws but their implementation is weak, which is the real problem,” says Sharma. “There is supposed to be a one-door policy, but in reality investors are made to jump through hoops to register companies or repatriate profits. The process is cumbersome, full of hassles. We need detailed guidelines about how these laws will be simpler and easier to implement.”

Former president of NRN association Jiba Lamichhane agrees, stating that though the laws are all right there are other problems. “Overall our laws are quite liberal, but they fail to create a conducive investment climate with extortion, hassles over repatriating profits. If we want to attract investment, we must learn from best practices around the world. African countries attract huge investments from China while we have not been able to do so despite being next door,” he says.

Investing in Nepal is more expensive than in other Asian countries due to the lack of skilled manpower and infrastructure, and experts say that without improvements the two bills are not going to make much of a difference.

On the positive side, FITTA and PPPIA have eliminated many of the hassles related to registering FDI companies. Investors who needed to get approval from at least five agencies, now need to go to only two.

The World Bank’s Nepal Country Manager Faris Hadad-Zervos told Nepali Times: “Nepal is entering a new chapter in its development, and it is not just about one law or policy but a change in the narrative where Nepal has survived several crises and is moving to rebuilding. The actual impact of the bills will depend on regulations to operationalise these laws.”

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