Kathmandu, August 29:

Both government and private sector are working hard to reform the existing foreign direct investment (FDI) policy with a new vision, as it has not been able to lure more FDIs.

Despite the adoption of free market economy after the restoration of democracy in 1990, the FDIs flow has not seem any remarkable boost due to frequent government changes, instability in administration mechanism, weak security and weak implementation of Foreign Investment and Technology Transfer Act-1992. FDI, at present, occupies only one per cent in total gross domestic product (GDP).

After 1990, successive governments tried to take some measures to lure FDIs like removal of import licences, full convertibility of Nepali rupee, liberalisation to open joint venture financial institutions, announcement of foreign investment and one window policy, and New Foreign and Technology Transfer Act. However, frequent strikes and blockades, and lack of law and order situation have repelled the business community from investing here.

According to the latest report prepared by Economic Policy Network (EPN) — a joint undertaking of the government and Asian Development Bank (ADB) — private sector has suggested that present FDI policy is not encouraging and needs changes to create favourable environment to attract more FDIs.

“After its entry into the global trade body, Nepal should open FDIs in services sectors such as tourism, health and education, financial services, warehousing and multi-Modal Transportation, banking insurance and consultancy services also,” private sector has suggested. They have also suggested to waive dividend tax and taxes on export.

“Similarly, customs duty and income tax should also be reduced,” they suggested, “A high level Board of Investment along with the private sector participation should be created to lure more FDIs.

Similarly, a mechanism like Economic Advisory Council under the Prime minister should also be established. Al the ministry should have a FDI promotion desk or section.” Private sector has suggested that there is a need to formulate annual investment plan to coordinate with annual export plan. “At presently there is no coordination between investment plan and export plan.” “Government’s strategy is the most essential to attract FDIs in certain sectors. Being a LDC Nepal has to adopt more liberal policies to attract FDIs.”