Nepal | May 27, 2020

‘Look into constraints for foreign investment’

Himalayan News Service
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Kathmandu, September 20

The government has been advised to introspect the realities discouraging foreign investment in Nepal. Indian joint ventures (JVs) and multinational companies in Nepal have highlighted some key issues that have been discouraging foreign investment in the country.

As investment from India is considered a catalyst in attracting investment from other countries, the government must address some genuine issues raised by the Indian JVs and multinationals, said Saurya SJB Rana, president of Nepal-India Chambers of Commerce and Industry (NICCI).

The major hassles raised by the Indian JVs and multinationals in Nepal are issues related with dividend repatriation, labour problems, intellectual property rights, mismatch in duty structure and limited trading permissions, among others.

“Indian multinationals and JVs have not been reinvesting in Nepal, which could play a catalytic role to bring further investment from India and across the globe,” said Rana, adding, “Investors from India have been hesitating to invest in Nepal and they are closely watching investors who have already made investments in the country.”

Multinationals and JVs from India often complain about the repatriation of dividend. “There are times when even though the paperwork is fully compliant, authorities demand proof of financial investment,” according to NICCI.

NICCI has made the government aware regarding the need to simplify the process to make the provisions investment-friendly. However, the government has not taken any concrete step to facilitate the procedures of dividend repatriation, among others.

The government has extended limited trading permission to Indian JVs in Nepal. The country has allowed import of high quality products which cannot be manufactured in the country but the JVs are permitted to import finished products only once a year. If there is shortage of imports, it can lead to smuggling of those products due to which the government can lose revenue. To end this situation, NICCI has suggested the government to permit JVs to import products equivalent to some percentage of their turnover, which could be a smaller percentage of the total turnover.

Similarly, labour law has been identified as another major obstacle to lure foreign investors in the country. “There is lack of progressive law in accordance with international standards, which should protect the rights of the workers as well as the interests of the investors for which there has to be a structured co-relation between labour discipline and industrial productivity,” NICCI President Rana said.

Some of the IP-related issues and the duty mismatch have also been highlighted. Though intellectual property right (IPR) has emerged as a critical issue globally, Nepal sorely lacks the required polices and regulatory mechanism. Virtual absence of an equitable IPR system in the country, lack of legislative framework on IPR-related issues for industries like trademark, patent, design, etcetera, compatible with the World Trade Organisation and World Intellectual Property Organisation provisions have been identified as another bottleneck to bring in investment.

Mismatch in duty has also been hurting investors and has remained a constraint to bring fresh investments. Ironically, in some specific products, duty levied at the customs points is higher for raw materials than the finished products. “If the government does not reduce the duty levied on raw materials, then manufacturers will definitely hesitate to invest in the country,” stated Rana.


A version of this article appears in print on September 21, 2016 of The Himalayan Times.

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