Nepal | May 27, 2020

EDITORIAL: FDI facility

The Himalayan Times
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At a time when the country is heavily dependent on remittance it would be fitting if it
succeeded in acquiring more FDI

For the first time the draft bill of the Foreign Investment Act would have a provision that would allow the foreign investments to be made in the country’s sole secondary market.

This is expected to lessen the domination of the banks and BFIs in the secondary market which at present stands at around 70 per cent and sectors such as the production and manufacturing would benefit.

It also believed that after the bill comes into force the growth of the secondary market would double. However, it is likely that more investments would be coming into the country and less going out.

This needs to be taken into account if the bill wishes to win the confidence of local investors which it could. Among other things the draft bill also permits foreign investors and non-resident Nepalese citizens to invest in the country through the secondary market by purchasing shares of the companies that are listed in the stock market.

However, it permits the sales of the shares only through the stock market, and the total foreign investments should not be more than a certain percentage which has yet to be decided.

The minimum number of shares that foreign investors could buy and foreign currency to be kept prior to the purchasing of shares will be according to the standard by the stock market. This is a regulatory body of the Nepal Government.

The responsibility of implementing the policies, acts and rules pertaining to foreign investment would be done by the Foreign Investment Promotion Board to enable the establishment of industries that would be based from foreign investments.

The draft bill has yet to set a ceiling of investments that can be made by foreign investors. As a member of the World Trade Organization it has its commitments to fix the upper limit for equity investment for industries which are service-oriented.

Industries established under the FDI would be given all the facilities being provided to domestic industries. Among the facilities provided to such industries the income tax has been waived for a certain period after they resume production.

If these industries reinvested their profits to enhance its capacity or set up other industries all forms of taxes would be waived.

Meanwhile, the domestic investors should not be discouraged for they too are making a significant contribution to the economy. The draft bill has been labeled as ‘bold’ and also capable of luring in more foreign investment with its lucrative provisions for the foreign investors as well.

The domestic investors should also be provided with equal facilities. This ambitious bill has done some homework and already identified priority projects such as hydroelectricity, transportation, agriculture, and tourism for the potential foreign investors.

However, FDI would not be entertained for 13 industries including traditional cottage industries, arms and ammunition, real estate, network and media.

At a time when the country is heavily dependent on remittance it would be fitting if it succeeded in acquiring more FDI.

If these measures are implemented in earnest there is no reason to be skeptical and Nepal could be one of the favored countries for foreign investors to invest in.


Solar lights

The Ministry of Federal Affairs and Local Development has asked the Kathmandu Metropolis, 12 sub-metropolises and other municipalities to submit progress reports about the installation of solar-powered lights in their respective areas within three days.

The ministry has asked all the municipalities to install solar panels to light selected streets before Dashain. Ninety-six municipalities, including KMC, had received proposals to install 44,000 solar panels to light streets at the cost of Rs. 3.38 billion.

The initiative taken by the ministry is a good idea as the move will help reduce load-shedding.

The electricity from the national grid may not be needed to light the streets in urban centres once all the municipalities install the solar panels.

Local consumers are required to bear up to 15 percent of the total costs of the street lights powered by solar panels. However, the ministry needs to ensure that the batteries used for lighting the streets are replaced on time.

It may add more financial burden to the consumers and local bodies.

Once the solar panels and batteries are installed the concerned agencies are least bothered about repairing and replacing them when they cease to function.


A version of this article appears in print on October 07, 2016 of The Himalayan Times.


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