Policy proposed to allow foreign investors to invest in securities

Kathmandu, Oct. 5: The Ministry of Industry is making legal arrangements whereby a foreign investor can make an investment in securities or equity in any Nepalese public limited company, or buy an industry that is in operation.

Through the Draft of the Foreign Investment (Amendment and Integration) Bill, the Ministry has proposed to allow the foreign investors or Non-Resident Nepalese to buy the securities of the companies listed at the Nepal Stock Exchange.

The Draft is prepared to amend the Foreign Investment and Technology Transfer Act, 1992.

Similarly, the foreign investors can establish a venture capital fund to make equity investment in Nepalese companies.

However, such fund should be established as a public limited company and will not be allowed to invest more than 10 per cent of its paid-up capital in any single company.

If the Bill ratified as it is, foreign investors can buy any company that is in operation with the approval from the government.

Likewise, they can make an investment through technology transfer to any industry, and establish branch of foreign company in Nepal.

The Draft has made a mandatory provision that the foreign investors must bring money through the banking channel. The money should be in the convertible foreign currency or Indian reupees.

It has proposed the removal of the cap on foreign investment.

“Apart from the investing in securities, foreign investors can invest up 100 per cent in any companies. But, the government can impose cap on service industry which won’t be less than Nepal’s commitment to the World Trade Organisation,” read the draft.

The proposed legal framework on the foreign investment has made a clear provision on the ‘exit policy’.

Foreign investors can leave the country after clearing their liabilities following the government approval for the same.

The Draft has proposed complete income tax waiver for a specific period for hydroelectricity generation and transmission project, manufacturing industry, mines, tourism and international airlines companies with the foreign investment.

Similarly, tax waive off would be offered to the companies that invest in the research and development of agriculture, minerals and other specified technology sector.

The Draft has proposed cash incentives, loan and foreign currencies facilities for the foreign investors.

“This is the high time for Nepal to attract foreign investment. Without large foreign investment we can not develop the industrial sector, create employment and increase the contribution of the manufacturing sector to the Gross Domestic Product,” Minister for Industry Nabindra Raj Joshi said in an interaction programme on the Draft.

President of the Nepal Chambers of Commerce and Industry (FNCCI) Pashupati Murarka termed the Draft as ‘Bold’ and said that the government had been seriously working to attract foreign investment.

He urged the government that the facilities that were availed to the companies with the foreign investment to the domestic companies.

According to Murarka, the government should open the outbound investment.

“Nepalese should be allowed to invest in the foreign countries. If the outbound investment is legalized, the money that goes out will return, else there will be capital flight,” he said.

Country manager at the Berger Paints Nepal Saibal Ghosh suggested that the foreign countries should be allowed to test their brands in Nepalese market.

Published in The Rising Nepal Daily.