Govt determined to reform laws to increase investment

Lalitpur, July 9

Minister for Industry, Commerce and Supplies Damodar Bhandari has said that it is heartening that the private sector is raising the same demands for the last two decades but many of them have not been fulfilled even now.

"The political leadership has failed to address the short-term and long-term need of the industrial sector. Had it been done there would have been expansion of industrial base, more employment generation and greater contribution to the economy," he said while addressing the 22^nd Annual General Meeting of the Confederation of Nepalese Industries (CNI) in Lalitpur on Tuesday.

"The manufacturing sector's contribution to the GDP has gradually gone down to 5 per cent from about 14 per cent several years ago. Until we keep the industrial sector at the forefront of the national development, we will further fail to strengthen economic development," said Minister Bhandari.

He maintained that the government now has taken such issues seriously and is determined to address the policy hurdles that have long been obstructing the development of industry in the country.

The policies and programmes of the government and budget for the upcoming Fiscal Year 2025/26 have given priority to address the demands of the private sector and resolve the challenges faced by the industries and entrepreneurs.

According to Minister Bhandari, the Ministry of Industry, Commerce and Supplies (MoICS) has been putting its efforts to make impactful cooperation and collaborations with the relevant ministries including the Finance, Physical Infrastructure, Foreign Affairs and Energy.

He said that his ministry will work towards promoting Nepal's products in the international market, enhance export and attract more investment.

Lawmaker and president emeritus of the CNI, Binod Chaudhary, said that through the recent initiatives to make policy reforms to promote the private sector investment and businesses, the government has given a clear indication that it has intentions to facilitate business growth and development.

Likewise, President of the CNI, Rajesh Agrawal, said that despite interest rates falling to a single-digit level and investable funds being available within banks and financial institutions, industries and businesses have not been able to take loans due to insufficient overall demand.

"As a result, they have also been unable to invest. This is currently the greatest challenge facing the economy," he said while informing that the industrial output has not increased, and irregular electricity supply to industries has pushed production costs higher.

According to him, on one hand, investable funds in banks are rising while, on the other hand, policies adopted by the regulatory authority have discouraged investors.

Capital expenditure by the government plays a vital role in keeping the overall economy dynamic. However, the state of capital spending has remained a matter of concern for a long time, he said.

The recent legal reforms aimed at improving the economic and business environment, encouraging investment, and ensuring good governance in public services—along with directives on the use of domestic goods in public bodies and budgetary provisions to promote production in fiscal year 2082/83—have instilled hope in the private sector. "However, effective implementation of these revised laws and directives is critical to achieving meaningful outcomes," said Agrawal.

He said that the legal reforms and the budget of 2025/26 have introduced some historic initiatives.

According to him, the new provision allowing Nepali entrepreneurs or companies to set up sales branches or semi-processed export-based factories abroad, and invest up to 25 per cent of their annual export earnings overseas is a visionary step.

Agrawal also maintained that financial penalties should be imposed for economic offences, but entrepreneurs should not be imprisoned, as the state cannot benefit from jailing businesspeople.

"With the overall contraction in demand, producers are struggling, and the inability to collect outstanding dues is adding to their distress. While many countries have enacted Payment Protection Acts, Nepal has no such legal framework to date. I therefore sincerely urge the government to introduce a Payment Protection Act," said Agrawal. 

Published in The Rising Nepal daily on 10 July 2025.