Government Lowers Minimum Limit for Foreign Investment but Procedural Hassles Remain

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Government Lowers Minimum Limit for Foreign Investment but Procedural Hassles Remain

June 24: With the objective of increasing investment in the country, the government has reduced the minimum limit required for foreign investment in the budget announced of the upcoming fiscal year (FY 2022/23). The government had raised the minimum limit for foreign investment from Rs 5 million to Rs 50 million in the budget three years ago in accordance to sub-section 3 of section 3 of the Foreign Investment and Technology Transfer Act 2075 BS.

Now the minimum limit has been set at Rs 20 million. According to foreign investment experts, although the reduction of the minimum limit is positive, it is not possible to attract large investments immediately. According to Anjan Neupane, an expert on foreign investment, there is a possibility of additional investment in the IT, tourism, and service sector if the government lowers the minimum limit. He says the threshold is still too high.

According to him, it is not yet easy to attract investment in Nepal. Foreign investors have to face the obstacles on every step that starts after pouring their investment.

“The Department of Industry has a one-door system. NRB has two employees. That’s all. The old problems are still there,” said Neupane.

According to Neupane, no procedural reforms have been made in the bodies that deal with foreign investors such as the Department of Industry, the Office of the Registrar of Companies, and the Immigration Department.

Investors are well aware that the obstacles in investment approval, company registration, visa permission, business establishment, and operation have not been solved yet. According to Neupane, more than two dozen agencies, including half a dozen ministries, are still needed to take the project to the construction stage. The one-door system is just for the sake of name.

Former Vice-Chairman of the National Planning Commission Dipendra Bahadur Chhetri says that an investment-friendly environment has not been created in the country yet. According to him, the law and system have changed in Nepal but the mindset and tendency of the bureaucracy have not changed and the investors have to suffer due to this. He suggested that the government should create an investment-friendly environment by implementing the provisions in the budget properly.

The budget announced by the government on May 29 has a provision that allows foreign investment of up to Rs 100 million to be sanctioned through the automated system. In addition, if large investors request foreign direct investment approval through electronic means, preliminary approval will be given within seven days to complete the preparatory work. The remaining work related to investment approval and operation of the industry can be completed within six months. The budget also mentions that land will be available for the industry for 50 years on lease.

The laws and processes related to foreign investment are in the budget to attract the investment of non-resident Nepalis.

Whatever the provisions the budget has to attract foreign investment, it must immediately remove the procedural hurdles to attract more investment, says Ganesh Karki, vice-president of the Independent Power Producers' Association (IPPAN).

According to him, the main reason for the inability to attract foreign investment in Nepal's hydropower sector is the procedural hurdles and inability to trust the investors. “No one comes to invest less than Rs 2/4 billion in hydropower sector. The government has set an unnecessary threshold, which is meaningless,” Karki said, adding, “The government should focus on creating a conducive environment for foreign investors.”




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