The Industry Ministry said that a draft law had been completed and that it was collecting inputs. The Nepali private sector has long been demanding that people should be allowed to invest abroad.

Nepalis are barred from transferring capital out of the country by Act Restricting Investment Abroad, 1964 which states that no one shall make any kind of investment abroad after the commencement of the act. The law states that violators will be fined an amount equal to the investment and/or jailed for up to six months.

Industry Minister Mahesh Basnet said that the new Foreign Investment and Technology Transfer Act would open the door for Nepalis to invest abroad. “As many Nepalis, particularly non-resident Nepalis and Nepali business houses, already have investments abroad, we should not be much conservative about allowing Nepalis to invest abroad,” he added.

The New Foreign Investment Policy introduced last week has mentioned reviewing the restriction on investing abroad. Based on that policy, the new act will open the door for Nepalis to invest in foreign countries, ministry officials said.

The foreign investment policy which was originally drafted in 2013 had included a provision that Nepalis would be allowed to invest up to $10 million abroad after obtaining the Nepal Rastra Bank’s (NRB) approval. The recently introduced policy has not specified any upper limit. Minister Basnet said that a detailed provision would be inserted in the act. When asked if the government would place an upper limit on foreign investments, he said that the ministry had received recommendations that no such ceiling be imposed. “We will decide the matter after making a wide consultation with stakeholders,” he said.

Regarding fears that the absence of a limit might drain the country’s foreign exchange reserves, Basnet said that the government would take such possibilities into account when finalizing the act.

According to the minister, the government has already started work on constituting the Foreign Investment Facilitation Centre of Nepal which will provide one-door service to foreign investors in Nepal besides coordinating and helping Nepalis to invest abroad.

“We have already started an organization and management survey for the purpose,” said Basnet. According to him, the ministry has planned to present the bill to the next session of Parliament.

Meanwhile, Senior Vice-President of the Confederation of Nepalese Industry (CNI) Hari Bhakta Sharma said that the government’s move was a welcome step, adding that allowing Nepali corporate houses to invest abroad would give them an opportunity to grow as global multinational companies.  

“If we are not allowed to compete in the global market place, we will never learn global corporate practices and realize the potential of Nepali companies,” said Sharma. Regarding concerns of massive capital flight due to such a provision, Sharma said that the government could fix certain conditions allowing only companies earning a profit and those that have paid taxes to invest abroad.