Draft foreign investment bill: Govt removes provision on facilitating int’l investorsThe Ministry of Industry has removed a provision from the draft of the Foreign Investment and Technology Transfer Bill (FITTB) that would have allowed foreign investors to bring in investment without seeking government approval.
The Ministry of Industry has removed a provision from the draft of the Foreign Investment and Technology Transfer Bill (FITTB) that would have allowed foreign investors to bring in investment without seeking government approval.
The initial draft of the FITTB included a provision that would have enabled an inflow of foreign direct investment via an “automatic route”.
This provision would have allowed foreign investors to bring in investment in certain sectors without getting approval from different government authorities.
The subsection 4 of section 10 of the initial draft of the FITTB clearly mentioned that foreign investors need not take prior approval from authorities to invest in certain sectors listed in the Nepal gazette. The provision was included in the bill to facilitate entry of foreign investment required to lay much-needed foundation for economic growth.
This provision, however, has been removed from the draft bill which is being
sent to the Cabinet. The draft bill will be sent to Parliament after the Cabinet endorsed it.
According to the latest draft, foreign investors first have to get investment approval from the designated authority followed by another approval from the Nepal Rastra Bank (NRB) to bring in the fund.
If the draft bill is sent to Parliament as it is, the status-quo will prevail and foreign investors will be compelled to follow the cumbersome process of seeking approval to bring in funds. Many investors, it is said, drop the idea of investing in Nepal because of the lengthy process of getting the approval.
As per the existing law, any foreign investor interested in investing up to Rs2 billion in Nepal has to get approval from the Department of Industries (DoI). Such approval is awarded in a relatively hassle-free manner. But in case of investment of over Rs 2 billion and up to Rs 10 billion, approval must be sought from the Industrial Promotion Board chaired by the Industry Minister. The board has a history of taking quite a long time to approve investment plans.
Similarly, foreign investors have to seek approval from the Investment Board Nepal (IBN) to invest over Rs 10 billion in Nepal. If the IBN fails to hold its meetings at regular intervals, the process of approving the investment plan gets delayed.
The “automatic route for investment” as proposed by the initial draft of the bill would have facilitated hassle-free entry of funds, a source at the Ministry of Industry said.
The provision, according to the source, was removed from the draft after the NRB objected to it, stating it would leave the country vulnerable to financial crimes, like
money laundering and terror financing.
Bhisma Raj Dhungana, head of Foreign Exchange Management Department of the NRB, however, said no such objection was made by the central bank. “We are yet to discuss the matter in detail and we have not suggested the Industry Ministry to make any change to the draft bill,” said Dhungana.
Industry Secretary Shanker Prasad Koirala refused to make any comment on the issue.