Nikita Acharya of Urban Girl had high hopes when she travelled to London last year to make a pitch to investors. But the c0-founder of the online shopping platform was rejected by investors, who she said told her the lack of clarity around policies regulating foreign direct investment in Nepal’s e-commerce platforms was one of the reasons for their denial.

“We still don’t have certainty, policywise, about what might happen to our business in the future,” said 25-year-old Acharya, “and that is the biggest risk.” 

As the government is set to court international investors on mega infrastructure projects during the two-day Investment Summit starting on Friday, young Nepali entrepreneurs, especially those from the IT sector, say they have been forced to cancel deals with global investment firms because of a lack of clarity in policies and difficulty in doing business in the country.

[Read: Everything you need to know about the Nepal Investment Summit]

Nepal’s nascent but growing IT sector has seen a steady stream of entrepreneurs buoyed by increased internet reach and high social media use among the country’s young population. But IT entrepreneurs say the policies haven’t caught up with the innovation in the IT field, which has hurt growth and business. 

When Amun Thapa started Sasto Deal in 2011, the immediate challenge was the absence of a payment mechanism for online transactions. Eight years have passed since, but the issue of online payment mechanism still is a big question mark, affecting Nepal’s growing pool of digital ventures that are now increasingly looking at foreign investments to scale up their operations.

“The government did nothing then. And it hasn’t done anything even after all these years,” said Thapa. Like Acharya, the 32-year-old entrepreneur's pitch to international investors fell through three years ago because of the lack of clarity in policies regulating online marketplace platforms like Sasto Deal and Urban Girl. 

“We have to operate in grey areas amid confusion, and without reforms, we will not be able to convince global investors to help us expand,” said Thapa.

The recently passed Foreign Investment and Technology Transfer Act doesn’t define e-commerce and Nepal doesn’t allow FDI in retail to protect local entrepreneurs. But Thapa and Acharya say not having a clear definition of what e-commerce is—it could include retailers and online marketplace for buyers and sellers like Sasto Deal—hitting them hard. 

Sasto Deal was finally able to secure funding in 2016 from Televentures, an investment firm owned by Nepali entrepreneurs and then last year from Dolma Fund, an international private equity fund 

The absence of policies to address the ecosystem of e-commerce from payment systems to data privacy and logistics of delivering and handling complaints also limits their growth, keeping investors away. Industry observers say the additional burden of going through bureaucratic red tapes before injecting foreign investment, and visa hassles for the workforce coming to Nepal from abroad further exacerbate the situation. As a result, there are investors who are on the sidelines waiting for clarity on policies and regulations.

“IT is a knowledge-based industry and not having access to human resources, who bring in much-needed knowledge, from outside Nepal, could hinder growth,” said Shabda Gyawali, investment director at Dolma. Gyawali says that Dolma’s investment in Sasto Deal wouldn’t have been possible if the government had not removed a provision from FITTA’s draft bill, which stated that foreign investors couldn’t invest in Nepali companies like Sasto Deal unless they had invested in e-commerce companies in three countries.

The government is finally drafting a national e-commerce policy, and young entrepreneurs see a sliver of hope that things are finally moving. But the lack of a prominent stage for small and medium enterprises, especially those from the IT sector, at the Investment Summit is discouraging, industry insiders told the Post.

“Our investment mindset hasn't really caught up with the understanding of IT, which is very asset light,” said Ashutosh Tiwari, managing director of SAFAL Partners, a consulting and investment firm. 

Besides the session on the digital economy, moderated by Tiwari, and another session on youth entrepreneurship development, there is nothing else the government plans to showcase the strides Nepal’s startup scene has made in recent years. At a pre-summit briefing on Wednesday, Maha Prasad Adhikari, the CEO of Investment Board, hinted they could have done more to give the sector a more prominent stage at the summit.

“I don't need to say much about the digital economy since we view it as one of the main areas of investment,” said Adhikari, “We are trying to build some projects, which we couldn't bring forward this time, but we are in close consultation with related experts.”

But a  new Information Technology bill proposed by the KP Sharma Oli administration last month has alarmed IT entrepreneurs, who say the bill is not in line with the government’s messages about Nepal being open for business opportunities and foreign investment, and could stifle innovation in the country.

“The government needs to understand that things are moving so fast that no policy can keep up,” said Tiwari. “They should look at the most open economies like Sweden and Norway to remain in pace with the innovators, and not at Burma or China for best practice.” 

But the government has repeatedly defended the bill. Last Wednesday, it was Finance Minister Yuba Raj Khatiwada. “We want to play regulatory as well as a facilitative role to promote the IT sector, which includes everything from artificial intelligence, big data, cloud computing, as well as e-governance and e-commerce,” Khatiwada told journalists at the pre-summit briefing. “As soon as the IT management bill is passed, all of this will be taken care of.”