Foreign Investment Law In Nepal was first initiated in 1981 AD. Since then, it has rewritten for only two times. Last time in 2014, Foreign Law In Nepal Was Re-Initiated. Foreign Investment In Nepal is vital for developing economies due to the narrow fiscal space in government finances and the poor capacity of the private sector. Foreign Direct Investment (FDI) and other Portfolio Investments play a crucial economic role, as their effects are directly multiplied. As far as sustainable growth and development of the country are concerned, FDI is one of the main elements and Nepal is no exception.
Practices in Foreign Investment Law in Nepal
In 1981 the FDI was initiated in Nepal by the Foreign Investment and Technology Transfer Law. Nepal adopted liberal economic policies and was, therefore, taking steps to attract FDI in 1990. In the 2015 World Opportunity Index Ranking, Nepal was also 124th in 136 countries, with a score of 3.43. But Nepal scored 4.00 points and ranked 88th out of 137 countries, according to the World Competitiveness Index 2017-18 (edition) published by the World Economic Forum. This demonstrates that in our economy, we still have a great deal to do for increasing FDI, although some positive economic changes have occurred in recent years.
Present Status and Regulatory Framework of FDI in Nepal
A total of 3,905 industries from 90 countries have received NPR 208.04 milliards of FDI approval in FY 2016/17. In the first eight months of that period, Nepal only received 10.15 billion NPR of external investments in industries. India has the largest 39.08% share of the sum, followed by the top 5 receiving FDI (annex 1), China, Hong Kong, South Korea, and British Iceland. Nepal received USD 106 million in FDI, according to the World Investment Report 2016.
Challenges and Opportunities of FDI in Nepal
Nepal’s Constitution directs the state policy to encourage and mobilize Foreign Capital And Investments in technology to replace imports, promote exports and develop infrastructure in accordance with its own national interests (The current 14th regular plan provides a thorough mobilization of foreign investment in an innovative, competitive and dynamic economy. Foreign investment Policy 2014 has set itself the objective, by maintaining trade balance by import substitution and export promotion to make national economies competitive and dynamic, attracting foreign capital, technology, skills and expertise in national priority areas.
Nepal recognized and taken steps to attract FDI for foreign investment in the economy. As far as FDI is concerned, there are currently several rules and regulations in Nepal. Examples of such things are Foreign Investment and Technology Transfers Law, 1992; The Foreign Investment and Technology Transfers Law, 2006. The Investment Board Law, 2011. For the establishment of an FDI firm it is important Foreign Investment and Technology Transfer Act (FITTA), Foreign Exchange Regulation Act (FERA), labor/immigration law. In addition, various acts relating to form operation are industrial enterprise law, electricity law, environmental protection law, land acquisition law, labor law, water resources law, telecommunications legislation, income tax law, VAT law, excise duty law, bonus legislation, patent design and trade-mark legislation, competition promotion and trade protection legislation, consumer protection law, copyright legislation, banks and the F. board for the promotion of industrial and investment ($ 20 million to $100 million); Investment Board of Nepal (Greater Than $100 million).
Diverse programs for the attraction and mobilization of foreign investment in the last year are proposed in the 14th plan (launched in the FY 2073-74). and bilateral investment incentive promotion and protection agreements and double tax exemptions are some of the FDI Friendly Policy measures. Improved registration service and land procurement for foreign investment industries are other attractive measures.
FDI inflow to the Nepalese economy is still not satisfactory although Federal Direct Investment is given priority in government policy. There may be several reasons why foreign investors seem not interested in investing here: Economic fundamental elements, ease of business and quality of the rules of law, The Global Opportunity Index have identified four factors of opportunity. The main responsibility for attracting the FDI is to improve these factors. Nepal has not been able to focus on FDI due to frequent changes in the government. Investors are aware of a country’s national investment credit rating, but Nepal has not been rated so far.
There are plenty of opportunities for FDI in Nepal: the rich natural resources, culture, and biological diversity, the economically strategic location between China and India, and comparatively low wages. Due to the underdevelopment of the economy, different sectors are unused, so foreign investors can benefit from this. The government has provided various incentives to foreign investors, which is a Foreign Investors Opportunity In Nepal. So before thinking about Investing in Nepal, every investor should have a good knowledge of the Foreign Investment Law In Nepal.
For Legal Consultation on Corporate Law
Disclaimer: This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation or inducement of any sort from the firm or any of its members. The law office shall not be liable for consequences arising out of any action undertaken by any person relying on the information provided herein.