Presentation for Business Delegates of Britain-Nepal Chamber of Commerce

March 15, 2016Kathmandu

FOREIGN INVESTMENT & LEGISLATIVE COMMITMENTS : NEPALESE PERSPECTIVES.

-Advocate Saroj K. Ghimire

1sarojghimire@hotmail.com www.pradhanlaw.com

FDI in Nepal- Sector Wise

0

50

100

150

200

250

300

350

2012 2013 2014 2015

Energy based

Tourism

Service

Manufacturing

Agro and Forestry

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Foreign Investment- Country wise & Projects[81 countries- 2959 projects]

Mode of Foreign Investment• Direct Investment only.• Foreign investment in Nepal should be in

the form of foreign currency or capital assets or foreign loans.

• The re-investment of earnings from foreign investment also constitutes foreign investment.

• Portfolio investment is planned by FDI Policy 2015 but not materialized yet.

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• The FITTA permits foreign investors in equity participation up to 100 percent in almost all industries.

• a minimum amount of investment of NPR.5 million (approx US$ 50,000) that a foreign investor needs to invest.

• Broad areas are open including manufacturing industries, hospitals, education, restaurant, information technology, energy based industries, tourism industries, mineral resource based industries, agro-based industries, service industries and construction industries etc.

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• The FITTA restricts foreign investment in certain industries including but not limited to :

• .

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•trading companies, •export and import business, •small cottage industries,•retail business. •internal courier, •internal tourism,•motion pictures business (Produced in national languages and the language of the nation)

•real estate business (Excluding Construction Industries) •beauty parlor,•fish and poultry farming •Local Catering Service • Rural tourism etc

• In addition to those direct forms of foreign investment use of rights, specialization, use of foreign owned trademarks and goodwill, franchise and use of foreign technical, consultancy, management and marketing services are treated as technology transfer.

• The Investment Board Act 2010 has formed Investment Board for facilitating mega projects relating to infrastructure or service industry in the areas of construction industry, mine industry, tourism industry or air industry having fixed capital of Ten Hundred Million Rupees or more Rupees project cost for private section have various modalities including PPP.

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Limitation of Foreign Investment RatioArea of Investment Max investment

% wiseHydropower, construction, manufacturing, tourism

100

Telecom 80Bank & Financial Institution 20-85Consultancy (Management, account, legal & engineering)

51

Insurance 70Aviation•Domestic•International

4980 (practically 49)

•Hotels 7 Restaurants 100 8

Legislative and Policy Commitment• Commitment of national treatment;• No nationalization of foreign investment industry;• No taxation with out making laws and guarantee of

repatriation in foreign currency;• Arbitral dispute settlement mechanism (UNCITRAL);• Commitment to recognise and enforce foreign arbitral

award;• Commitment of timely reform in laws and policies and their

implementation; • Assurance of transparency and clean administration• Adaptation of simplified procedures;• Competence and structural reform and administration

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• Formation and mobilization of Industrial Security force;

• Flexible immigration policies and facilitation of TTA and skilled expats

• Setting single point to facilitate investors• Acceptance of important role of private sectors in

economic activities.• Enhancing and facilitating economic diplomacy.• Opening port folio investment opportunity.• Developing effective mechanism of IPR protection.• Creating foreign investment friendly environment• Facilitation for investment exit 10

At the end…• Nepal has obligation in regional and international arena for the

investment environment via WTO, WIP, MIGA, BIPPA, BIMSTEC, SAFTA, Avoidance of Double Taxation Treaties etc.;

• New constitution has realized the importance of foreign capital for economic development;

• Government is committed for facilitating foreign investment and their personnel;

• Changes and reforms in investment policy have been good and expectation of modern Investment law to be enacted soon.

• Bullish on a series of reforms, commitments unveiled by the government which we expect FDI inflows to rise ahead.

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References:• The Constitution of Nepal 2015• Foreign Investment and Technology Transfer Act 1992• Industrial Enterprises Act 1992• Investment Board Act 2010• Foreign Investment Policy 2015• Department of Industry, Industrial Statistics 2014• Procedural Manual of Foreign Investment 2013

Thank you

AWARDS & RANKINGS 2015