Favorable winds gather behind Nepalis' investing abroad policy
KATHMANDU, April 18:
The Nepali private sector’s long wait to go around the globe to invest looks likely to be ending soon.
Divergent views amongst the professional and private sector bodies have helped put a proposed Foreign Direct Investment (FDI) policy that also has provisions for ‘outward investment by Nepalis’ on ice for about a year.
However, with a change in leadership at the private sector’s apex umbrella organization -- the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) -- led by its newly elected president Pradeep Jung Pandey, the policy has received a shot in the arm as Pandey has clearly articulated that he favors the policy. “The policy allows Nepalis to show their expertise abroad in their respective sectors and can also bring better payoffs.”
Pandey’s stance on the policy is completely opposite to his predecessor Suraj Vaidya’s, who openly opposed the idea.
Vaidya argued that the time was not right to allow Nepali money to go outward what with the country in serious need of huge foreign investments. The policy drains the money out, he said. The Confederation of Nepalese Industries (CNI) and other private sector bodies have been all for the policy for long.
Pandey said, “We should stop seeing the Nepalis as being capable of only bringing in money they earned as wages for labor. They are also capable of earning by doing business -- be it in the Middle East or in developed countries.”
There is no point in worrying that such investors will take away a lot of money as good investors and entrepreneurs can also collect resources from banks and financial institutions in the investment destination country.
The Ministry of Industry (MoI) officials say they shelved the policy after the private sector remained divided on the issue. They say they replaced those policy details with a clause -- ‘The necessary laws and bylaws will be amended for opening doors to Nepalis to invest abroad’.
MoI officials say they made the changes in the draft to extricate themselves out of muddling into any dispute between the private sector parties.
Previously, the proposed policy draft had stated ‘to allow Nepalis to invest up to US$ 10 million abroad after acquiring Nepal Rastra Bank’s (NRB’s) approval’. The draft policy also said ‘threshold of foreign investment could be increased gradually based on the capacity of investors and NRB to set the necessary working procedures.
MoI officials say they are thinking of putting back the previous clauses in the discussion.
In a recent public private dialogue held in the capital with the private sector, MoI had drawn much criticism for omitting those clauses and replacing them with new ones.
We should stop seeing Nepalis as being capable of only bringing in money they earned as wages for labor. They are also capable of earning by doing business -- be it in the Middle East or in developed countries.
FIVE DECADES OLD-
The law of 1964 (Restricting Investment Abroad Act 1964) is still effective in barring Nepalis from investing abroad. The current Minister for Industry Karna Bahadur Thapa says there has been a sea-change in the context as the law was endorsed at a time when no one imagined Nepalis could reach the far away lands of Europe, America and the Middle East to even work.
“Nepalis should be allowed to invest abroad and show their expertise there, and explore opportunities in a globalized context,” Thapa says, adding that it was quite an open secret that Nepalis have already started investing abroad. MoI officials say that Thapa has the FDI policy and FDI Act on his top priority list.
He is also of the view that Nepalis should be allowed to invest in some 40 to 50 countries in the initial stages.
“It is natural that investors choose the better investment climate, and we are also moving toward making a better doing-business situation with reforms in the country,” Thapa says.
SECTORS FOR OUTWARD INVESTMENT
A study by NRB in February suggested opening up investment abroad but only in competitive sectors.
NRB had specified that Nepal can invest in banking, insurance, construction, and hotel and hospitality sectors.
Former Finance Secretary Rameshore Khanal said that such investment should only be allowed if it means an expansion in Nepali’s technology or the enterprises have their headquarters in Nepal and also provide employment to Nepalis. Khanal also added that it would be in Nepal’s interest strategically to send Nepalis to invest abroad.
Khanal suggested such sectors could be an expansion of the Nepali brand hotels and hospitality businesses, handicraft industries, and mountaineering and adventure tourism enterprises, among others. Their exposure in foreign lands could also promote the Nepali identity and presence in the world, added Khanal.
Industry Secretary Krishna Gyawali says, “We need to define the sectors, ceilings, proportion and conditions for opening outward investment from Nepal and for doing so we will conduct further consultationw with the private sector.”
REGULATORY MECHANISM
Experts, economists and high-level officials have a unanimous view that the country should open the doors for Nepalis to invest abroad. They have also equally emphasized that there must be a strong regulatory and monitoring mechanism to keep tabs on such investment and their returns.
Khanal says Nepalis should be allowed to invest abroad by allowing them to open capital accounts but not before fixing a ceiling.
“There is no point in worrying that such investors will take away a lot of money as good investors and entrepreneurs can also collect resources from banks and financial institutions in the investment destination country,” Khanal says.
Newly-elected FNCCI Senior Vice-president Pashupati Murarka says there has to be separate acts to govern inward and outward investment. “Inward investment must be facilitated whereas outward investment demands regulation,” added Murarka.
The proposed policy, if it goes as planned, will not only pave the way for opening up new avenues for the Nepali private sector but also bring to an end the open secret practice of using the back doors to go global to do business.
Source: Republica
