The governmentis planning to amend the Foreign Exchange (Regulation) Act, 1962, to partiallyderegulate investment abroad.

“We haveconcluded that restricting investment in foreign countries has been preventingthe growth prospects of certain sectors that have the potential of reapingbenefits by investing abroad,” said Revenue Secretary Shishir Kumar Dhungana.

The initialdraft of the bill to amend aforementioned law has listed banking, insurance,noodles, footwear, construction and hotel/hospitality sectors as potentialsectors for deregulation.

Nepalis werebarred from investing abroad to curb capital flight from the country. “However,barring investment abroad does not necessarily translate to increasedinvestment within the country,” said Dhungana. “For example, local noodlesmanufacturers have to pay 80 per cent customs duty to export noodles toBangladesh, but if we allow a Nepali manufacturer to invest in Bangladesh, heor she will get local treatment there and can be competitive in Bangladeshimarket.”

Dhungana addedthat the government would permit outward direct investment after cross-checkingthe sector, the market potential, commitment to repatriate profit back home andinvestment in priority sector defined by the government.

“Allowing ODIdoes not necessarily mean allowing investors to take away capital as they wish.The investment will be opened for institutional investors following theircommitment to return the profit earned by investing in the sector of theirexpertise to Nepal,” said Dhungana.

The ForeignInvestment and Technology Transfer Policy has already stated that doors wouldbe opened for investment to real investors on the basis of proper regulation.

Bhishma RajDhungana, executive director of the Foreign Exchange Management Departmentunder Nepal Rastra Bank, said it was prudent to legally allow investors toinvest abroad in certain sectors, especially as they have been resorting toillegal channels at present.

Private sectorplayers have welcomed the government’s plans. “As we readily welcome foreigninvestment into Nepal, Nepalis should also be allowed to invest abroad insectors of our expertise,” said ShekharGolchha, senior vice president of theFederation of Nepalese Chambers of Commerce and Industry. He added that apartfrom enhancing the capacity of Nepali entrepreneurs, the move will expand theempire of Nepali businesses across the globe.

Source: TheHimalayan Times, 12^th September 2018