The government is enforcing an automated system for foreign direct investment (FDI) worth up to Rs 100 million, targeting to facilitate the foreign investors.
According to the Department of Industry (DoI), the system will make the one-window policy effective for foreign investors. “The new system is expected to remove the existing lengthy procedures.”
While announcing the budget for the fiscal year 2022/23, the government talked about implementing the automatic system for foreign investment of up to Rs 100 million. The provision will also be applicable for joint venture companies.
The system will incorporate Nepal Rastra Bank (NRB), Office of The Company Registrar (OCR) and a number of related government offices. Provided the system will come into effect, the foreign investors will not have to take approvals from government offices separately. Likewise, the online system will allow people to register and accomplish the required bureaucratic process to open a company even from their home country. It will be applicable for businesses in 10 sectors and sub-sectors prescribed by the government.
Under this system, the NRB and the OCR will maintain the automated mechanism dedicated for the purpose. This will maintain the necessary data within the automated system. For other related offices that do not have the database, the DoI will coordinate to fulfill the necessary process for the foreign investors.
In this system, the foreign companies need to develop their user IDs and passwords via the online platform. They have to fill up the necessary details on the template developed by the DoI.
The foreign companies need to declare the country of origin in which they are registered. After fulfilling the due procedures, the aspiring foreign companies will instantly receive the approval certificates, provided they fulfill the criteria, according to the DoI.
Once the companies get the registration, they need to submit their project proposals at the DoI prior to the date they start their businesses. Likewise, the ones looking for operating joint venture companies will have to submit a hardcopy of the joint venture agreement at the department.
The government is introducing the system at the time when the FDI inflow in the country dropped by a notable amount. Nepal received FDI of mere Rs 2.55 billion in the first six months of the current fiscal year, a straight drop from Rs 12.66 billion during the same period last year.
An NRB report published in October shows that Nepal’s realization of FDI is only one-third of the total amount committed by the investors. As of 2020/21, the pledged amount in FDI was Rs 357 billion, while the actual realization was only Rs 130 billion.
Although the government is putting its effort to welcome the FDI in the maximum amount, it is not being effective due to various reasons. The government has revised a number of laws including the Foreign Investment and Technology Transfer Act, and has lowered the minimum threshold limit for the FDI to Rs 20 million from Rs 50 million since October 14, 2022.
