Legal Hurdles to Investment

  3 min 2 sec to read
Legal Hurdles to Investment

This year is going to be different in Nepal’s government budgeting. The Finance Minister will hopefully present the budget to the parliament on May 28 as stipulated in the new Constitution, instead of the previous practice of doing so just a few days before the new fiscal year starts in mid-July. With this new practice, it is hoped, the budget will get passed before the fiscal year starts so that the government agencies will be able to go on full-fledged implementation right from the beginning of the fiscal year. 

While such timely approval of the budget will really be a good development, that alone will not be sufficient for the country to gain the momentum of growth expected after the promulgation of the new constitution. 

Growth needs investment that increases production of goods and services and creates jobs. And government investment alone will not be sufficient for this. It requires private sector investment as well. 

Nepal is s a fertile ground for investment due to its low existing level of development and proximity to big markets on all sides. The private sector investors were holding back in the past due to political uncertainty. But they had started announcing plans and commitments to invest big in Nepal, soon after the second election to the constituent assembly and the tempo had increased in the subsequent year as the possibility went on increasing for a New Constitution actually being promulgated. They hoped that after the new constitution comes in effect, the political uncertainties, and thus the country risk, will fall drastically down. 

But these commitments are not followed by actual flow of money even after so many months of the new constitution being promulgated, except in a few cases, and the reason is not only the Terai unrest and resultant fuel crisis or the lack of electricity. In fact, the lack of electricity offers a good business opportunity to invest in hydropower projects. 

In closer scrutiny, it can be concluded that the investors are holding back because too many laws crucial laws (such as the Industrial Enterprises Act, Foreign Investment and Technology Transfer Act, Banks and Financial Institutions Act, Labour Act and Special Economic Zones Act) are still pending in the parliament for a considerably long time (some of them since the first Constituent Assembly). 

The delay gives an impression that the parliament (and the government that holds a majority in the parliament) is least worried about growth in investment including foreign direct investment. It seems the government and the parliament think that as Nepal is already getting enough foreign money in the forms of workers' remittance and official assistance (mobilised through the domestic and international non-government organisations), there is no hurry to invite foreign money in the form of foreign direct investment. That impression spreading across the investor community needs to be removed fast by speeding up the passage of these laws. And the job of lobbying for this is the responsibility of the business associations. If these associations are handicapped in this as the hurdles in the passage of such Bills are caused by the businesspersons themselves who are members in the parliament, these association should now hold discussions with their peers who are in the parliament. 

The coming budget to be announced on May 28 will really play a crucial role in the country’s economic growth only if the pending laws are passed together with that budget so that the new fiscal year starting in mid-July will really be an investment year.

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