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Cabinet okays Foreign Investment and Technology Transfer Act

June 06, 2017

Foreign investors can now get approval for investments of up to Rs five billion in Nepal from Department of Industry (DoI).

The amendment bill of the Foreign Investment and Technology Transfer Act (FITTA), which was passed by the Cabinet on Friday has authorised DoI to approve FDI to this limit. Currently, DoI is providing approval to foreign investments of up to Rs two billion in Nepal. Meanwhile, foreign investments of more than Rs five billion and up to Rs 10 billion must be approved by the Industrial Promotion Board, which is chaired by the industry minister. However, foreign investors will need permission from Investment Board Nepal to make investments of more than Rs 10 billion in Nepal.

“The long-awaited FITTA has been endorsed by the Cabinet and it will help to further strengthen the investment climate in the country,” said Minister for Industry Nabindra Raj Joshi, adding that the new act has introduced different provisions to promote foreign investment in Nepal. Joshi also said that availability of FITTA and different investment-friendly provisions incorporated within it will be crucial to materialise the foreign investment pledges that Nepal has received at present.

The new draft bill of FITTA has not fixed any limit for foreign investment in Nepal. However, it has a provision that the government can fix upper limit of
equity investment for service-oriented industries as per commitments made by Nepal after being a member of the World Trade Organisation.

Meanwhile, the new amendment bill of FITTA, for the first time, has welcomed foreign investment in the country’s secondary market. It has enabled foreign institutional investors and non-resident Nepali citizens to invest through the secondary market in Nepal, which is also called portfolio investment, by purchasing shares of those companies listed in the stock market.

The new FITTA has given Foreign Investment Promotion Board the responsibility to implement FITTA and other acts and rules regarding foreign investment in Nepal. It has identified hydroelectricity, transportation infrastructure, agriculture, tourism and aviation as priority sectors for foreign investment in Nepal and has restricted foreign investment in 13 different types of industries including traditional cottage industry, arms and ammunition, real estate, network and media, among others.

On top of that, the new FITTA has mentioned it will treat foreign industries and investments and domestic industries equally in terms of different subsidy and tax waiver facilities. The FITTA has given income tax waiver facility to industries under FDI for up to five years after they begin production and  all forms of taxes have been waived off for the profit that foreign industries use to reinvest to enhance the industry’s own capacity or in any other industry.