As this ended long-running differences over the article on "compensation of loss", technical officials of Nepal and India also finalized the draft of Bilateral Investment Protection and Promotion Agreement (BIPPA) on Thursday. [break]
The two sides had negotiated the draft on Wednesday and Thursday. “We are glad we managed to iron out differences,” said Dhundi Raj Pokharel, joint secretary of Ministry of Industry (MoI), who added that MoI would now forward the draft to the cabinet for endorsement and signing at the higher political level.
Interestingly though, MoI had already forwarded a finalized draft to the cabinet in the past as well. However, the draft had been returned to the ministry for revision and clarification on some of its provisions.
Under the article on “denial of benefit”, in which the cabinet had sought further clarification, the new draft agreement has provisioned that only the industries of substantial business will enjoy the facility as pledged in the agreement.
“We have mentioned various parameters like scale and structure of investment, employment and turnover to define “substantial business”,” said Pokharel.
He told myrepublica.com that the new draft makes investors liable to bear commercial risks and get insurance cover for disasters, riots and other types of damages. “But for the non-commercial loss, which mainly include losses resulting from reversal of fiscal and monetary policy, they can claim compensation from the government,” Pokharel told myrepublica.com.
What this means is, if the cabinet okayed the agreement, the government would not be able to alter tax and other policies for the Indian Investors for at least 10 years of signing of the agreement. If it acted otherwise, the companies can claim compensation for possible loss.
“We decided to agree on this clause because we in the new Industrial Policy have already incorporated a provision of covering non-commercial risks of all business enterprises,” said Pokharel.
However, not all officials at MoI agreed with him because the new Industrial Policy is still being debated at the Finance and Infrastructure Committee and has not been ratified yet.
“If this agreement had come after the cabinet´s nod on the policy, it would have been understandable. But consenting on it before the endorsement of the policy is not a right decision,” said an official. “What will happen to this draft agreement, if the government did not approve the compensation facility in the Industrial Policy itself?”
However, Pokharel noted that the motive behind extending this facility was to guarantee investors that changes in governments and policies will not push them to a disadvantaged position.
The agreement also promises that the government will not nationalize the foreign investment project, will pledge national treatment to the Indian investment and enterprises and other facilities as well.
milan@myrepublica.com
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