KATHMANDU, Oct 5: Amid concerns about challenges in attracting foreign direct investment (FDI) due to procedural complexities, the government is set to streamline the process by approving foreign investments of up to Rs 500 million through the automatic route.
The Ministry of Industry, Commerce, and Supplies has introduced a policy to facilitate foreign investments through the automatic route, utilizing the authority granted under subsection 1 of section 42 of the Foreign Investment and Technology Transfer Act. This policy will enable investors from any country to receive initial investment approval online upon submitting their applications.
Baburam Gautam, director general of the Department of Industries, explained that these new measures have been implemented to simplify and expedite the foreign investment approval process. He stated, "Foreign investors can apply from abroad to invest up to NPR 500 million, and they will automatically receive pre-approval through the online system." Gautam added that, despite this policy arrangement, the development of the necessary "software" is still ongoing. "Investors will upload the required documents online and receive investment approval automatically," he said.
The private sector has welcomed this government initiative to attract foreign investment through legal means. Chandra Prasad Dhakal, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), emphasized the importance of proper implementation, saying, "While policy reforms have been made to attract investment, it's crucial that these decisions are implemented effectively."
Take holistic measures to boost FDI in Nepal
It's worth noting that the online system for this arrangement, which was published in the national gazette on Monday and came into effect on Tuesday, is still under development. Despite the government's efforts to establish a one-point service center for investor convenience, there have been complaints about the effectiveness of service provision.
The government has identified seven specific areas where foreign investment will be allowed through the automatic route, with no minimum limit imposed for investments in information technology-based industries. These areas include energy production from wind, solar power, biomass, and related machinery and equipment manufacturing. Additionally, investments in bio gas, energy co-production in the sugar industry, and energy exploration are open to foreign investors. Agriculture and forest production industries are also included, covering various sectors such as fruit and vegetable processing, greenhouse operations, and more.
Furthermore, the infrastructure sector allows foreign investment in vehicle parking facilities, export goods processing zones, wastewater treatment plants, film city and studio construction, and warehouse development and operations. Lastly, the tourism industry welcomes foreign investments in motels, hotels, resorts, bars, restaurants, amusement parks, water parks, conference facilities, and sports tourism ventures.
In the information technology-based industries, foreign investments are welcome in services such as Technology Parks, IT Parks, Biotech Parks, Software Development, Data Processing, Digital Mapping, Business Process Outsourcing (BPO), Knowledge Process Outsourcing (KPO), Data Mining, Cloud Computing, Web Portal, and Web Design.
The service industry sector also offers attractive investment prospects. Within this sector, foreign investments are encouraged in various areas including mechanical workshops, construction businesses, hospitals, nursing homes, polyclinics, rehabilitation home operations, physiotherapy clinics, Ayurvedic and other alternative healthcare facilities, sports services, swimming pools, garbage collection and sanitation, garbage recycling, veterinary services, health examination facilities (including X-ray, CT scan, MRI, ultrasound services, and health examination laboratories), as well as international courier services.
In the manufacturing industry, foreign investors will discover opportunities in livestock and fish feed production, the manufacturing of starch, glucose, bakery items, processing and packaging of animal and fish meat, oil and fat production from basic raw materials, confectionery and biscuit manufacturing, sugar production, and non-alcoholic beverage production. Additionally, there are opportunities in textile fabrication and recycling, garment and clothing production, manufacturing of electronic household appliances, production of items using plastic and rubber, the creation of bags, luggage, suitcases, trolley bags, and similar products for carrying goods. Foreign investment is also encouraged in the production of wooden materials, apart from traditional and culturally inspired artisanal products.
Within the manufacturing sector, investment opportunities extend to toiletry product manufacturing such as toothpaste, soap, and shampoo, production of items using glass, manufacturing of bicycles, scooters, motorcycles, automobiles, and related equipment, electric lights, switches, meters, meter fuses, wiring wires, compressors, and other related items. The medical, surgical, orthopedic, and electrical wire manufacturing sectors are also open to foreign investment.
