Government should facilitate the investors, rather than adding one after another hassle
Until recently, the Nepal Rastra Bank (NRB) used to provide exchange facility for companies to purchase or procure software services from international suppliers. The central bank suddenly made a recommendation letter of ‘regulatory agency’—a pre-condition to make the international payment for the purchase of software services. This new requirement of the central bank put companies, particularly with foreign investment, in a quandary: how to get the recommendation letter of the agency of technology regulator which does not exist at all? Struggling to get the approval for the foreign exchange to make international payment of the software services, some companies approached the Department of Industry (DoI), where they are registered, to acquire the recommendation letter. Citing that it was not a regulatory agency for software services and has no any authority, the DoI declined to issue the recommendation letter.
According to the DoI, it has received applications from over half a dozen firms, including three multinational companies, to get the recommendation letter for international payment of nearly Rs 500 million for software services. The department has put on hold these applications ‘until a solution’ is found. The NRB seemed to have restricted the payment by making the requirement of recommendation letter of regulatory agency after the foreign exchange reserve of the country started to deplete. Going from pillar to post to get the recommendation letter for the payment of much-needed software services is another hassle for investors. This also contradicts with the government’s commitment to cut red tape and facilitate investments through ‘one stop service center’.
Halting payment is not only likely to affect the operation of firms and industries which rely on software but also discourages other possible foreign investors who want to come and invest in Nepal. A huge gap between the pledges that foreign investors make and the realization of such commitment could also be attributed to this type of uncertainty of government rules and regulations governing investments. Data from the Department of Industry shows that Nepal received commitments for cumulative foreign investment of Rs 114.96 billion in the past five years. However, the country was able to receive actual investment of only Rs 54.38 billion during the period, according to the NRB. This is about 47 percent of the pledged amount. This figure shows that the government needs to do more to make an environment in the country that helps to translate the pledged amount into realization. However, rather than facilitating investors, making them to suffer due to its own policy shortcomings does not bode well for the country that desperately needs foreign capitals. Regarding the case of payment for software services, it’s unfortunate scenario whereby operations of some companies with foreign investment are likely to be hit when they cannot pay their international suppliers for the purchase or renewal of software services. Thus the government should immediately designate the regulatory body of software services so that they can get the recommendation letters to get foreign exchange service from the NRB. While authorities at the DoI could be right on raising the authenticity of the payments that are not intended to avoid taxes in Nepal, they cannot halt the payment under these pretexts. To make sure that the payments are of genuine nature, it’s again the government who should first come up with protocols or measures to curb wrong practices rather than finding excuses to halt the payments. If the government is really serious about attracting foreign investment, it should facilitate investors rather than adding one after another hassle.