Ordinances are introduced by the government as a means of promoting private sector investment

To make things easier for investors, the government, which is frequently blamed for not creating an atmosphere that is conducive to investment, has implemented important law reforms. The government has made it easier for both indigenous and foreign Nepali investors to invest by three important ordinances, one of which amends certain Nepal Acts.

The new laws, which were approved at Friday’s cabinet meeting, center on changes to government service delivery, investment, and land policies. To enhance the business and economic climate and draw in more investment, the Companies Act and the Foreign Investment and Technology Transfer Act have been modified.

Legal reforms to promote private sector investment have long been demanded by the Nepal Chamber of Commerce (NCC), the Confederation of Nepalese Industries (CNI), the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), and other business associations. In response, the government has amended nine laws before the investment conference and has undertaken other legislative reforms. With these ordinances, it hopes to further encourage investment.

The amendments tackle the difficulties of company liquidation and streamline company registration. Companies that are liquidated without conducting business are now eligible for a reduction in penalty. New regulations enable Nepali businesses to build branches overseas, conduct business, and repatriate earnings to Nepal in order to help them compete in international markets. The procedure for repatriating overseas profits and investments has also been simplified.

When deadlines are set in the law, the revisions now mandate that decision-making authorities act within a maximum of seven days, addressing business sector concerns regarding delays in government operations.

The same certificate will now be sufficient for foreign investments in province-registered industries; no further provincial government recommendation is needed. The proposed modifications allow service-oriented enterprises to be developed in special economic zones, which are currently only permitted to accommodate manufacturing industries.

Additionally, the government changed the law to permit the issuance of up to 40% of sweat shares to individuals who make various contributions to start-up businesses. For conventional businesses, the sweat share ratio is limited to 20%, whereas for startups, it can reach 40%.

According to the law, new businesses can now issue shares based on their reputation, ideas, value creation, intellectual property, commercial goodwill, technical information, or knowledge transfer from individuals. This makes it easier for businesses to raise money by identifying intangible assets.

Furthermore, the law states that a private firm’s conversion to a public company does not require approval. A public business may also have a director who is also a board member of another public company with a similar mission, according to the Companies Act, with the exception of those in the banking, finance, and insurance industries.

These long-promoted legal reforms have been well received by the corporate sector. The FNCCI and Industry President, Chandra Prasad Dhakal, stated that by progressively attending to the concerns expressed by the private sector, these reforms will contribute to the development of a better investment climate. “The ordinance’s modified clauses will further stimulate investment,” Dhakal stated.

A legislation reform task committee was established by the government to enhance the investment climate. The government has included the task force’s recommendations into the ordinance, which intends to eliminate onerous regulations and create new ones in order to promote business-friendly and economic reforms, according to Pratap Paudel, an expert member of the task force. Paudel stated, “To make the procedure easier for investors, policy changes have been implemented,” emphasizing the government’s dedication to putting the task force’s recommendations into practice. The task committee had noted problems with service delivery and offered fixes.

Holders of non-resident Nepali (NRN) citizenship and their family members can now come to Nepal with a free two-year multiple-entry visa and a free 10-year visa. The purpose of these clauses is to encourage foreign Nepalis to invest in the nation.

Additionally, holders of NRN citizenship will be exempt from the Foreign Investment and Technology Transfer Act’s requirements while establishing businesses in Nepal. Additionally, there are now clear rules regarding the sale of employee shares that are given to employees of the company.

In accordance with the Foreign Investment Act, the revised aviation policy permits up to 80 percent foreign ownership in foreign airlines, 49 percent in domestic carriers, and up to 95 percent in aviation training and maintenance facilities.

Additionally, the new laws allow foreign investment in agricultural mechanization and technology. In addition to foreign investments, foreign financial institutions will now be able to lend money to other businesses. Foreign financial institutions can now offer project loans with the borrower’s property in Nepal serving as collateral, whereas before only foreign-invested industries could obtain loans from foreign banks.

The power to settle revenue disputes up to three million rupees without bringing cases before the Revenue Tribunal has been given to the Department of Revenue Investigation (DRI). Settlements in instances involving income leakage might be reached by paying fines and other sums without awaiting the outcome of the case. A fast-track mediation procedure has also been implemented to reduce the delays in settling disputes involving government contracts.

In a similar vein, the Ministry of Finance and the Nepal Planning Commission (NPC) have forecasted the resources that will be available over the following three years as well as the spending caps for the current fiscal year. This will assist in creating the medium-term spending plan and getting the budget and initiatives ready for the upcoming fiscal year.

By Falgun 7 (February 19) of every fiscal year, the NPC must submit recommendations for project and program proposals to the Finance Minister, adhering to the resource and expenditure restrictions established by the Resource Estimates Committee. In order to facilitate the budgetary process for the upcoming three years, these rules ought to incorporate the budget cap, the medium-term spending structure framework, and multi-year resource guarantees for national pride initiatives.

According to the availability of resources, spending capacity, and expenditure requirements, the Ministry of Finance has made provisions in the budget formulation process to finalize the budget by modifying or adjusting the budget amounts, programs, or activities suggested by the pertinent ministries and central bodies.

The Ministry of Finance may also transfer funds or resources for a project upon request from the relevant ministry or central agency if a foreign grant or loan agreement is made in the middle of a fiscal year and more money is needed for an ongoing project. This will happen without raising the total amount of foreign aid specified in the Appropriation Bill.