KATHMANDU, May 30: The government has unveiled a series of legal and procedural reforms aimed at attracting foreign investment and improving the country’s business climate, including provisions allowing foreign investors to lease residential apartments and enabling Non-Resident Nepalis (NRNs) to participate in the secondary securities market.
Presenting the budget for the upcoming fiscal year, Finance Minister Dr. Swarnim Wagle said the reforms are designed to streamline processes from investment approval to profit repatriation, while reducing regulatory bottlenecks that have long discouraged investors.
Under amendments to the Foreign Investment and Technology Transfer Act, the requirement of prior approval from Nepal Rastra Bank for repatriating foreign investment has been scrapped. Investors will now only be required to notify the central bank. The government has also removed the “prior approval” requirement under the automatic investment approval mechanism, replacing it with a simplified notification-based system.
Understanding Stock Market
The reforms also broaden the definition of foreign investment to include hybrid instruments such as convertible instruments and project-linked financing. Procedures for remitting payments abroad for services, royalties and technology transfer have also been simplified.
Amending the Civil Code, the government has introduced a new provision allowing foreign investors, multinational companies and international organisations operating in Nepal to lease residential apartments for employee housing or related purposes. Such entities will be permitted to lease up to 25 percent of apartment units or buildings on a long-term basis.
In a significant move for capital markets, the government has opened the secondary securities market to NRNs. Necessary amendments will be made to laws governing investment approval, accounting standards, profit repatriation and capital gains taxation to facilitate their participation. Officials said the measure is expected to boost foreign currency inflows and deepen the domestic capital market.
The government has also announced plans to establish a separate Commercial Tribunal to expedite resolution of business disputes. It has further pledged new legislation on intellectual property rights protection and a revised legal framework for debt recovery.
Finance Minister Wagle said industries will no longer require prior approval from the Department of Industry for capacity expansion, ownership changes or capital increases. Instead, a notification-based system will be introduced under amendments to the Industrial Enterprises Act.
To improve credit access for small and medium enterprises, the government has introduced a “first loss recovery” mechanism under a credit guarantee framework. It also plans to develop a credit scoring-based lending system for individuals and businesses to enhance financial inclusion.
