Trade (Role of Foreign Investment)

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Foreign Investment and Transfer Technology Act, 1992

Nepal has only recently opened the doors to foreign investment. The Foreign Investment and Technology Transfer Act 1992 lays down the law governing foreign investment and the applicable rules and regulations. The Foreign Investment and Technology Transfer Act has undergone its first amendment in 1996 aiming at making the environment of industrial investment more congenial straightforward encouraging and transparent. The Industrial Policy of 1992 identifies foreign investment promotion as an important strategy in achieving the objectives of increasing industrial production to meet the basic needs of the people, create maximum employment opportunities and pave the way for the improvement in the balance of payments. Foreign investment is expected to supplement domestic private investment through foreign capital flows, transfer of technology, improvement in management skills and productivity and providing access to international markets. In this context, HMG is encouraging foreign investment in Nepal by providing attractive incentives and facilities within a liberal and open policy. The importance attached to foreign investment is clearly reflected in the constitution of the kingdom of Nepal. In the directive principles of the Constitution, it is stated that a policy of attracting foreign capital and technology shall be adopted.

Forms of Foreign Investment

Foreign Investment is welcome in the form of share (equity). Reinvestment of earnings derived from foreign investment also constitutes foreign investment. In addition to this, investment made in the form of loan or loan facilities also constitutes foreign investment.

Areas Open For Investment

Foreign investment is allowed in Nepal in every sector of economic activities with the exception of the following :-

1. Cottage Industries*.

2. Personal Service Business (Business such as Hair Cutting, Beauty Parlour, Tailoring, Driving Training, etc.).

3. Arms &Ammunition Industries.

4. Explosives, Gunpowder.

5. Industries related to Radio-Active Materials.

6. Real Estate Business (excluding Construction Industries).

7. Motion Pictures Business (Produced in national languages and the language of the nation).

8. Security Printing.

9. Currencies &Coinage Business.

10. Retail Business.

11. Travel Agency.

12. Trekking Agency.

13. Water Rafting.

14. Pony Trekking.

15. Horse Riding.

16. Cigarette, Bidi (Tobacco), Alcohol (excluding those exporting more than 90% ).

17. Internal Courier Service.

18. Atomic Energy.

19. Tourist Lodging.

20. Poultry Farming.

21. Fisheries.

22. Bee-keeping.

23. Consultancy Services such as Management, Accounting, Engineering and Legal Services.

* With the exception of cigarette, bidi, cigar, chewing tobacco. khaini industries and industries producing other goods of a similar nature utilizing tobacco as the basic raw material alcohol and beer producing industries, Handloom, Pedalloom, Semiautomatic loom, Warping, Dyeing and Printing, Tailoring (Other than Readymade Garments), Knitting, Handknitted Woolen Mat and Blanket (Radi, Pakhi), Woollen Carpet, Pashmina, Woollen Garments, Carpentry, Wooden Artistic, Product, Cane and Bamboo Works, Natural Fibre Products, Hand Made Paper and Goods made up thereof, Gold, Philigiree Products including Silver, Brass, Copper, Precious and Semi-Precious Stones, Ornaments, Sculptures and Pottery, Leather Cutting and Tanning, Rural Tanning and Leather Goods producing Works, Jute, Sabai Grass, Babio, Choya, Cotton Thread Products, Artistic Products made up of Bones and Horns, Stone Carving, Ceramic Fine Arts, Pauwa, Boutique, Incense Stick (Dhup), Dolls and Toys Industries and cottage industries with the fixed asset of up to two hundred thousand rupees.

However, no restriction is made for the transfer of technology in industries specified above.

Nepal encourages foreign investment as joint venture operations with Nepalese investors or as 100% foreign owned enterprises. The broad areas open for foreign investment include manufacturing industries, energy based industries, tourism industries, mineral resource based industries, agro-based industries and service industries.

Technology Transfer

The Foreign Investment and Technology Transfer Act 1992 defines "Technology Transfer" as any transfer of technology to be made under an agreement between an industry and a foreign investor on the following matters:

1. Use of any technological right, specialization, formula, process, patent or technical know how of foreign origin.

2. Use of any trademark of foreign ownership.

Acquiring any foreign technical, consultancy, management and marketing service.