Threshold for FDI to be raised to US$ 200,000

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    KATHMANDU, April 21

    FDIThe Ministry of Industry is preparing to raise the threshold for foreign direct investment (FDI) by four times to US$ 200,000 from US$ 50,000 after FDI poured only in small industries with small capital.

    The ministry is preparing to raise it as the entrepreneurs coming in pretext of FDI have been found to have abused visas and the ministry felt that such industries cannot fulfill the targets. The ministry had raised the threshold from US$ 20,000 to US$ 50,000 only around one and half years ago. The ministry stated that it is once again preparing to raise threshold after the stakeholders complained that US$ 50,000 is also small and it has increased malpractices. “We are preparing to raise the threshold to US$ 200,000 after receiving suggestions that the threshold of US$ 50,000 cannot create jobs and raise productivity in the current context,” section officer at the ministry Parvati Sharma said. “It has not been decided yet as the issue is still being discussed,” she added. She revealed that a scientific policy is being prepared in accordance to the international model as the current policy about foreign investment is not contemporary. She said the ministry is preparing to bring the new policy by mid-May.

    She stated that the policy is being reformed to address the lack of capital formation owing to low domestic saving and to develop/expand infrastructure sector. “We hope that this will attract managerial and technical skills and help in expanding the reach to international market and reducing trade deficit through industrial development,” she opined. She revealed that the draft of the policy has prioritized hydropower (generation/transmission), transportation (fast track, railway, postal highway, cable car, metro service, flyover, and international airport), agricultural and processing of medicinal herbs, tourism, mineral based and manufacturing industries.

    The threshold for hydropower generation has been set at 30 MW while that for transportation and other infrastructures has been set at US$ 10 million. It is US$ 2 million for industries for processing of agricultural products and medicinal herbs, promotion of export and import substitution. There is, however, no threshold for tourism sector but the draft mentions about special facilities for three-star or better hotels. It is Nepali currency equal to US$ 2 million for mineral-based and manufacturing industries. The draft also has not set a threshold for communication, and higher studies (health, technical and vocational). The Foreign Investment and Technology Transfer Act that was brought along with the Industrial Enterprises Act 21 years ago had determined the fixed capital of Rs 20 million for an industry with FDI. It was then reduced to US$ 20,000 five years later following criticism that it was too high. It was again raised to US$ 50,000 only around one and half years ago.

    Nepal has attracted Rs 122 billion in FDI by the end of 2013, according to the Department of Industry data. Foreign Investment Director at the department Bipin Raj Bhandari stated that over 2,700 projects have proposed for investment by the end of the ninth month of the current fiscal year.

    Source : Karobar Daily