Kathmandu. Although the government has been making various policy commitments and facilitation efforts to attract foreign investment in Nepal, foreign investment worth about 100 million US dollars (Rs 15.22 billion) has returned due to tax problems and dividend refunds.

The investment, which was preparing to come to Nepal from the US and Europe, has been stopped due to Nepal’s tax laws, problems in the process of withdrawing dividend after investment, and practical difficulties faced by foreign investors. According to a reputed former banker who has been trying to bring the investment to Nepal for two years, foreign investors have backed out of their decision to invest in Nepal.TAG_OPEN_p_53

One of the investments that came back was related to a private equity fund and the other was related to a project to set up a data center in Nepal. The total investment of both projects was about $100 million.TAG_OPEN_p_52

The former banker, who has been facilitating the bringing of foreign investment in Nepal, has said that the efforts made for two years have finally gone in vain. He had also made preparations to meet the Finance Minister and other top government officials to convince the investors to invest in Nepal.

} “I was preparing to meet the Finance Minister and other high officials to reassure the investors,” he said, “They did not want to invest in Nepal as they saw that the facilities given in the law would not be available and the investors could be arrested.” ’

Investors had made the problems faced by the companies with foreign investment in Nepal as the main basis. In particular, the problems faced by the Dolma Impact Fund, which is registered and operated in Ncell and Mauritius, have discouraged them from investing in Nepal.

Some high-ranking officials working with foreign investors and government officials who came in contact with InvestmentNews are also aware that foreign investors are reluctant to invest due to the problems seen in the internal tax policy and the process of withdrawing dividends.TAG_OPEN_p_48

Investors disappointed by Dolma and Ncell’s experience

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The former TAG_OPEN_p_47 banker said that investors in the US and Europe have taken seriously the problems faced by companies with foreign investment in Nepal.

Foreign investors have taken the problems faced by Dolma Impact Fund, which has invested in Nepal from Mauritius, in terms of tax exemption and dividend refund as an example. The government has terminated the non-double taxation agreement with Mauritius with effect from July 1, 2083.

Similarly, the developments related to Ncell have also become a matter of concern for new foreign investors. He said that the incident of leaving the country after the arrest of the CEO of Ncell and the problems faced by the Malaysian CEO while leaving Nepal are seen as the risks that investors may face while investing in Nepal.

} “Even after the earnings of foreign investors in Nepal, there has been an experience of imposing taxes by bringing effective laws and scaring investors,” said the banker, who has been consulting to bring foreign investment for two years. Investors do not see Nepal as an investment country only. ’

TAG_OPEN_p_43 According to him, foreign investors want to ensure returns on investment, legal protection, tax stability, and the ability to withdraw their capital and dividends after investment. If policy facilities are limited to paper and there is a difference in practice, then investors prefer other countries.

TAG_OPEN_strong_28 FDI commitment reduced by 53.8%

The government data also shows that the environment for attracting foreign investment in Nepal is weakening.TAG_OPEN_p_42

In the first quarter of the fiscal year TAG_OPEN_p_41 2083/84, the commitment of foreign direct investment (FDI) has decreased by 53.8 percent compared to the same period of the previous fiscal year.

According to the Department of TAG_OPEN_p_40 Industry, Nepal has received foreign investment commitments worth Rs 16.23 billion from mid-July to mid-October of the current fiscal year. Such commitments were Rs 35.13 billion in the same period of the last fiscal year.

The number of foreign-invested projects has increased during this period. In the first quarter of the last fiscal year, there were 311 projects, which increased to 422 in the same period of the current fiscal year. The number of projects has increased by 35.7 percent.TAG_OPEN_p_39

} However, while the number of projects has increased, the commitment to investment and job creation has decreased significantly.

TAG_OPEN_p_37 In the first quarter of the last financial year, there were commitments to provide employment to 33,814 people through foreign-funded projects. This commitment has come down to 5,129 in the same period of the current fiscal year. This is a decline of 84.8 percent.

Statistics show that even though the number of foreign-funded projects has increased, their total investment amount and commitment to job creation are weak.

The investment climate did not improve even after the new government came to power

The Nepali Congress President had also said that the expected improvement in the environment to attract foreign investment has not improved after the formation of the new government.TAG_OPEN_p_35

Speaking at a press conference held at the party office, he raised the issue of not being able to attract foreign investment even after the formation of the government.TAG_OPEN_p_34