KATHMANDU: The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has expressed the hope that the investment climate would improve and the economy would be revived if the new action plan for the development, expansion and improvement of the capital market is effectively implemented.

The federation believes that the proposed provisions will make a significant contribution to making the capital market more transparent, competitive, investment-friendly and dynamic. The federation believes that the strengthening and expansion of the capital market will not only facilitate the long-term capital raising required for industries and businesses but also broaden the scope of capital flow in the overall economy by keeping the morale of investors high.

In this context, the FNCCI has taken far-reaching provisions such as effective implementation of book-building system, capital balance of institutional investors, development of new investment instruments, reforms in securities business and regulatory framework and restructuring of stock exchange as milestones and welcome steps.

Likewise, expansion of inter-day trading and margin trading, issue and exchange of securities, clear investment policy for institutional investors, capacity enhancement of CDS and development of institutional bond market will help increase the depth and liquidity of the capital market.

The FNCCI believes that facilitating the investment of Non-Resident Nepalese in the capital market, managing private equity and venture capital, mobilizing capital in startups and innovations, and expanding the reach of small investors will create new investment opportunities and increase the confidence of the general investors in the market. Also, we believe that it will be beneficial for all to move forward in collaboration with the federation to operate the capital market more sustainably. The federation believes that it would be good to see international practices while implementing these provisions.

According to the federation, the arrangement of issuing bonds as per the nature and necessity of the project, facilitation in share collateral loan and making the transaction of treasury bill and development bonds effective would help expand long-term financial resources.

The arrangement related to the reduction of capital gain tax and the final form of profit tax has been passed by the Council of Ministers as mentioned in the action plan and it is very positive from the point of view of investment incentive and stability of capital market, the FNCCI said.

The FNCCI would like to draw the attention of the following issues to make the capital market more systematic, transparent and investment-friendly. The FNCCI believes that the tax of 10 percent on the profit on the issue of shares of unlisted companies should be harmonized with the tax rate on the profit on the disposal of listed securities and if the tax rate is set at 15 percent for the investment companies dealing in securities, it will promote institutional investment and help in expanding the depth and liquidity of the market.

Similarly, the FNCCI believes that the disclosure of intention to sell shares, which has been implemented some time ago, should be implemented in a more clear, practical and consistent manner with international practice.

This provision shall be amended to provide for prior disclosure on the sale of shares of strategic partners or main promoters of listed companies and to record transactions through the system of transactions outside the regular ones prescribed by the stock exchange market by adopting the offer for sale; In the case of non-affiliated shareholders in the business, it is appropriate to provide information to the stock exchange before the market opens, if there is a change in the ownership of the shares of the shareholders by more than 1 percent.

The FNCCI believes that this provision will help in increasing transparency, investors’ right to information and confidence in the market. The federation believes that effective coordination between the regulatory body, Nepal Stock Exchange, securities entrepreneurs, institutional investors, private sector and investors is necessary for the effective implementation of the new capital market provision.

The federation is committed to continuous policy dialogue and collaboration with the government, linking the development of the capital market with the expansion of industry, business and investment. Overall, the federation welcomes the efforts of the government in the capital market reforms and wishes for its successful implementation. The federation believes that these reforms will increase investors’ confidence in the capital market, attract domestic and foreign investment, facilitate long-term capital mobilization for industries and businesses, and contribute significantly to the sustainable development of Nepal’s economy.