The proposed Foreign Investment and Technology Transfer Act (FITTA) has backtracked on the policies taken by the current Act that was brought more than two decades ago, according to economists, former bureaucrats and ministers, who also criticised it for being prepared in haste without much consultation and homework.
The draft Act prescribes sectoral ceiling for foreign investment, which is a complete backtracking from the current Act, said former secretary Bhola Chalise, addressing ‘Policy Talkies’ on the draft of Foreign Investment and Technology Transfer Act, 2070, organised by Samriddhi Foundation in association with the Society of Economic Journalists-Nepal, here, today.
"There is no rationale in keeping different ceilings in investment," he said, adding that the Act should facilitate the inflow of foreign investment, not restrict it. "
The draft Act — that has proposed $200,000 minimum ceiling for foreign investment — has also opened up outward foreign investment, which should come through a different Act, Chalise added. "The draft Act has envisioned more institutions and is complicated, and has many loopholes for foul play. It needs to be amended and made competitive."
The Act should be simple and help foreigners bring investment and transfer technology, according to former secretary Rameshwor Khanal.
"It should make the Investment Board a single focal point for all primary foreign investments irrespective of nature and size of investment and Securities Board of Nepal for all secondary market investments. Likewise, the provision of restriction to strikes should be brought in the SEZ Act and not in the FITTA," he said.
However, it should reduce the tax rate for manufacturing enterprises that use local raw materials and generate direct employment for more than 1,000 people, according to Khanal.
"Companies like Dabur and Ncell should be encouraged to go public," he said, adding that there is no rationale in restricting real estate development like housing, office and business complexes, multi brand retailing and star hotels.
How can multi brand retailing hurt local businesses, former finance minister Madhukar Rana said, questioning the rationale behind restricting retail chains. "The country needs foreign investment to generate employment and retail chains are the largest employment creators."
If local businesses are competitive and have capital, the government should ban foreign investment, otherwise there is no need for caps and ceilings, said chief executive of Mega Bank Anil Shah. "World class service and technology are a must to increase the competitiveness of local businesses."
The Act has to be brought at par with Cambodia and Vietnam as it should be a document that helps attract investment making Nepal a more lucrative investment destination, he added. "Opening the door to foreign investors is not enough, it should be profitable and help domestic investors too."
Likewise, president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Suraj Vaidya said that the draft Act will not help attract foreign investment as it has been drafted in haste, and lacks appeal.
"If the draft is not updated, it will only help in the outflow of investment and will not be able to attract foreign investment to the country," he added.
The world has turned into a global village and restricting foreign investment and technology will take the country back to the dark ages, said senior economic adviser at the finance ministry Dr Chiranajivi Nepal. "Protectionism does not help promote local industries, it will rather weaken them," he said.