With the outbreak of the COVID-19 pandemic more than a year ago, the global economy has nose-dived on an unprecedented scale. The global health crisis forced nations to adopt tough restrictive measures, including lockdown and prohibitory orders to rein in the spread of coronavirus. The transport, trade, manufacturing and tourism has come to a grinding halt, triggering massive lay-offs and economic recession. The pandemic has badly struck the economic globalisation as the global production networks and flow of goods and services got disrupted. The virus laid bare the shortcomings of the interconnected and interdependent world, interrupting the flow of foreign direct investment (FDI). The UN Conference on Trade and Development (UNCTAD) has predicted that global FDI flow will contract between 30 to 40 per cent during 2020/21. The LDCs like Nepal will be further affected if the pandemic lingers and continues to bite the economies.
The recently unveiled budget has set the target of attaining 6.5 per cent growth in the upcoming fiscal year although the Asian Development Bank has forecasted that it would be around 3.1 per cent. The government’s target is based on the assumption that the pandemic will subside and the economy will start to improve at a desired pace. It has also counted on the foreign aid, assistance and investment to fuel the economy battered by the pandemic. In order to attract more FDIs, Nepal Rastra Bank (NRB) has introduced ‘NRB Foreign Direct Investment and Loan Management Bylaw, 2078’ which allows the foreign investors to bring their money into Nepal without taking approval from the central bank.
According to the news report carried by this daily, it will not be mandatory for the foreign investors to secure prior approval from the NRB to send or remit foreign currency to Nepal after obtaining foreign investment approval from the foreign investment sanctioning body. However, they are obliged to inform the NRB after the investment is approved as per the bylaw. Similarly, the foreign investors are not required to acquire approval from the NRB to bring in exchanges for the purpose of company registration, feasibility study and prior expenses before the operation of their enterprises here. The new legal provision is expected to end the duplication in the approval process and ensure the prompt entry of FDI.
Now the NRB will not take more than 15 working days to decide on whether to approve the repatriation of dividends from the date an application is submitted. This has eased the process to repatriate the dividend. However, the investors must take NRB’s approval in advance to bring foreign loans into the country. It will decide on whether to allow the foreign loans within 15 working days of the application. Likewise, the foreign investors are not obliged to submit an audit report of the latest financial year if the FDI or foreign loans are less than one million US dollars. The bank has formed a facilitation committee under its deputy governor to smooth the process for the entry of foreign investment and loans. Nepal is in the dire need of the foreign investment to promote the large and medium-sized industries as the industrial sector has suffered setback owing to the pandemic. With the implementation of the bylaw, the doing business is also expected to be faster and result-oriented.