Budget outlines series of business, investment reforms

Kathmandu, May 31:Through the budget of the next Fiscal Year 2026/27, the government has expressed its 'full commitment' to industrial innovation. 

It has made a plan to invite the private sector to develop and operate industrial areas like Motipur and Nayurdhap in line with the policy of expanding high-quality industrial infrastructure. 

In the Panchkhal Special Economic Zone (SEZ), priority will be given to women entrepreneurs. Further concessions will be offered on loan disbursements to women entrepreneurs. "We will make arrangements for a 'Special Economic Administration Zone' where all decisions regarding tax, customs, import, export and investment will be made under a single roof," said Finance Minister Dr. Swarnim Wagle while presenting the budget at the joint session of the Federal Parliament on Friday. 

To enhance the competitiveness of productive industries, the government plans to review the demand charge for electricity and provide discounts on electricity tariffs. Industrialists will be able to mortgage structures built on land provided in industrial areas, SEZs, or on lease, for banking purposes.

A plan is also announced to encourage the expansion and growth of industries and businesses that have been unable to operate at full capacity due to lack of capital, by providing 'Business Revival Loans'.

Likewise, the government is set to implement the 'Investment Express' concept by introducing an automated route system within the next three months.  "We will make arrangements for integrated services covering everything from company and industry registration, financial services, tax system participation, and visa applications, including provisions for information access, compliance reporting, and risk-based auditing," read the budget. 

A legal provision will be made so that projects approved by the Investment Board do not require further approval from other agencies. 

Investment visas will be provided for conducting research and studies related to investment in approved projects, and investment and profit repatriation will be facilitated by simplifying share transfer, tax clearance, asset valuation, loan repayment, dividend distribution, and liquidation processes.

Expansion of labour-intensive industry 

To develop and expand labour-intensive industries with export potential, such as agro-processing, tourism services, and light manufacturing, model Employment-Linked Production Zones will be operated.

A sewage system with treatment plants will be operated in collaboration with the government and the private sector in industrial areas and corridors, using clean energy-based technologies.

Concessional loan facilities will be provided to replace traditional boilers in industrial establishments with electric boilers. An allocation of Rs. 220 million is made to convert 100 industries to electric or bio-briquette-based boilers.

Rs. 650 million is earmarked for industrial infrastructure development, and Rs. 500 million for the design, construction, and maintenance of industrial and mining access roads used by heavy vehicles, with special standards.

The budget also announced to establish a Mining and Minerals Authority for the comprehensive regulation and management of the extraction, production, supply, and use of mineral and construction materials.

"We will expedite the necessary processes for the commercial production of petroleum in Dailekh. We will proceed to reduce the Government of Nepal's share in the Dhaubadi Iron Industry and operate it under a public-private partnership model," said FM Dr. Wagle. 

Customs duties lowered to seven tiers 

The finance minister reduced customs duties on 273 types of raw materials, ensuring that the tariff on industrial raw materials is at least one level lower than that on finished goods. He also limited the existing eleven tiers of customs duties to just seven.

The budget also announced to draft, replace, or amend dozens of acts, regulations, procedures, and directives for investment promotion, economic reforms and smooth delivery of services. A Bill to amend related acts will be presented in Parliament to immediately repeal the 15 laws announced earlier.

Similarly, the government announced to amend company law to facilitate the process of dissolving companies, while ensuring clarity on issues such as conflicts of interest and disclosure of information. 

It will enter into foreign investment protection and double taxation avoidance agreements with more countries. "We will amend the Insolvency Act, 2063, to resolve financial problems of consumers as well as micro, small, and medium-sized enterprises. To promote investment, we will draft a limited liability partnership law, which will encourage angel investment to be directed into venture capital and private equity funds," said Dr. Wagle. 

Simplifying provisions to invest abroad

The government has announced plans to simplify the provisions allowing Nepali citizens to invest abroad. Through amendments to the Industrial Enterprises Act, a new provision will be introduced requiring industries only to notify the Department of Industry regarding matters such as capacity expansion, change of ownership, and capital increases.

Similarly, amendments to the Foreign Investment and Technology Transfer Act will remove the requirement for prior approval from Nepal Rastra Bank for the repatriation of investment, with notification to suffice. Convertible instruments, project-related funding, and other hybrid instruments will be included within the scope of foreign investment. 

The requirement for prior approval in the automatic approval process for foreign investment will also be removed. Furthermore, procedures for sending service fees, royalties, and technology-related payments abroad are to be simplified.

Likewise, FM Dr. Wagle announced that legal provisions for the recovery of loans will be made. A law on the protection of intellectual property will be drafted shortly. By analysing past overall economic activities, arrangements will be made to provide credit based on the creditworthiness of individuals and businesses. A separate tribunal is to be established for the speedy resolution of commercial disputes, and the Conciliation Act will also be improved.

To ensure financial access for small and medium-sized industrialists, loans will be guaranteed through a 'first loss recovery' mechanism.

Dr. Wagle also announced that the start-up operating system will be strengthened by tailoring start-ups to identification, skills, market access, and financial inclusion, through profit-linked tax concessions, preferential access to public procurement, digital registration, and regulatory facilitation.