9 power summit 1

8/3/2019 9 Power Summit 1

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-Rishi Raj Koirala-Director-Department of Industries

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Contents

1. Salient Features of Industrial Enterprises Act (IEA),1992

2. Salient Features of Foreign Investment & Technology Transfer Act (FITTA), 1992

3. Procedure for Foreign Investment in HydropowerProjects

4. Mechanisms Safeguarding Foreign Investment in Nepal5. Key Laws Relevant to the Potential Foreign Investors6. Conclusions

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1. Salient Features of Industrial

Enterprises Act, 19921. Classification of Industries

Manufacturing IndustriesEnergy-Based Industries Agro and Forest Based IndustriesMineral IndustriesTourism IndustriesService Industries

Construction Industries2. No Licensing Required to set up Energy Based

Industry 3. Registration of Industry is required

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Contd IEA, 1992

4. Time bound Registration: 21 days

5. Department of Industries (DOI) for investmenton fixed asset > NRs. 30 million. For less thanthat Registration will be done at the Departmentof Cottage & Small Industries (DCSI)

Note:However, for all the projects/industries involving foreigndirect investment (FDI), DOI is the relevant authority .

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Contd IEA, 1992

6. Apart from the facilities granted by sectoralpolicies and acts, the Industries may enjoy

additional facilities as stipulated in Section 15, 16,22 of the IEA 1992.

7. No nationalisation of privately owned industriesenterprises.

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2. Salient Features of Foreign Investment &Technology Transfer Act, 1992

1. Foreign investors are permitted to own up to100% equity shares in Energy based industries.

1. Foreign Investment means following investmentmade by a foreign investor in any industry:

a) Investment in share, (Equity),b) Reinvestment of the earnings derived from the clause (a)

above,c) Investment made in the form of loan or loan facilities.

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Contd FITTA, 1992

3. Technology Transfer means any transfer of technology tobe made under an agreement between an industry anda foreign investor on the following matters:

a) Use of any technological right, specialisation, formula, process,patent or technical know-how of foreign origin,b) Use of any trademark of foreign ownership,c) Acquiring any foreign technical Consultancy, management and

marketing service

4. Technology transfer is possible even in areas whereforeign investment is not allowed.

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Contd FITTA, 1992

5. Permission of the DOI is required to get approval forforeign investment, technology transfer, loaninvestment and other related agreements

6. For projects with fixed asset of over NRs. 2 billion,Director General of DOI can approve the FDI.Proposal with investment above that, InvestmentPromotion Board (IPB) grants approval.

7. 100% repatriation possible on the proceeds obtainedfrom the sale of shares, profit or dividend earned oninvestment on shares, loan principal and interest,fees/royalties in lieu of Technology Transfer

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Contd FITTA, 1992

8. Provision Related to Visa: On recommendation of theDOI, following types of visa can be granted by theDepartment of Immigration

Non-tourist Visa for up to 6 months, to conduct study or research for making investmentBusiness Visa (to foreign investor, dependent family,

authorised representative) up to 5 years at a time till theforeign investment is retained. This visa can also begranted to experts deputed under TTA.Residential Visa: Investment > USD 100,000 at a time

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Visa Contd.

SN Investment Visa Fee US$ Remarks

< 1 year Yearly 5 years

1 Nrs. 10 million 10/month 100/yr 300/yr

3 >Nrs. 100 million No Fees

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Contd FITTA, 1992

9. Provision Related to Dispute Settlement:

Parties to settle the dispute in the presence of DOI

Arbitration, in accordance with the prevailingarbitration rules of the UNCITRAL at KathmanduHowever, in case of projects with fixed assetinvestment of over NRs. 500 million, disputes may be

settled as mentioned in the JVA.

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3. Procedure for Foreign Investment inHydropower Projects

Two modalities are normally followeda. Get the Survey License from the DoED and approach the

DOI for FDI approval, Company Registrars Office (CRO)for Company Registration & again DOI for industry registration

b. Apply at the DOI for FDI approval, which solicits theopinion of the DoED and after concurrence approves theproposal. The investor then approaches the CRO forCompany Registration and DoED for Survey License

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Procedure .........Contd.....

1. In DOI, clear procedures for FDI approvalhave been laid out for different forms of foreign investment

Establishing a new industry either with 100% equity or in Joint Venture (JV) with Nepalese investor/s.Making an equity investment in an existing Nepaleseindustry by Share TransferMaking a loan investment in an existing Nepaleseindustry (foreign or local)Engage in Technology Transfer in an existing Nepaleseindustry

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Procedure .........Contd.....

Additional Procedures for new proposals(after getting approval for FDI) before

commencing the project implementationIncorporate the company at the Company RegistrarsOfficeRegister the industry at DOI (Conditional when theproject has to conduct IEE/EIA)Registration at Inland Revenue Office to get Permanent Account Number (PAN)

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4. Mechanisms Safeguarding ForeignInvestment in Nepal

Some of the key institutional arrangements that havebeen made to promote foreign investment in Nepalare:

Nepal is a member of the Multilateral InvestmentGuarantee Agency (MIGA) and the World IntellectualProperty Organisation (WIPO)Nepal has entered into Bilateral Investment Treaties(BITs) with countries such as France, Germany,Mauritius, and United Kingdom.

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Mechanism .........Contd.....

Nepal has also entered into Double Taxation Treaties(DTTs) with 9 countries, namely, India, Norway,China, Pakistan, Sri Lanka, Austria, Thailand,Mauritius, and Republic of South KoreaNepal is also a signatory to the Convention on theSettlement of Investment Disputes between States andNationals of Other States and a member of theInternational Centre for the Settlement of InvestmentDisputes (ICSID), associated with the World Bank.

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5 . Key Laws Relevant to thePotential Foreign Investors

Sector Specific Laws (Civil Aviation, Hydropower,Food Control, Drugs, Telecommunication etc)Foreign Investment and Technology Transfer Act, 1992Industrial Enterprise Act, 1992Built Own Operate and Transfer (BOOT) Act andRegulationFinancial Transaction Act & Regulation (Nepal RastraBank)

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..Contd.

Company ActImmigration Act & RegulationIncome Tax Act & Regulation

Value Added Tax (VAT) Act & RegulationEnvironmental Protection Act & RegulationLabour ActInsurance Act & Regulation

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6. ConclusionsRegistration at DOI/DCSI is must for setting up anenergy based industry IEA, 1992 ensures non-nationalisation of Industry

Ministry of Industry has taken to ensure numerousmeasures to protect the investment of the foreigninvestors through different bilateral and multilateralagreements. However, the scope of these measures needto be widened furtherEnergy based industry can enjoy additional benefits andconcessions from industry related laws (IEA and FITTA),apart from that bestowed by the sectoral laws

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Conclusions.. Contd..

Up to 100% foreign investment is allowed in energy based industries DOI is the sole agency responsible for granting FDIapproval, foreign loan approval, technology transferapproval and other regulatory aspects of FDI projectsForeign Investors in energy sector requiring Visa needto get recommendation for different types of visa (non-tourist, business and residential) from DOIFITTA, 1992 is flexible enough to accommodateconcerns of foreign investors of large projects by allowing the investors to choose the jurisdiction fordispute settlement

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Thank You

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