BUSINESS & ECONOMY

India's Cooperation in Nepal's Investment Promotion

By Dr. Hari Bansh Jha

Nepal has been able to attract sizeable amount of foreign investment. This is partly due to the investment-friendly rules and regulations for the foreign direct investment, partly due to the lower labour cost and favourable attitude by the Indian Government towards Nepal’s development priorities.

Economic liberalisation, free market approach, lower tariffs and the insignificant non-tariff barriers are the cornerstones of Nepal’s economic policy. Apart from the deregulation of industries, the One Window Committee formed in the Ministry of Industry in 1992 has helped foreign investors in matters related to granting licenses, the supply of water, electricity, telecommunications, imports of machinery, raw materials and spare parts.

In Nepal, the foreign investors are hardly discriminated vis-à-vis the domestic investors in utilising incentives provided by Government. Both the foreign and domestic investors benefit from the provision of abolition of import licensing, minimal import duties on industrial raw materials (5%), import duty on machinery and equipment (1%), effective corporate tax on income (25%), and income tax concession. Labour costs in Nepal are almost the lowest in South Asia. Besides, under the Foreign Investment and Technology Transfer Act, 1992, 100% equity participation by foreigner is allowed in almost all important sectors except defense, cigarettes and alcohol industries and a few other sub-sectors like cottage industries, travel and trekking agencies, consultancy services, real estate business and retail business.

As a result of some of the above attractions, many Indian industries have expanded their network in Nepal in the form of joint venture firms. Of the total 499 JV projects with foreign collaboration in Nepal, India alone accounts for 34 per cent. Similarly, of the total capital investment in the JVs amounting to Rs. 52,689 million, India’s share is 35 per cent. In terms of employment, Indian joint venture firms generate employment opportunity to as many as 29,000 people. Thus, Indian investment in Nepal plays an important role in the development of this country.

The Treaty of Trade (1996) and Treaty of Transit (1997) between Nepal and India have proved a milestone in investment promotion, industrial expansion and export growth of Nepal. Whereas the Treaty of Trade allows Nepalese manufactured products free access to the Indian market without customs duties and quantitative restrictions, the Treaty of Transit provides for new transit route from Kakarbhitta to Banglabandh port in Bangladesh as an alternative to Calcutta port in India. It is only recently that the Special Additional Duty (SAD) introduced by India on the imports of Nepalese manufactured products has created certain problem to the Nepalese. But given the warm relations, this problem could be sorted out soon.

The open border between Nepal and India provides major opportunity to the former to benefit from ‘proximity’ between the two countries. Besides other advantages, this has facilitated nearly free flow of commodities from one country to the other. Convinced that strong Nepal is an asset to India, Nepal was accorded more and more concessions in successive trade and transit treaties than the one concluded between Nepal and British India in 1923.

The Mahakali Treaty signed between Nepal and India at the level of the two Prime Ministers in 1996, and subsequently ratified by more than two-thirds majority of the Nepalese Parliament, is rightly considered a major milestone in co-operation in water resources between the two countries.

Located at a point on the Mahakali river, which is on the border between the two countries, the Pancheshwor Project will generate 6,000 MW of hydropower to be shared equally by the two countries. In addition, the principles for apportioning costs on the basis of benefits in irrigation and flood control have been spelt out.

The Mahakali Treaty aims at the integrated development of the Mahakali River Basin and truly constitutes a futuristic vision of co-operation between the two countries in the twenty-first century. Because of the massive investment in the Pancheswor Project amounting to US $ 4 billion, the project will have multiplier effect on the Nepalese economy. As soon as the project will take off, the employment opportunities and national income will increase substantially.

Another major breakthrough in the investment sector is the signing of a Power Trade Agreement (PTA) between Nepal and India on June 5, 1997, which is intended to regulate power production and its transmission between the two countries. The Agreement, however, awaits ratification by the Nepalese Parliament. There will be considerable prospect for foreign investment in the hydropower sector once the agreement is ratified. The country is paying a huge price for this delay. Under the new provision, power produced in Nepal could be directly supplied to Power Trade Corporation (PTC), which was created by the Federal Government of India in May 1999. Its mandate is to import power and distribute it to state utilities. It was created to overcome the difficulties in power imports due to insolvent power utilities in certain states where PTA had previously proved difficult to negotiate.

If the Export Processing Zones are set up and the Nepalese traders start getting the services of Nepal Multi-modal Transit and Trade Facilitation Project (NMTTF), the foreign investment climate, particularly from India, will be further increased. Therefore, all possible efforts might be made by the concerned agencies and the country’s diplomatic missions abroad to attract foreign investment with a view to accelerating industrial growth, reduce its huge deficit in balance of trade, enhance employment opportunities, promote the growth of GDP and bring prosperity in the life of the Nepalese population at large.

Nepal’s very own Search Engine launched

By a staff reporter

Nepal’s very own search engine gateway-nepal.com was launched in the US last month. Gatewaynepal.com is similar to Yahoo, Excite, Altavista. etc, and provides links to other websites and lets people search according to keywords entered, according to a press release sent through Nepal Tourism Board.

The architect and main programmer of the website is Bimal Pratap Shah, a graduate in Computer Information Technology from the US. "Gatewaynepal.com is the first of its kind in the sense that lets users (net surfers) choose between Nepalese sites only as well as non-Nepalese sites" says Shah, Subir Kunwar is the Graphic Designer of the site.

Hundreds of Nepalese sites are linked to gateway-nepal.com. The site is user friendly and visually appealing to young and old alike. Gatewaynepal also has the basic Chat facility but soon will have more powerful chat with more features. Pretty soon visitors to the site will have the choice to enter HTML (present site) as well as site build on (Macromedia Flash 4.0). The site built with Flash 4.0 will have sounds and animation.

Gatewaynepal is built with HTML, XML, ADOBE PHOTOSHOP 5.5, MACROMEDIA FIREWORKS, MACROMEDIA DREAMWEAVER, MACROMEDIA FLASH 4.0. ORACLE 8i, JAVA, ACTIVE SERVER PAGES.