An innovative approach to improve Investment environment in Nepal - Nepal Business Forum (NBF)
The government of Nepal established Nepal Business Forum (NBF) in May 2010 through an Executive Order with an objective to create job opportunities by bringing reforms in business operation and investment promotion in the country to accelerate the pace of economic development. It has completed 5 years successful with significant reforms and got recognized at the global level as well.
NBF, a Public Private Dialogue forum, is formed specifically to stimulate dialogue and group efforts between the public and private sectors. It deals with various issues ranging from laws to policies along with regulatory constraints targeting to improve investment environment. The platform helps in identifying constraints, limitations and barriers in business operations and growth of investment. The institutional framework NBF focuses around conducting regular dialogue in a transparent way to find the solutions of the problems faced by both the public and private sector stakeholders with their own engagement.
Nepal’s emergence from conflict, a multi-sector platform established to maintain a formal link between the private sector and government around making policy, regulations and laws could help achieve inclusiveness amongst a broad range of stakeholders and promote sustainable growth to the benefit of the whole country, and thereby reinforce the process of systemic stabilization. The idea of creating an economy-wide, national-level PPD was born. Consultations are taking place on a regular basis and 100 plus meetings of different layers are already organized.
Structure of NBF and functions of different layers
The NBF has been designed to create a long term impact. This is reflected in its structure that includes twice year High Level Business Forums meeting and 10 working groups. Initially, there were only six working groups. The dialogue mechanism will drive issues through a clearly defined process. The mechanisms enables the private sector to identify priority issues.
1. The institutional framework of NBF shall comprise of the followings:
- High Level Business Forum,
- Steering Committee,
- Private Sector Development Committee,
- Permanent Management Committee
- Working Groups
2. High Level Business Forum (HLBF) and its Procedural Affairs: HLBF is the apex and highest body of NBF which is chaired by the Prime Minister. It holds meeting as required and this layer is comprised of ministers, secretaries, civil society, private sector organizations, and development partners. MoI Secretary serves as Member Secretary of the HLBF. This forum recommends reforms of all aggregate and sectoral policies and principles related to industrial, economic, monetary, commerce, export/import and corporate governance of Nepal.
3. Private Sector Development Committee (PSDC): This committee is chaired by the Chief Secretary and is comprised of Secretaries of relevant ministries and private sector chamber presidents. Joint Secretary of Ministry of Industry (Industrial Promotion Division) services as member Secretary of the Committee. MoI serves as the coordination body. Chief Secretary calls the meeting, PSDC requests the concerned ministries to implement reform decisions taken by the Working Groups and if jurisdiction of such decision falls under two or more ministries or bodies, the Committee shall forward such decision to the Ministry of Industry to get it approved from the Cabinet. The Committee shall meet at least once every two months and also prepares its procedural guidelines and submit report to the HLBF chaired by the Prime Minister.
4. Permanent Management Committee (PMC) – PMC is an oversight body of NBF to look after day to activities of NBF constituted under MoI as per the executive order. PMC monitors the budget prepared by the NBF Secretariat along with annual programmes and get it approved from the Steering Committee. It manages all resources/staff and required financial support. PMC executes all programmes approved by the Steering Committee.
The composition of NBF is as follows:
- MoI Secretary – Chair
- MoF Joint Secretary – Member
- MoI Joint Secretary – Member
- Umbrellas organizations – 2 members (FNCCI and CNI who contributes financially)
- Development partners – maximum two
- NBF Secretariat Coordinator – Member Secretary
5. Working Groups (WG): WGs carry out their respective work on thematic areas as well as sector specific areas. WGs may organize symposium, conference and interaction meetings on the issues related to the scope of work. One senior government official (Secretary or a person of similar rank) and one private sector representative shall be co-chairperson of each Working Group. Related private sector associations may nominate each working group’s vice chairpersons and members representing the private and each WG shall have a total of eight members, composed of four members each from the government and the private sector. There are 10 working groups that deals with various thematic issues/sectors.
6. Secretariat: There is one Independent Secretariat which is headed by the Coordinator. The space is provided by the Government. Besides this, Public Sector Coordination unit has been set up at the MoI which is headed by Joint Secretary at the Industrial Promotion Division. It acts as a secretariat as well as and coordinates with all line ministries for NBF related work. Similarly, private sector chambers have set up their secretariats as well to support NBF. Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and Confederation of Nepalese Industries (CNI) have also set up Secretariat for NBF work.
NBF Achievements as of Dec 2015
As of 2015, with the facilitation of NBF and the support from various ministries, 75 recommendations/reforms implemented out of 165 issues raised from both the public and private sector. Since the beginning, IFC, The World Bank Group, UKAID, NORAD provided financial support to NBF that closed in December, 2014. In an attempt to sustain the PPD platform, the government of Nepal with the suggestions of private sector and the development partners made a first amendment on the executive order in an attempt to include various provisions towards the sustainability of NBF. Danish Government has already reached an agreement with the Ministry of Finance, to support for NBF in the coming 4 years. With our innovative work, NBF was globally recognized and awarded in 2013.
- USD 6.7m in private sector savings through five reforms in tax payment and visa issuance simplification, refinancing facility to exporters, hydropower reforms
- Promoting investments: Board of Investment (BoI) Act has been passed and IB has been established, now in operation as PPP model; FDI Working Group created
- Facilitating trade: Harmonization of custom working hours between India and China; rationalizing documents for trade
- Improving market opportunities: Registered collective Trademark for Pashmina and coffee; standards enforced on the quality of wool used in pashmina and carpet (major export items)
- Encouraging exports: Refinancing facility for exporters made available at 4.5% as per NRB Monetary policy
- Reforms in the Hydropower sector :Elimination of authorized capital of NPR 100 million per MW hydro power for issuance of survey license ; CCS US $ 0.84 million
- Improving industrial security: Establishment of the industrial security force, reducing strikes in the eastern region
- Promotion of local goods: PPMO has made a provision to give a price preference of 10% to domestic/local products than other products
- Establishment of Social Security Fund to support insurance and social security benefits for workers : the fund is established and has more than USD35m in savings from payroll contributions.
- Registration and use of a collective trademark for Nepalese tea– Implemented
- Collective trademark Registration of Pashmina and Carpet (and its use for handmade Carpet) Pashmina trade market – implemented, Carpet still in the process
Rationalizing documents for trade – implemented
- Liquidity Management – Implemented
- NRB decided to make REPO more effective to manage liquidity problem instead of regular outright purchase.
- The NRB, in the review year, managed the problem by injecting liquidity through the secondary market operation (Rs. 71.39 billion), outright sale auction (Rs. 2.0 billion) and reverse repo auction (Rs. 19.0 billion), Repo auction (Rs. 92.39 billion)- (Source: current macroeconomic situation, available annual data of the FY 2010/11).
- Promoters’ Share: There should not be any differentiation between public and promoters’ shares – Being implemented
- Deposit Insurance: Premium for Deposit Insurance is very high and not scientific – being implemented
- Foreign Institutional Investors in stock market: Foreign institutional investors are not allowed in investing in stock market currently due to existing law – Under implementation
- In the WG meeting held on Dec 5, 2012, Mr. Deputy Governor informed the meeting that a meeting of Management Committee of Nepal Rastra Bank held on 2069/7/26 had made a decision to carry out study on the subject immediately.
- Review of the Insurance Act 2049 – Being implemented
- Merger and acquisitions: The increment of capital requirement for non-life insurance business is Rs. 100 million and 250 million for life insurance business -- Implemented
- Allowing access to credit information to borrowers –Discussion was held to provide such information even to the borrowers as necessary. Currently this is being provided to banks and financial institutions only - Being implemented.
- Repatriation of income and earnings (either interest/dividends income, sales of shares, loans and interest, among others). The process was time consuming – being implemented
- Business Visa – extended for 5 years- implemented
- The criteria developed for business visa are based on investment volume, revenue contributions and employment opportunities to Nepali nationals and volume export. The Government has enforced the new guidelines the business visa for 5 years (15 March, 2013)
- 25 Oct 2013: During this fiscal year, DoI recommended five-year business visa to 12 foreign investors. Similarly, a total of 216 investors and 73 foreigners were recommended for one-year business visa and non-tourist visa.
- Non-tourist Visa – process simplified - implemented
- A letter from MOI on June 11, 2013 was issued to DOI to implement the reformed process for Non - Tourist visa as decided by the meeting at Investment Board on April 28, 2013. In the new process, the DOI will recommend for the work permit directly to the Home Ministry and for labour permit to the Department of Labour, simultaneously. After getting the approval from both the offices, the DoI will recommend Non-Tourist visa to the expatriates.
- NRB restrictions on payment of Indian Currency: Central Bank currently allows only INR 100,000 for companies who are subsidiaries of Indian company and whose managers need to frequently travel to India for official purpose and receive service from Indian entities. - Implemented
NBF has supported to build confidence between the public and private sector, investment promotion issues are stimulated and explored, and solutions designed including the identifying of constraints faced by public and private, thanks to the structured mechanisms who are ready to sit together and resolve the issues at the table.