Saturday, July 27, 2019

Investment climate assessment and more flights between Nepal and China

In its latest assessment of investment climate in Nepal, the US Department of State argues that widespread corruption, cumbersome bureaucracy, and weak implementation of laws and regulations have generally kept investors at bay. The recently enacted investment laws and regulations— including FITTA, IEA, SEZA, PPP and Investment Act, revised Labor Act and IPR policy, among others  – have maintained institutional and procedural impediments to smooth business practices, dissuading all but the most risk-tolerant investors. 

The assessment notes that Nepal has considerable investment potential in hydroelectric power, agriculture, tourism, IT and infrastructure sectors. However, the country is attractive only to investors who are willing to accept inherent risks and the unpredictability of business operations. Significant investment barriers include:
  • Corruption
  • Limitation on operation of foreign banks, repatriation of profits, currency exchange facilities
  • Government’s monopoly in electricity (transmission) and petroleum distribution
  • Overseas migration and poorly trained workforce
  • Proliferation of politicized trade unions and syndicates masked as associations
  • Cumbersome and obstructive immigration laws and visa policies for foreign investors
  • Political uncertainty due to the continued disregard to addressing the political demands and discontents of political parties representing the Terai region
  • Security risk from insurgent groups that have persistently and pervasively using intimidation, extortion and violence
  • Poor connectivity due to mountainous terrain and poor infrastructure
  • Restrictions on the media and NGOs
The most troublesome barriers are corruption, bureaucracy, lack of implementation of existing procedures and requirements, and a weak regulatory environment. It states that “many of the corruption- or petty bureaucracy-based hindrances impeding the smooth conduct of business, however, remain unaddressed in the absence of pay-offs or personal interventions with cabinet-level officials”. 

Furthermore, “many foreign investors note that Nepal’s regulatory system is based largely on personal relationships with government officials, rather than systematic and routine processes.  Legal, regulatory, and accounting systems are not transparent and are not consistent with international norms”.

Nepal and China agree to increase weekly flights to 98
From The Kathmandu Post: Nepal and China signed a revised bilateral air services agreement on Friday, which will allow 98 weekly flights between the two countries on a reciprocal basis, an increase from the existing 70 flights per week. Of the increased 28 flights, Chinese carriers will have to operate 21 flights in and out of the two upcoming international airports—Gautam Buddha International Airport in Bhairahawa and Pokhara International Airport, according to Tourism Ministry officials who signed the agreement in Beijing.
The existing pact between the two countries allows flights to seven destinations in China: Beijing, Shanghai, Lhasa, Guangzhou, Kunming, Chengdu and Xi’an. In the revised pact, the Chinese side has agreed to designate eight new destinations for Nepali carriers, according to Pramod Nepal, an under-secretary at the Tourism Ministry. “Nepali carriers will be allowed to operate flights to any new destinations within China at the Nepali airlines’ discretion,” he said. 
Currently, five Chinese carriers—Air China, China Southern, China Eastern, Sichuan Airlines and Tibet Airlines—operate flights to Nepal. However, no Nepali carriers currently fly to China. The national flag carrier used to operate a service to the Japanese city of Osaka, via Shanghai, until 2008 under fifth freedom rights. In 2015, Nepal Airlines applied for landing permission at Guangzhou Baiyun International Airport, but its application is still pending.