German Investors Call for Better Investment Conditions

29. Oct. 2013

Nepal-German Chamber of Commerce and Industry (NGCCI) organized on 29 October 2013 a roundtable on “Investment Potentials and Experiences of German Investors in Nepal.”

The main results of the meeting point to the Government’s insufficient action and commitment to attract and keep German investors in Nepal.

The roundtable brings out following recommendations with regards to the seven key problems having serious implications on the Nepalese economy:

Prohibitive regulations for a long-term business visa stipulating 50,000 US $ investment threshold cause German investors, mostly small and medium enterprises (SME), to close their business or opt for other countries and therefore the creation of indispensable jobs and gain of essential business know-how is missing. The Ministry of Industry needs to reintroduce a lower SME-friendly investment threshold and to formulate and implement a SME promotion policy.

Time consuming and costly application and renewal of long-term business visa, company registration, renewal, closing down and share selling processes and the lack of coordination between respective agencies, departments and ministries discourage existing and potential FDI. Under the guidance of the Ministry of Industry a One Window policy for FDI providing efficient management of these processes needs to be implemented.

Poor investment climate causes low investment by foreign and domestic investors, limits growth of existing investments and causes closure of business.

German investors do not enjoy personal and property security facing extortions by unions and criminal gangs. Like domestic investors, they suffer from labor problems due to pressure of political parties, lack of electricity, water, manpower and adequate transportation. The government and all political parties need to contribute their share to establish political stability through free and fair elections and good governance.

Excessive import duties on manufacturing and packaging equipments prevent investment in manufacturing and value addition. The result is : agro producers are forced to sell bulk to nearby limited low price markets. Ministry of Commerce and Supplies together with Ministry of Finance needs to exempt technology, esp. manufacturing and packaging equipment from import tax, support the import of selected manufacturing and packaging equipment with subsidies and promote the use of technology nationwide.

Nepalese export goods loose competitive edge because of frequent increase of price due to erratic changes in minimum wage. Exporting manufacturers from Nepal have to carry extra costs for customer promotion costs arising from such changes. Employers, unions and the Ministry of Labor need to negotiate predictable and stable minimum wage agreements.

The pre-payment regulations for Nepalese export goods is not compatible with global business practices of payment 6 weeks to 3 months after shipment. Nepalese producers face marketing constraints. Ministry of Commerce and Supply needs to abolish the pre-payment regulation, the Letter of Credit can be used by Nepalese exporters.

The problems faced by German and partly also by Nepalese investors have serious implications on the Nepalese economy. It is about time the political parties and the respective units of administration and government changed the foreign investment policy to one which includes small and medium sized foreign investment.

NGCCI calls on the Government of Nepal to change its foreign investment policy by facilitating foreign investment through reintroduction of a lower, small and medium sized business friendly investment threshold and to formulate and implement a national promotion policy for SMEs which create jobs.

In the roundtable, German Ambassador Frank Meyke, representatives from the Department of Industry, Ministry of Commerce and Supplies, Ministry of Foreign Affairs as well as German investors, German Development Bank (KfW) and representatives of the board as well as members of NGCCI took part.

The roundtable started with a presentation by Mr. Peter Effenberger, a German investor who runs a model and research bio-farm in Gorkhka district. He informed about constraints faced by his business. Business potential he sees in Nepal are the organic sector, esp. coffee, medicinal and aromatic plants, niche products, eco & adventure tourism, manufacturing and packaging equipment.
Contact: NGCCI, 4413-208 / 209 / 286