Govt to shield investors from non-commercial risks

Investors, who have long withheld their investment decisions fearing adversities associated with unstable politics and policy changes, may find their concerns addressed soon. Ministry of Industry (MoI), in a bid to protect investors´ interests, has pushed the government for providing a special policy cushion under which the state will compensate the industries in case they suffered losses from changes in policies, adverse political climate, bandas and strikes, among others.

It has also proposed the government to set up a special fund to cover such risks, broadly termed as non-commercial risks. It has also incorporated a provision in this connection into the new Industrial Policy that the ministry finalized recently. This policy cushion has been mooted in a bid to lure investment -- both domestic and foreign -- and to assure the investors that the government is serious about maintaining policy consistency and protecting investors´ interests, officials said.

"Actually a provision in this connection has always remained an integral part of the Bilateral Investment Protection Agreement (BIPA) that Nepal has signed with nearly a dozen of countries. Only thing we are doing now is internalizing it in our policy," said Pratap Kumar Pathak, Secretary at MoI. Since the provision in this connection is being included for the first time in the domestic policy, it will guarantee foreign investors about enforcement of the facilities promised to them.

Moreover, if the cabinet endorsed the provision in the new Industrial Policy, it will also entitle domestic investors and industries with the same compensation facility, bringing them on the same footing as the foreign direct investment and joint venture industries. Under the facility, industries will get compensated for the losses they might suffer from any changes in the tax rate and other fiscal announcements. "Our motive behind extending this facility is to guarantee investors that change in governments and policies will not push them to a disadvantaged position," said Pathak.

Since the government will compensate them for the loss if it changed the policy in negative way, MoI officials say, it will help build investors´ confidence to put their money in industries. Under the political risks, the MoI has argued that the government should cover losses emanating from strikes and bandas, thefts and attacks on industries as well, if it is serious toward industrial growth.

However, officials admit that they will have to undertake rigorous exercise on quantifying the losses to make sure that the claims are genuine and justified. If the cabinet endorsed the provision, it will for the first time establish the compensatory rights of the investors, said Pathak.

Most importantly, it will also establish employers´ rights, as the government will also cover losses emanating from forceful closure of the industries, obstruction in production and other strikes by workers." "Countries across the world have pledged various facilities to lure investors. Given that the country faces various problems because of internal instability, we feel extension of this facility is a must to promote industrial development," said Pathak.
Source: Republica