The Foreign Investment and Technology Transfer Act, 2075 (2019) (“FITTA”) has undergone significant amendments to modernize its provisions and align them with the evolving business and technological landscape. The amendments were introduced by the Government of Nepal through a publication in Nepal Gazette dated 16th Baisakh 2081. These changes aim to attract foreign investments and streamline the technology transfer process.
Below are the key highlights of the amendments:
1. Expanded Definition of Non-Resident Nepali (NRN)
Amendment: The definition of “Non-Resident Nepali (NRN)” under Section 2(c) has been updated. The term now refers to an individual who possess NRN citizenship or an NRN identification card in accordance with prevailing laws.
Implication: Earlier, the definition lacked clarity in defining NRNs, creating confusion and limiting their ability to invest in Nepal. The expanded definition ensures inclusivity, allowing a broader category of NRNs to invest in Nepal.
2. Comprehensive Definition of Technology Transfer
Amendment: Section 2 (f) now provides a detailed definition of “Technology Transfer”. The scope of this term has been expanded to include agreements between domestic industries or companies and foreign industries, firms, or companies on the following matters:
- Patent, design, trademark, goodwill, technological specificity, use of technological knowledge (franchise), formula, process,
- User’s license or technological know-how sharing,
- Management and technical services,
- Reverse engineering.
Implication: Earlier the definition was limited to an agreement between Nepali industry and a foreign investor. By explicitly defining technology transfer mechanisms, the amendment encourages collaboration between Nepalese industries and foreign enterprises. It also promotes the introduction of innovative technologies, essential for modernizing Nepal’s industrial sectors.
3. Provision for Technology Transfer Abroad
Amendment: A new provision, Section 7A, has been introduced to enable Nepalese industries or companies to transfer technology to foreign industries, firm or companies. Key aspects include:
- Authorization for Technology Transfer: Industries established in Nepal can now transfer technology to foreign industries, firms, or companies.
- Management of Foreign Exchange Earnings: Any income generated from such transfers must be brought back to Nepal with the approval of the Nepal Rastra Bank.
- Establishment of Foreign Branches: Industries can establish branches or units in foreign countries with departmental approval.
Implications: The earlier Act lacked provisions for outward technology transfer, limiting Nepal’s ability to participate in global technological collaborations. This amendment facilitates Nepal’s participation in global technological collaborations, fostering innovation and enabling Nepalese industries to monetize their technologies internationally.
4. Simplified Approval Processes for Foreign Investment
Amendment: The amendments in Section 12 and 17 streamline the approval process in the following ways:
- In Section 12, the requirement for recommendations from the Ministry has been removed, delegating authority directly to the Department.
- In Section 17, the Department now has sole authority to approve foreign investments, expediting the decision-making process.
Implications: The earlier multi-tiered approval process often caused delays. The streamlined process reduces bureaucratic hurdles, enhancing investor confidence and accelerating foreign direct investment (FDI).
5. Flexibility in Industry Operations
Amendment: Under Section 45, industries with foreign investments are now permitted to collaborate with other industries for the production of goods or services through contracts or subcontracts.
Implications: Earlier provisions were restrictive, limiting collaborative opportunities between industries. The new flexibility promotes partnerships, joint ventures, and resource optimization, facilitating knowledge and skill transfers across industries.
6. Inclusion of Ride-Sharing in Foreign Investment
Amendment: A significant update has been made to the Schedule of Sectors Eligible for Foreign Investment. Ride-Sharing Services are now included in the list of sectors where foreign investments exceeding 70% ownership are permitted.
Implication: Recognizing ride-sharing as a viable sector for foreign investment aligns Nepal with the digital economy and addresses urban mobility challenges. This amendment is expected to attract global players and improve service standards in transportation.
Conclusion
The amendments to the Foreign Investment and Technology Transfer Act mark a significant step toward fostering a more dynamic, competitive, and investor-friendly environment in Nepal. By addressing ambiguities, reducing bureaucratic red tape, and opening new avenues for technology transfer and investment, these changes align with Nepal’s vision of economic growth and global integration.
Disclaimer: This note is provided solely for general information and does not constitute legal opinion. For specific legal query, please seek professional counsel.
