Tourism Policy

The Industrial Policy of 1992 significantly increased the amount of foreign direct investment in the nation. The Government also adopted the Foreign Investment Policy in 1992 to support this procedure. The Foreign Investment and Technology Transfer Act (FITTA) was passed in the same year in accordance with this policy. In 1996, FITTA was later modified. The primary specific law controlling foreign investments in Nepal is hence this Act.

The goal of the government is to decrease Nepal's enormous external debt and borrowing while increasing the country's inflow of foreign direct investment. The promotion of technology transfer, which frequently goes hand in hand with foreign investment, is the other goal. The government also used a combination of trade changes, numerous liberalization initiatives, and macroeconomic modifications to encourage foreign direct investment.

FITTA stipulates that a foreign investor may invest directly in a sector of the economy in any of the following ways:

• Made an investment in shares (equity)
• Reinvestment of the investment's earnings
• An arrangement for a loan or loans.

According to FITTA, a "technology transfer" is any transfer of technology that will take place as part of a contract between a business and a foreign investor that addresses the following issues:

• Use of any patent, specialization, formula, or other piece of foreign-sourced technical knowledge.
• Any trademark use by a foreign owner.
• Purchasing any foreign consulting, managerial, technical, or marketing services.

FITTA offers a variety of benefits and concessions to businesses that are founded as a result of foreign investment. These facilities are divided into four basic categories: facilities for repatriation, facilities for land, incentives for taxation, and other facilities. However, FITTA forbids foreign investment in some industries. For instance, foreign investment is restricted in the production of goods that harm public health, the production of weapons and other military supplies, and the development of small businesses. The following are the principal clauses of the foreign investment policy:

• Foreign investment is permitted in full.
• Foreign large and medium-scale investment is permitted.
• Profits, dividends, and capital repatriation may all be remitted in full.
• There are provisions for technology transfer in cottage and small industries.
• Foreign investment is assured of its security.
• Industries receive enticing facilities, rewards, and concessions
• The one-window system offers quick and effective services to overseas investors.

For Nepal's economic development, international resources and technology are required. Since 1956, when it began its planned economic development, it has been requesting such money. However, the only thing entering the nation was official capital. Nowadays, it is commonly acknowledged that formal capital alone is insufficient. This has also been declining recently. (2000) Sharma. The FITTA was implemented in this setting.

Monetary Policy

The various fiscal and monetary tools are used by the government and the Nepal Rastra Bank, respectively. Saver, consumer, and investor spending behaviors are all influenced and regulated by the usage of these tools. There was significant development in the early 1990s.

The fundamental goals of monetary policy are to stabilize the external and financial sectors, foreign currency reserves, and inflationary expectations in order to foster an environment that is conducive to rapid and sustained economic expansion. The operating aim of monetary policy is assumed to be the surplus liquidity of commercial banks, microfinance initiatives, refinancing plans, and improvements to the foreign exchange industry. The utilization of an open market operation is a crucial component of monetary management.

• Development banks and finance firms have been added to the list of counterparts for the conduct of monetary policy. Previously, the counterparty could only be a commercial bank.
• Commercial banks, development banks, and finance firms will be given access to the short-term standing liquidity facility (SLF) secured by GON treasury bills and development bonds. Earlier, only commercial banks were given access to this facility.
• To predict the surplus liquidity position of commercial banks, the liquidity monitoring and forecasting framework (LMFF) will still be used.
• It will continue to be possible to monitor the liquidity positions of commercial banks based on their cash balance, loans, and deposits.
• Outright buy, repo, and outright sale auctions will be used for the financial management. and reserve repo auction as the main instruments of monetary policy.
• The current outright sale and buy, repo, and reverse repo auction systems, as well as various pricing auction systems, will be maintained.
• The maximum maturity period for reserve repo auctions and repo transactions remains at 28 days.
• A indicator of monetary tightening is the increase in the CRR on domestic deposits from 5% to 5.5%.
• Banks and other financial institutions who maintain an account with the NRB may use the discount facility, loan, and refinance facilities for a maximum of six months.
• The present bank rate, which was 6.25 percent, has been raised to 6.5 percent in order to tighten the monetary policy stance.
• The export refinancing rate has been lowered to 2%. Commercial banks using this facility are not permitted to charge interest rates more than 5%.
• The Rs 2 billion refinanced facility for struggling firms has been maintained. This facility's refinance rate has been set at a fixed 1.5%.
• The current penalty rate for SLF has been raised from 2 to 3 percent in order to counteract the potential negative impact on the economy of overusing such facilities.
• The NRB will keep offering Rural Development Banks the current refinancing facilities.
• The required percentage of credit provided to the underserved sector by development banks and finance companies is 1.5 percent and 1 percent, respectively. The deprived sector credit requirement of 3 percent for commercial banks will continue.
• Prompt corrective action (PCA) will be aggressively enforced for banks and financial institutions that are unable to meet the minimum capital adequacy ratio as per BASEL 2.
• Each bank and financial institution will implement the risk-based supervisory strategy in a planned manner.
• From 2010, prudential regulations will be issued for the wholesale banking branches of foreign banks operating in Nepal.

References:

• books.google.com/books?isbn=143877060X
• es.scribd.com/doc/311017842/Critical-analysis-in-FITTA
• globallawnp.com/foreign.htm
• Pant, P. R. (2009). Business Environment in Nepal (SIXTH ed.). Kathmandu, Nepal: Buddha Academic Publishers and Distributers.
• slideplayer.com/slide/8557203/