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Public-private partnership is widely discussed in Nepal. Now, its time to assess the law

Public-private partnership
Photo by Cytonn Photography on Unsplash

A developing country like Nepal requires a plethora of investors. Hence, the country needs to explore different ways to generate investments and public-private partnership, popularly referred to as PPP, is one of the most discussed issues.

In Nepal, there were only a few investors because of political instability, internal conflict within the country, and many other things. With the promulgation of the constitution in 2015 and growing political stability, private investors and foreign private investors started to invest in different sectors in Nepal. This is how the public-private partnership began gaining attention.

In Nepal, the Public-Private Partnership and Investment Act, 2019, along with its regulation, governs all affairs related to the investment model. Despite the early implementation of the law, public-private partnership has not gained momentum in the country due to various factors including the law that was meant to facilitate the process. Hence, it is high time the stakeholders assessed the law from the private investors’ perspectives and make necessary reforms.

Pros for private investors

As per the Public-Private Partnership and Investment Act, there are some advantages for private investors.

For example, if any private investors get linked with Investment Board Nepal, it can also recommend additional facilities for the private investors. Additional facilities include capital subsidies for the materials used in the project and partial subsidies for electricity tariffs used during project implementation. Besides this, the board can also arrange on providing loans at lower rates than that of the prevailing in the market to the private investors. Provisions for the viability gap funding are also introduced by the act for the investors for being linked with the Investment Board Nepal. Moreover, rewards will also be awarded if the investors hand over the projects to the concerned agency before the time specified in the agreement.

Cons for private investors

However, there are also certain cons thanks to some provisions of the Public-Private Partnership and Investment Act and its regulation. The viability gap funding is a pro for private investment, but sometimes, the funding is also considered a disadvantage for them. Such a facility may be useful for the government, but not every time for the private investor.

In the meantime, to gain profits from the project, private investors have to hand over the project to the government, but it also involves some disadvantages.

Another disadvantage is that royalty needs to be paid by the investors to the concerned agency. Also, under different headings, investors have to pay fees, and service charges to be linked with the Investment Board of Nepal. The fees vary as per the size of the investment. There is also a provision that before or after an agreement is performed, investors have to pay 0.2% of the total cost of investment.

What next?

The government must be always aware of the details of investments coming within the country. Though there are certain subsidies, and arrangements done by the government in order to lure private investors, the fees for private party investors to be connected with the Investment Board Nepal are quite high. The government should make feasible fees for private party investors in order to lure them to our country. The fees for the letter of intent, royalty and other charges must be reconsidered by the concerned agency.

Furthermore, the concerned agency must look at making other additional facilities to grant private investors in order to attract them.

In conclusion, advancement in the new idea of investment in the Public-Private Partnership and Investment Act has certainly created hope for a nation like Nepal. So, it solely depends upon the government and concerned agencies whether it will be successfully implemented to benefit the country.

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Duwadi is a student at the Kathmandu School of Law.

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