High-Level Economic Reform Commission Report: Over a Dozen Suggestions for Stock Market Reform

The High-Level Economic Reform Suggestion Commission handed over its report to Finance Minister Bishnu Paudel on Friday. The commission, which began its study in the second week of Kartik 2081 as per the government's mandate, presented the report today, including several recommendations for improving the capital market and stock market.

The commission proposed more than a dozen suggestions to develop the stock market, enhance regulation, and promote investment. These include providing margin loans through securities brokers, allowing hydropower companies to issue Initial Public Offerings (IPOs) only after commencing production, permitting Non-Resident Nepalis (NRNs) to trade in the secondary market, and immediately initiating secondary market trading for government bonds.

Key Recommendations in the Report:

1. Raising Public Awareness: Promote investment by mobilizing financial resources through the capital market and increasing public awareness.

2. Secondary Market for Government Bonds: Immediately start secondary market trading for government bonds.

3. Participation of Non-Resident Nepalis: Amend the Foreign Investment and Technology Transfer Act, 2075, to allow NRNs to trade in the secondary market individually based on their NRN citizenship ID, without requiring a capital investment fund. Permit NRN investors to repatriate up to 50% of the invested amount twice a year.

4. Restructuring the Securities Board: Amend the Securities Act, 2063, to reform the structure of the Securities Board of Nepal (SEBON). Remove provisions for including representatives from the Institute of Chartered Accountants of Nepal, the Federation of Nepalese Chambers of Commerce and Industry, and a joint secretary from the Ministry of Law, Justice, and Parliamentary Affairs. Increase the number of experts on the board from one to two.

5. Margin Loans: Introduce a system for providing margin loans through securities brokers.

6. Enhancing SEBON’s Capacity: Ensure effective regulation and supervision as the capital market expands by providing SEBON with adequate manpower and granting it autonomy to enhance its efficiency.

7. IPO for Hydropower Companies: Allow hydropower companies to issue IPOs only after they begin production.

8. Privatization of Public Enterprises: Convert public enterprises into public limited companies and sell shares to the private sector. Instead of government loans, issue bonds to mobilize financial resources for such enterprises.

9. Reducing Transaction Fees: Lower transaction fees for large-scale share trading.

10. Restructuring Nepal Stock Exchange: Restructure the Nepal Stock Exchange (NEPSE) by increasing its capital and involving the private sector in share ownership. Similarly, restructure CDS and Clearing Limited to include other institutions in share ownership and provide secure depository services with adequate manpower.

11. Commodity Exchange Market: Expedite the operation of a commodity exchange market by introducing a Public Warehousing Act.

12. Facilitating the Private Sector: Reduce costs and simplify procedures for productive private sector companies to mobilize capital through the stock market by issuing shares and bonds.

13. Transparent Premium and Book-Building Process: Establish a transparent method for issuing shares through premium and book-building processes and raise public awareness about these mechanisms.

Finance Minister’s Response
While receiving the report, Finance Minister Paudel expressed his commitment to initiating the necessary processes to implement the recommendations. He emphasized the government’s dedication to developing the capital market and promoting investment.