Non-Resident Nepali's Entry Plan into Nepal's Secondary Securities Market: A Story of Unfulfilled Promises

The plan to integrate Non-Resident Nepalis (NRNs) into Nepal's secondary securities market remains just that—a plan. Despite the Nepal Securities Board conducting a study and submitting a report to the Ministry of Finance, there has been no further discussion on the matter. As a result, the hope for NRNs to invest in Nepal's secondary securities market has turned into a mere tale of unfulfilled promises.

Formation of the Committee

To advance the plan of integrating NRNs into the secondary securities market, the Nepal Securities Board had formed a four-member committee chaired by Sujan Kumar Kafle. The committee included board member Bholanath Dhungana, executive director Muktinath Shrestha, and deputy executive director Deepa Dahal. This committee prepared a study report and submitted it to the Ministry of Finance with recommendations.

Status of the Report

Despite the submission of the report, the Ministry of Finance has not prioritized it, resulting in no progress on the file. Since the submission of the report by the Nepal Securities Board, there has been no discussion on the matter within the Ministry of Finance. The report, submitted to the Financial Sector Management and Institution Coordination Division of the Ministry of Finance, has not moved forward.

Changes in Division Heads and Ministers

The file's lack of progress is also attributed to changes in the division heads and ministers. The report was submitted when Bhupal Baral was the division head. However, since the appointment of Narayan Prasad Rijal as the new division head, there has been no progress on the file. Similarly, the recommendations made during Dr. Prakash Sharan Mahat's tenure as finance minister have not garnered attention from the current finance minister of the Maoist Center, Barshaman Pun, leading to the file's stagnation.

Recommendations and Benefits of the Report

According to study committee member-secretary Deepa Dahal, the report outlines the benefits and challenges of allowing NRNs to enter the secondary securities market. The report suggests amendments to legal complexities and includes policy recommendations for banking system improvements and foreign investment.

The report highlights various benefits of allowing NRNs into the secondary securities market. These include increased transaction volumes, a rise in the number of investors, and direct and significant contributions to foreign currency earnings. The report clearly states that adopting such improvement measures could have a positive impact on Nepal's economy.

Legal Definitions and Complexities

Investor Tilak Koirala mentions that the lack of legal definitions has turned this plan into a mere story. He states that without clear definitions on how NRNs can invest in Nepal, the duration of their investment, and the mechanisms for transferring dividends and profits, this plan remains unfeasible. Due to the lack of clear legal definitions, NRN investments cannot materialize.

Policy and Procedural Suggestions

The committee's report suggests amending legal complexities and drawing on best practices from other countries to improve the banking and securities market systems. The committee concludes that by adopting practices like bank account management, transaction, and demat account management, and the concept of custodian banks, NRNs could be allowed to trade in the secondary market.

The report includes policy and procedural recommendations for foreign investment, based on best practices from other countries to facilitate transactions. The committee's report indicates that implementing such measures could positively impact Nepal's economy.

Conclusion of the Report

The committee prepared the report after studying laws and consulting experts. It suggests laying the foundation for diversifying investment instruments and introducing foreign investment into Nepal's securities market, which is currently dominated by ordinary shareholders. The report states that allowing NRNs into the secondary securities market could directly and significantly increase transaction volumes, the number of investors, and foreign currency earnings.

Legal Complexities

The report suggests amending some legal complexities to allow NRNs entry into the securities market. It also recommends improvements to the banking and securities market systems by adopting best practices from other countries.

Overall

The plan to integrate NRNs into Nepal's secondary securities market remains just a plan. Despite the submission of the report, the Ministry of Finance has not prioritized it, leading to no progress on the file. Consequently, the hope for NRNs to invest in Nepal's secondary securities market has turned into a mere tale of unfulfilled promises.