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Can a Nepali citizen invest in foreign sharesCan a Nepali citizen invest in foreign shares is the most asked question nowadays. Buying and selling stocks is the topmost and trending topic that has been arising today in Nepal. Investing globally can offer more chances to grow your money. It allows you to benefit from worldwide economic improvements and provides a broader range of investment options. We will discuss the investment opportunities that are possible for Nepali citizens.

Let’s first understand the stock market in Nepal. Nepal Stock Exchange (NEPSE) established in 1994, actively supports the national economy by facilitating the buying and selling of shares, channeling funds to businesses, and fostering investment. 

Operating under the regulations of the Securities Board of Nepal, NEPSE employs modern technologies for efficient online trading. It lists companies from various sectors, allowing investors to trade shares during specified hours. NEPSE’s indices offer insights into market performance, attracting both domestic and international investors and contributing to the overall development of Nepal’s financial landscape.

Can a Nepali citizen invest in foreign shares?

As you know, Nepal has strict capital controls. According to the act provided by the Nepal Law Commission, Nepali citizens cannot lawfully invest abroad unless they acquire special permission from the Nepal government or Nepal Rastra Bank. Act Restricting Investment Abroad, 2021(1964)

Act Restricting Investment Abroad

Act Restricting Investment Abroad

This act is so old that King Mahendra Bir Bikram Shah Dev adopted it with the approval of the national panchayat. Although King Mahendra died, as did Nepal’s kingdom, this statute remains in place today.

According to the law, those in violation would face a fine equal to the investment and/or imprisonment for up to six months. Nepalese citizens are unable to transfer funds outside of the nation except for medical, travel, and educational needs.

What is the objective of this law?

Looking at it objectively, there are positive sides to this Act. Without it, Rich individuals might invest in foreign assets, leaving our homeland barren to gain higher investment returns. As we know Nepal’s economy requires a lot of investment, and NEPSE, in its early days, needs more attention and care to grow, even if it’s somewhat enforced.

The goal of the government is to stop money from leaving the nation. Similar to Nepal, a lot of countries with lower reserves of foreign currency prevent their citizens from making large-scale foreign exchange investments abroad. As a result, residents of these economies—including Nepal—are prohibited from making outside investments.

Some believe this law is illogical, outdated, and badly worked out. They believe that investment in any nation that allows such acts should be open to Nepalese citizens as well as all other free people. Still, laws are laws, and we have to follow them, particularly if they are provided by our constitution.

Understanding Act Restricting Investment Abroad, 2021(1964)

Some individuals may experience confusion regarding the “Foreign Investment and Technology Transfer Act, 2019” and the “Act Restricting Investment Abroad 2021,” mistakenly believing that these acts permit Nepalese citizens to invest in foreign stock exchanges.

Here is the fact: 

The 2019 Foreign Investment and Technology Transfer Act (FITTA) intended to bring in foreign investment, technology, and money for the export expansion and substitution of import industries. Similar to the “Act Restricting Investment Abroad 2021,” the FITTA bans people of Nepal from investing abroad. To improve the national economy and make it profitable, strong, and employment-oriented for long-term economic growth, the focus is instead on attracting foreign investment and technology.

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FAQs:

Does Nepal's judicial system monitor or keep an eye on the situation?

The government is monitoring but the fact many people use the loophole and invest in India and other countries. Nepal Law Commission may have personal insight on the matter.

How do I buy international stocks from Nepal?

Nepali citizens are not allowed to invest in foreign shares according to the policies of the Nepal Government and the central bank. If the Nepal government allowed Nepali citizens to purchase stocks from other countries, currencies that are accepted in the international market like Euros, USD, Yen, GBP, or Chinese Yuan are required. If you have an international bank account in any of these, it's better. Next, open a brokerage account with a company that lets you trade on different stock markets. Fidelity Investments is one such option, but it doesn't accept accounts from Nepal.

Conclusion: 

Nepal implemented tight capital controls under the 1964 Act Restricting Investment Abroad. This regulation requires formal authorization for international investments, which has drawn controversy. However, it should be noted that the major goal of this regulation is to promote domestic economic growth. Nepal’s government is not now interested in promoting a free market environment for foreign investments. After reading the blog you might be clear about Can a Nepali citizen invest in foreign shares.

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