Nepal’s WTO

Obligations as to
Competition Policy
Nischal Wagle
Competition policy under WTO
• Havana Charter for an International Trade Organization contained the competition law under
Chapter V. However, it was not incorporated to the General Agreement on Tariffs and Trade
(GATT).
• The WTO also concerns mainly with the trade issues.
• The Ministerial Conference in Singapore (1996) established the Working Group on the
Interaction between Trade and Competition Policy (WGTCP) to study various aspects of this
issue, with the participation of all WTO Members.
• The Ministerial Conference in Doha (2001) recognized the case for a multilateral framework to
enhance the contribution of competition policy to international trade and development, and the
need for enhanced technical assistance and capacity-building in this area.
• The Most Favored Nation (MFN) Treatment, Anti-dumping, Non-discriminatory Administration
of Quantitative Restrictions of WTO can also be connected with the competition policy.
 Report of Nepal on the Accession to the
WTO
• Article XII of the WTO Agreement.
• Accession
1. Any State or separate customs territory possessing full autonomy in the conduct of its
external commercial relations and of the other matters provided for in this Agreement
and the Multilateral Trade Agreements may accede to this Agreement, on terms to be
agreed between it and the WTO. Such accession shall apply to this Agreement and the
Multilateral Trade Agreements annexed thereto.
2. Decisions on accession shall be taken by the Ministerial Conference. The Ministerial
Conference shall approve the agreement on the terms of accession by a two-thirds
majority of the Members of the WTO.
• Nepal applied for accession to the WTO on 17 February 1997.
• “Memorandum on the Foreign Trade Regime of Nepal” was submitted on 10 August
1998.
Memorandum on the Foreign Trade
Regime of Nepal
• Economic Policies
• Main directions of the ongoing economic policies, tactical and strategic goals of the
economic policies, pricing policy, economic development plans, privatization plans,
sectoral priorities, regional development plans etc.
• Monetary and fiscal policy
• Foreign exchange, payments system and relations with the IMF, application of foreign
exchange control, if any
• Foreign and domestic investment policy
• Competition policy
• Privatization policy
Main directions of the ongoing economic
policies ………..
• The government has opted to shift its role from direct intervention
to promotion and regulation of economic activities.
• The current industrial policy allows for the development of almost
all industrial ventures without license.
• Nepal encourages foreign investment.
• There are no restrictions for foreign exchange.
• Strengthening the financial system and providing required finance
for industrial and business expansion is expected from the
liberalization of the financial sector.
Monetary and fiscal policy
• The monetary policy of Nepal is geared towards controlling excessive liquidity so
as to control inflationary pressures, and to improve the balance of payment situation
of the country.
• Sincethe start of the 1990s Nepalese Government has pursued tax reform programs
with the aim of raising public savings, reducing reliance on direct taxation and to
improve the overall efficiency and fairness of the tax system.
• Reforms have been undertaken to broaden the tax base, lower income tax rates, and
to simplify the rate structure across a whole range of taxes.
Foreign exchange, payments system and
relations with the IMF…
• TheCentral Bank publishes exchange rates for its transactions and the market rate is
determined by the foreign exchange market. Import licenses to obtain foreign
currency for specific goods are no longer required.
• TheNepalese Rupee has been pegged to the Indian Rupee at the rate of NRs. 1.6 per
Indian Rupee since February 1993.
Foreign and domestic investment policy
• Promoting and encouraging transparent and fair business environment for both
domestic and foreign investment and increasing the role of private sector in the
development process of Nepal is major objective of national economic policy.
• Forthis purpose, a liberal industrial policy was adopted in 1992, and the Industrial
Enterprises Act, 1992, the Foreign Investment and Technology Transfer Act, 1992,
and the One Window Policy of 1992 were announced.
• Foreign investment is expected to supplement domestic private investment through
foreign capital flows, technology transfer, and providing access to international
markets.
• Foreign investors will be granted a business visa until their investment is retained.
Competition Policy
• InNepal, currently there is no specific legislation on competition but the
Government feels the need to introduce legislation to guarantee free and fair
competition in the country.
Privatization policy
• In
1992, HMG Nepal launched a comprehensive privatization program which was
governed by the Privatization Act, 2050 (1994).
• During the first stage of this program, ten public enterprises were privatized.
• Bansbari Shoes and Leather Factory
• Bhrikuti Paper Mill
• Brick and Tile Factory Harisiddhi
• Nepal Film Development Corporation
• Balaju Cotton Factory
• Raw Hide Collection and Development Corporation
• Nepal Bitumin and Barrel Industry
• Nepal Lube Oil Limited
Questions submitted by Members and the
replies provided by the authorities of Nepal
Question 2: Could you provide details of the privatization plan?
Answer: The privatization program was launched in order to utilize the resources
currently invested in public enterprises in a more efficient and effective manner. The
long term objective of the privatization program is to set the economy on a dynamic
growth path by transferring public enterprises to the private sector and enhancing
private sector participation, particularly in manufacturing and services. However,
government shall take all necessary measures to ensure that the private sector shall
not use market power to obstruct market mechanisms. Nepal intends to concentrate
government activities to provide basic infrastructure, health and education services to
the population and to deal with the shortcomings of the market mechanism rather than
in the production and distribution of commercial products and services.
…
Question 3: Are there any restrictions to foreign participation in the privatization
program (e.g. specific sectors excluded, ceiling level of participation)? If so, do these
restrictions also apply to potential domestic investment?
Answer: The Privatization Act 1992, in general, does not discriminate between
national and foreign investors. However, while evaluating proposals, if the proposals
of two or more investors are found to be identical, priority shall be given to the
national investor or the group of national investors.
 …
Question 6: Nepal states that its current industry policy allows for development of almost
all industrial ventures without license. Can Nepal detail which industrial ventures require a
license, what the license requirements are, and where the requirements are detailed? Are
there any manufacturing or service sectors where foreign investors are required to obtain a
license and local investors are not? Are there restrictions on foreign investment that are
imposed under the Foreign Investment and Technology Transfer Act?
Answer: As per the Foreign Investment and Technology Transfer Act of 1992, Article 3,
permission from the Department of Industries is required for all foreign investment. As
provided by the Industrial Enterprises Act of 1992, permission for domestic investment is
only required only for industries producing explosives, including arms, ammunition and
gun powder, security printing, bank notes and coin industries; cigarette, bidi, cigar, chewing
tobacco, khaini industries and industries producing goods of a similar nature utilizing
tobacco as the basic raw material and alcohol or beer producing industries. The specific
requirements to get the permission are not detailed in either of these Acts.
…
Question 14: Are the conditions set down in the Industrial Enterprises Act 1992 and
the Foreign Investment and Technology Transfer Act 1992 identical for domestic and
foreign enterprises? If not, would Nepal provide details on the differences?
Answer: There are no substantive differences with regard to the treatment of domestic
and foreign enterprises in Industrial Enterprise Act 1992 and Foreign Investment and
Technology Transfer Act, except that described in answer to Question 6.
…
• Question 19: Nepal indicates there is a need to introduce legislation to guarantee
free and fair competition. Can Nepal please elaborate on plans to introduce
legislation on competition?
• Answer: Nepal does feel the need for legislation to guarantee free and fair
competition. However, Nepal has not yet outlined the plan to introduce such
legislation.
Legislative Action Plan
• First submitted on 21 May 2002.
• Competition Law
• Status of the draft : Interactions and discussions are initiated for the first draft.
• Expected Approval Date (Parliament) : September 2005

• Nepal submitted the revised Legislative Action Plan on 5 May 2003.

• Competition Act
• Status of Draft/Intended Actions: Preparation of draft of the new Act by Ministry of
Industry, Commerce and Supplies by November 2003; Endorsement by Council of
Ministers by February 2004
• Expected Approval Date: July 2004
Competition Promotion and Market
Protection Act, 2063 (2007)
• Date of Authentication and publication: 9 Ashad 2063 (23 June 2006)
• Objectives of the Act
• make national economy more open, liberal, market oriented and competitive by
maintaining fair competition in the market
• increase national productivity, and prevent improper intervention, monopoly and
restrictive business practices in the market
• increase the quality of goods and services and to ensure availability to the consumers,
quality goods or services at lower price
• prevent anticompetitive conducts in the market