While Nepal welcomes FDI, we must see to it that there are no shady deals to circumvent the country’s laws
Time and again, the multinational telecommunications company, Ncell, has been making headlines in the media, and always for the wrong reason, of course. This does little to boost its image shrouded as it is in one controversy after another. This time around, an investigation by journalists from Nepal and Britain have uncovered that the major stakeholding company in Ncell at different periods of time may have financed the local partners of the company to purchase 20 per cent of the shares as required by Nepali law, hoping there would be a transfer of the shares should Nepal’s law decrease or eliminate the limit on foreign ownership. While the purchase and sale of Ncell’s shares may have benefitted a handful of Nepali investors, who used funds that came covertly via tax havens, it challenges Nepal’s law on foreign exchange controls, taxation and foreign ownership.
Under Nepal’s Foreign Exchange (Regulation) Act, a Nepali person or entity cannot get financing from abroad to buy shares of a company in Nepal without permission from the central bank.
Ncell has been mired in controversy ever since Telia of Sweden quietly left Nepal in 2016, after selling its 80 per cent stake in the company to another telecom giant, Axiata, of Malaysia, without clearing its capital gain tax. And throughout these years, the government’s focus has been solely on recovering the capital gain tax worth tens of billions of rupees from the company. As a result, the purchase and sale of Ncell’s 20 per cent shares by local investors has largely escaped the attention of the government.
Neither has it bothered to investigate where the local partners got the money from or even if it came through a legal channel.
The Ncell investigation, carried out by the Centre for Investigative Journalism-Nepal and Finance Uncovered of Nepal, shows that Axiata paid $90 million to a secretive offshore company to fund the purchase of Ncell’s 20 per cent shares by businesswoman Bhavana Singh Shrestha. The 20 per cent stake is worth well over US$ 300 million and has earned more than $80 million in dividends since 2016.
There are valuable lessons to learn from Ncell’s operations in Nepal. While Nepal welcomes foreign direct investment (FDI), we have to be on our guard to see that there are no shady deals to circumvent the country’s laws. While foreign companies are here to make a profit and are legally authorised to repatriate all of their earnings back home, we, too, have every right to see that the companies pay every penny that they owe Nepal under Nepal’s tax laws. This demands strong supervision and coordination among the different departments and agencies of the government, such as the Large Taxpayer Office, Department of Money Laundering Investigation, Office of the Auditor General and Commission for Investigation of Authority, among others. Given the many ways big companies use to intimidate the country, the concerned departments must build up their capacity. And, of course, the politicians and authorities must show resolve to get to the bottom of any suspicious deal if there are any and assist in investigating such transactions, not covering them up for personal benefit.
Freed Haliyas’ woes
It has been 13 years since the Haliyas – land tillers – were freed from the age-old semi-bonded labour system in 2008. However, the government has done little for their rehabilitation. There are more than 19,000 freed-Haliyas, mostly in the remote districts of Karnali and Sudurpaschim provinces, according to a report published by a commission formed by the government shortly after their emancipation. However, they have received no support from the government till date.
Recently the freed-Haliyas of Bajura have filed a lawsuit against the government via the Dhangadi-based National Human Rights Commission, stating that they were economically, socially and culturally discriminated even though the government freed them from the Haliya system. The petitioners have demanded that each of them be provided at least five katthas of land and that the five-point deal reached between them and the government in the past be implemented. The food scarcity due to the outbreak of COVID-19 has made their life even more difficult. The condition of the women and children is even more pathetic. As the constitution has guaranteed the right to food and shelter, the government cannot escape from its duty in providing both to the disadvantaged group.