BIPPA will not pour Indian investment in Nepal

Gyanendra Bahadur Kunwar

Advocate, Nepal

TGQ1: What is BIPPA all about? When will the freshly signed agreement between Nepal and India come into effect?

Advocate Kunwar: The history of agreements of the sort freshly signed between Nepal and India during the state visit of Prime Minister Baburam Bhattarai to India, Bilateral Investment Promotion and Protection (BIPPA), dates back to the post-Second World War days. Though the agreement signed between Nepal and India is much similar to those which were signed between European States, the first of such agreements was signed between Germany and Pakistan as back as in 1959 itself.

With the signing of the agreement between Germany and Pakistan, relations have flourished to the extent that Germany later became the fourth largest trading partner of Pakistan. In fact, the objective behind such agreements signed between host and home states is for a fair and equitable treatment towards the investors of either country. Providing national treatment to the foreign investors and guaranteeing physical security to them is the prime objective. To date, more than 2600 of such agreements exist between states the world over.

However, in the backdrop of growing animosity between non-state actors with the foreign investors, agreements like BIPPA have become even more urgent. Thus it is natural for countries that are willing to or have been investing abroad demand such agreements from the host countries.

The issue is simply that who will dare to invest in a hostile environment? The question lay here.

As far as your query on when the agreement will come into effect is concerned, legal provisions demand that the agreement be ratified first by the Nepali Parliament. But, with a simple majority, which is in accordance to the Nepal Treaty Act 1990.

The working procedure relating to the ratification and accession of Treaties of the Nepal Treaty Act clearly necessitates for the agreement to be ratified by majority of the members present in the House of Representatives.

Unless both the governments complete their local legal requirements and confirm the date through exchange of diplomatic notes the agreement shall not come into effect, which has been clearly stated in Article 15 of the said agreement.

TGQ2: Who are the primary beneficiaries of the agreement?

Advocate Kunwar: It is simple. Nepali and Indian investors who are willing to and have the needed capital to invest in each other countries are the beneficiaries. Largely the private sectors will benefit. If you examine the preamble, Article-1, 2, 3 or say the agreement as a whole, it is easily understood that the corporations, firms and associations constituted under the law in force of the countries are the direct beneficiaries which can make the investment in the sovereignty and jurisdiction of both the countries and which may also benefit the host country in generation of revenue and creation of jobs.

TGQ3: What are major features of the agreement?

Advocate Kunwar: The major feature of the agreement is the general standards of treatment, which is comprised of Fair and Equitable Treatment, Full Protection and Security, Non-discrimination, National Treatment and Most-Favored-Nation Treatment. However, such general standards of treatment are subject to the prevailing law of the host country.

The Interim Constitution of Nepal in its Article 35(12), State Policies, has already welcomed and prioritized foreign capital and technology for the purpose of national development. Post 1990 policy changes resulted in the liberalized legal regime relating to investments. Several sectors have been opened for the foreign investment.

Some provisions of the agreement already existed in the prevailing laws of Nepal as such. The issue of expropriation and repatriation had been already dealt in Industrial Enterprises Act, 1992 and Foreign Investment and Technology Transfer Act, 1992, which the agreement contains in Article 4 and 7 respectively.

The most important part of our discussion here is that while Indian investors can invest in Nepal in a fully favorable and security guaranteed environment, but conversely we cannot invest in India. Our legal provisions bar Nepali nationals to invest in foreign lands. The section 3(1) of the ‘Prohibiting Investment in Foreign County Act, 1964 (2021B.S.) clearly states that "No Nepali national can ever make any investment in foreign countries". However, the situation changed significantly since 2021 BS. Now there are Nepali investors who have the needed capital and courage to invest in India or any other country and generate profit. Nepali bureaucrats and politicians are fully aware that there exists such an act that prohibits us from investing in foreign countries. But, yet the BIPPA was signed with India and thus the objective is to simply bring in only the Indian investors under the loose pretext of national development.

TGQ4: What is the relevance of BIPPA for Nepal then?

Advocate Kunwar: The fact is that now we are living in a liberalized economy. Both India and Nepal are the members of World Trade Organization. We have accepted the WTO agreements such as GATT, GATS, Trips and others. We already have ratified the MIGA convention. Our constitution too welcomes foreign investment; our legal provisions favor fair and equitable treatment to the foreign investors. I do not see much urgency in signing the agreement of this sort with India. In real sense BIPPA is nothing rather than Protection and Promotion of Indian Investment in Nepal. The problem is rather different. Our Prime Minister could have instead of pleasing India alone should have put his entire efforts in making favorable bureaucratic environment for investments both local and foreigners. Presently, the environment is simply not favorable for investment. People are facing too much bureaucratic hurdles in relation to trade and investment.

TGQ5: There is no debate whatsoever in India over the deal with Nepal, whereas in Nepal, parties are on the verge of resorting to street protest? What is this phenomenon all about?

Advocate Kunwar: The problem is the lack of transparency. The Prime Minister felt it unnecessary to hold discussion with local experts and he did not even inform the parliament that the government was singing the agreement with India. Yes, you are right Indians will not take to the streets because they know what their government is doing. The government in Nepal is weak and it has failed to take people into confidence over several issues. In the last six decades or more, since 1950 Bilateral Peace Treaty to this BIPPA, we have ourselves observed that several agreements have been signed without transparency. Baburam himself accepted that he took risk by signing the agreement. He is himself not confident that his gamble will yield positive result for the country.

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Comments

Posted on - 2011-12-01 by Nepalese people
Not only BIPPA any agreements going to do with India by present Nepalese Government. Definetly will be big harmful to the Nepal according the their politics since 1990 to till now.

Posted on - 2011-11-16 by Bipin Shah
A comprehensive insight of BIPPA for commoners like me. Thank you Advocate Kunwar.

Posted on - 2011-11-16 by shirendra rawal
bro weldone for your magnificent and logical interview towards the bipa treaty