Regulatory Hurdles in Nepal: Impact of Axiata’s Departure 

-Aarashi Ghimire

Ms. Ghimire ​​is a research intern at Samriddhi Foundation, an economic policy think tank based in Kathmandu. The views expressed in this article are the author’s own and do not represent the views of the organization. Author can be reached at Aarashi Ghimire [email protected]

The Malaysian Group, Axiata which is the majority stakeholder in Ncell has decided to leave Nepal. This significantly impacts the Telecommunication landscape of the country. The decision comes after 7 years of entry and operation in Nepal. “Uncertain regulatory and tax environment, the looming risks associated with the expiry of the mobile licenses in 2029”, were cited as a major reason for the exit by the Managing director.. This move by the company raises significant concern regarding the regulatory framework and the ease of doing business in the nation.

Experts have attributed Axiata’s departure to misguided government policies and laws that have created uncertainty for telecom companies. One highlighted factor in the exit is the hefty license renewal fee, an unrealistic cost for telecom operators already burdened by continuous tax obligations, including income tax, value-added tax (VAT), and rural telecommunication fees. The tax burdening nature of the government is exerting pressure on the business. These kinds of regulatory frameworks discourage business, further constraining the already frustrated sector.  

The stringent and uncertain provisions within Nepal’s laws present significant challenges to conducting business. For instance, the Telecommunications Act-1997 requires foreign-owned companies to surrender assets to the government upon license expiry, contributing to an atmosphere of unpredictability. Additionally, Nepal’s Foreign Exchange (Regulation) Act stipulates strict regulations on foreign financing for acquiring shares in Nepalese companies, adding unnecessary hurdles for foreign businesses and investments.

While Nepal plans to host an Investment Summit aimed at attracting foreign and domestic investors, these impediments remain unaddressed. The country’s policies, laden with red tape, hinder foreign businesses’ entry and investments. The disparity between the intent to attract investments and the lack of action in removing these barriers raises doubts about Nepal’s attractiveness for foreign investors.

Axiata’s departure from Nepal’s telecom sector serves as a wake-up call for policymakers. Addressing regulatory uncertainties, streamlining taxation, and removing bureaucratic hurdles are imperative steps to create a pleasant business environment. These actions are pivotal not only for retaining existing investors but also for attracting new foreign investments that are crucial for Nepal’s economic growth and development. The success of the upcoming Investment Summit may ride on Nepal’s willingness to proactively address these critical issues, signaling a commitment to fostering a business-friendly environment in the country.