NRN Association » Policies / Legislations » Status and policies

STATUS OF NON-RESIDENT NEPALI (NRN) and
SUGGESTIONS FOR THEIR LEGAL PROVISIONS AND FACILITIES

INTRODUCTION

The Nepali living and working abroad play an important role in the economic development of Nepal. According to the latest statistics, the Nepali working abroad have sent more than US$950 million to Nepal through various channels in 2001-02 alone. This amount would go up significantly if legal and banking provisions were made to facilitate foreign remittances for deposits and investments in the country.

Nepal has provided manpower services to foreign countries for almost 200 years. Since 1815 the British Government has hired Nepali citizens to join their military forces (Gurkha regiment) under an agreement signed between the two countries. The Governments of India and Singapore are also regularly recruiting Nepali Gurkhas every year. A number of them have even been awarded the Victoria Cross (V.C.) and other important awards in honour and recognition of their bravery and commitment.

More than 800,000 Nepalis are presently living in about 32 countries around the world. This constitutes Nepali residents, professionals, scientists, skilled and unskilled labourers, businessmen and students. Some of them have joined the United Nations system, other international and regional organizations and multi-national companies. Many of them have obtained citizenship of the country of residence.

Under the Foreign Employment Act of His Majesty's Government of Nepal (HMG/N) enacted in 2042 (1985), the Ministry of Labour and Employment Promotion (MLEP) has licensed about 200 employment agencies to hire Nepali citizens to work in foreign countries. In addition to these agencies, private individuals are also engaged in sending Nepali citizens abroad for employment.

LEGAL STATUS OF NEPALI WORKING/LIVING ABROAD

Thus far, no legal provisions have been provided for the Nepali living abroad for longer periods. The only present status is that they are treated on the same footing as those living in Nepal. Furthermore, no legal framework is available to welcome and attract financial resources that they can bring into the country for long-term investment and development.

Non-resident Nepali (NRN) have been making immense contributions to the countries of residence, particularly in the field of technical, economic, academic and social sectors. Unfortunately, they have not been able to contribute to their own country though they have a great potential, strong willingness and commitment to improve Nepal's financial resources by transferring foreign currencies through banks and other official channels.

As our neighbours Bangladesh, India, Pakistan and Sri Lanka have done in the recent past, there is a need for a separate legal provision for Nepali living in foreign countries. They could be called 'Non-Resident Nepali' (NRN) and perhaps could be defined as follows:

• "A Non-Resident Nepali (NRN) is a Nepali citizen or a person of Nepali origin who has been staying outside Nepal for at least 183 days in a year for employment, business or self employment and indicating an intention for an uncertain duration of stay abroad. Non-resident foreign citizens of Nepali origin* also covered under this definition. But Nepali citizens working for His Majesty's Government of Nepal or for Nepali resident organizations abroad are not covered under NRN"

NON-RESIDENTS OF SAARC COUNTRIES

Recognizing the importance of their citizens living abroad, the Governments of Bangladesh, India, Pakistan and Sri Lanka have drawn a legal framework encouraging them to send foreign remittances into their countries of origin. Bangladeshi citizens living abroad are called 'Non-resident Bangladeshi' (NRB); Indian citizens living abroad (other than SAARC countries) for more than 183 days/annum are called 'Non-resident Indians' (NRI); Pakistan calls its citizens living abroad 'Overseas Pakistanis' (OP); and Sri Lankans call theirs 'Non-resident Sri Lankan'. The Non-resident citizens of these countries are granted the following main facilities:

• Maintenance of bank accounts in both foreign and local currencies without tax implications.



• Investments in securities/shares, and deposits with local firms/companies.



• Investments in immovable properties in respective countries.

In addition, overseas citizens are granted a package of privileges if they remit incomes through banking channels as follows:

• Duty free import of personal effects.



• Discount in the auctions of corporate and industrial corporation where payment will be made in foreign currency.



• Special allocation of shares in privatization.



• Separate immigration and customs counters at international airports for handling at arrival and departure.



• Renewal of passports on urgent basis, free of charge, etc. In its Budget for 2001, the Government of Sri Lanka announced a proposal to permit Sri Lankan citizens living abroad to repatriate their earnings for investment into Sri Lanka without any exchange control restrictions. A special scheme was formulated for non-resident Sri Lankans to remit money into the country through an account titled Rupee Account for Non-Resident Sri Lankan Investment (RANSI). Income and interest from such investments would also be allowed to be taken back without exchange control restrictions.

In Pakistan, a package of incentives was announced for Overseas Pakistanis who send their remittances through normal banking channels to be exempted from all taxes. This has enabled Overseas Pakistanis to remit money freely for consumption, investment or any purpose to their families in Pakistan without any harassment by tax authorities.

The Reserve Bank of India approved the Resident Foreign Currency Accounts Scheme (RFCA) in 1992. Under this scheme, Indian citizens or People of Indian Origin (PIO), who have been living and working abroad for more than one year are allowed to open foreign currency accounts with banks in India or hold them separately with authorised dealers. Money deposited in this account and income from interest is exempt from income tax. Persons who have gone abroad for studies, training, etc. are not eligible for this facility however. The Government of India also issues People of Indian Origin (PIO) card to foreign residents of Indian origin. The cardholder enjoys the same rights as an NRI except the right to vote. This card is valid for twenty years and it grants them free entry into India without having to apply for an entry visa.

Moreover, the Governments of these countries, with the exception of Pakistan, have approved the provision of dual citizenship with a number of countries in the world.

As a result of the recognition of its non-resident citizens and the importance of foreign currency remittances from them, a large amount of foreign currency was allowed to be freely remitted through banking channels in those countries (India, Bangladesh, Pakistan and Sri Lanka). In return, when the US government announced its embargo on assistance to India and Pakistan in 1998, Non-resident Indians (NRIs) and Overseas Pakistanis (OPs) committed themselves to support their respective governments to cope with their national economy.
NEPALI LIVING AND WORKING ABROAD

Over 800,000 Nepali work and live abroad outside of the SAARC countries and this number is increasing rapidly. The Government has issued licenses to about 200 employment agencies which hire Nepali workers for foreign employment in 18 countries. The majority of them have gone to Asian and Gulf countries/territories, such as, Singapore, Brunei, Malaysia, South Korea, Hong Kong Taiwan, Macau, Saudi Arabia, Kuwait, Oman, Qatar, United Arab Emirates, Bahrain, Jordan, etc. Traditionally, Nepali workers have been going to these countries as unskilled and skilled labourers such as masons, carpenters, painters, plumbers, electricians and drivers. But in the recent past, Nepali engineers, doctors, teachers, computer specialists and technicians can be found in these countries competing with counterparts of other nationalities.

In addition to the above-mentioned countries, Nepali have also been living and working in the Far East (Australia, New Zealand, the Philippines and Japan), in Europe (United Kingdom, Germany, France, Switzerland, etc.), in Russia and CIS countries, in North America (Canada and USA) and in the Nordic countries (such as, Sweden, Finland).

Some of these Nepali are involved in corporate bodies and the others own private companies (unofficially), employing thousands of respective host citizens. In this respect, Nepali have been making invaluable contributions to countries where they have been living and to organizations and companies where they have been working. Many Nepali Army officials have sacrificed their lives while serving in the United Nations Peace Keeping Operations. Similarly, thousands of Nepali have sacrificed their lives while serving for military services with UK and India.

There is absolutely no doubt that Nepali living abroad have enormous potentials and resources to serve and support Nepal. According to a survey conducted in 1997 by the Department for International Development (DFID) of the Government of United Kingdom, Nepal received about US$ 506 million (Nepali Rupee 35 billion) through remittances in 1997 and this figure has almost doubled in 2002. This figure represents, according to the Nepal Rastra Bank, more than half of the national income. It is clear that the amount of remittances will increase further if the HMG/N encourages and attracts investments from Non-resident Nepali (NRN) as the Governments of Bangladesh, India, Pakistan and Sri Lanka do to their respective overseas citizens.
EXISTING ACTS AND HMG/N POLICIES

The HMG of Nepal has adopted the following Acts with regard to the foreign currency regulation and to attract foreign investment in the country:

1. Foreign Exchange (Regulation) Act 2019 (1962 AD) - This Act provided the opportunity to Nepali citizens or persons living outside Nepal or foreign nationals or Organizations to open accounts in convertible currency as following:
   • Persons receiving salary, allowances and pensions in convertible currency after working in international organizations, diplomatic missions;
   • Persons earning convertible currency from service, training, seminar, study and enterprise.
   Nepali citizens have been provided with the following facilities through this Act:
   • Interest earned from convertible currency deposit is exempt on convertible currency from income tax.
   • Items mentioned for import for personal use and through Open General License (OGL) could be imported from the amount deposited in convertible currency account.
   The above Act is superseded by the 2059 Act on Foreign Currency Regulations at which many Articles have been amended. The details of this Act will follow later.
2. Income Tax Act 2031 (1974 AD) - Legal provision as well as definition about 'Non-resident' (foreign nationals) was made in Income Tax Act 2031 (1974 AD). This Act was promulgated in order to levy tax on foreign nationals working in Nepal or acquiring income from Nepal.


It may be noted that this Act supersedes by the new 2059 Foreign Currency Regulation Act at which several amendments have been by the Government.
3. Foreign Investment and Technology Transfer Act 2049 (1992 AD) (FITTA) - This Act was passed to attract foreign investors and entrepreneurs to invest in the development of the industrial sector. According to Clause 2(d) of the FITTA act, a foreign investor is defined as a foreign individual, firm, company or corporate body involved in foreign investments or technology transfer. Foreign governments and international agencies can also invest either singly or jointly with Nepali citizen or firm/company in establishing industry or in development projects in Nepal. A 'single window' approach was adopted to facilitate foreign investors but unfortunately, never implemented.
4. The HMG/N has established an Employment Promotion Commission within the Ministry of Labour and Employment Promotion in order to encourage foreign employment for Nepali citizens. Accordingly, the Ministry of Foreign Affairs and the diplomatic missions has been advised for the promotion of employment of Nepali citizens and safeguarding their rights and interest. The government has also made the provision of credits to unemployed youths through banks to help them find jobs in foreign countries. Training institutions will be established in order to enhance foreign employment to Nepali citizens.
   
   In his Budget speech of the FY 1998/99, the Finance Minister of HMG/N announced that arrangement would be made to provide employment opportunities abroad by extensively exploring foreign labour market. This arrangement would be regulated under the long-term strategy and promotion of foreign employment including security personnel in various areas. Employment Promotion Commission and the Ministry of Labour will be made active to carry out these tasks effectively. Likewise, the Ministry of Foreign Affairs and the diplomatic missions abroad will be made active for employment promotion and safeguarding the rights and interest of Nepali workers abroad.
   
   The Finance Minister's speech, however, did not mention anything about attracting foreign currency remittances and regulating Exchange Control of remittances, deposits and investment from Nepali citizens working and living abroad.
   
   It is worthwhile to mention that HMG/N has recently approved a 10-year visa regime for Nepali origin foreign citizens living abroad. It is certainly a positive step towards recognition of the NRN issue but not enough to attract NRN investment in the country.

SUGGESTIONS AND RECOMMENDATIONS

In view of the aforementioned situation, the Russia-Nepal Chambers of Commerce and Industry (RNCCI) presents the following suggestions and recommendations to His Majesty's Government of Nepal for its active and due consideration:

• The status of Non-Resident Nepali (NRN) should be defined, as stated above, in the Constitution of Nepal. Honorary Nepali citizen of foreign nationality as per the constitution of Nepal 2047 (1990 AD) paragraph 10, as well as foreign citizen of Nepali origin may also be considered as NRN.
• Facilities and privileges similar to those offered to foreign investors as stated in FITTA 2049 should also be granted to NRN. These facilities and privileges, including foreign currency regulations and repatriation of deposits and assets, should be offered to NRN to attract investment in Nepal.
• As per Foreign Exchange Regulations Act 2019 (1962 AD), NRN should be allowed to open foreign currency accounts in authorised banks in Nepal. This arrangement should be regularised through NRN Foreign Currency Account Scheme under the Nepal Rastra Bank.
• Tax should not be levied on foreign remittances and interest earned on them.
• Double taxation on foreign remittances and investment should be avoided.
• Provision of dual citizenship may be granted to NRN. Dual citizenship normally can be obtained in more than one way: through country of birth, grandparents or parents, naturalization and marriage. Many countries in the world allow dual citizenship, e.g. Australia, Bangladesh, Canada, India, Sri Lanka and some countries do not recognize it, including Pakistan, Japan, Nepal, Thailand, Singapore, etc.
• Permission may be granted to NRN to establish business/industry and Overseas Corporate Bodies (OCB) in foreign countries and allow them to recruit foreign nationals to conduct business.

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