The SEZ program, which had first featured in the government´s budget 17 years ago, had moved close to materialization when the Maoist-led government a few months ago endorsed the Act through the cabinet and announced that it would enacted through an ordinance.
The then minister for Industry, Astalaxmi Shakya, had declared that once the law was enacted, she would instantly inaugurate the first SEZ developed in Bhairahawa.
“But the government has changed and all that process has gotten derailed,” said an official at the SEZ Project, a special wing in the Ministry of Industry (MoI).
The newly appointed finance minister, while talking with Republica, has said that the new government will give SEZ implementation a high priority. However, given that the upcoming Budget Session of parliament will focus on the government´s other policies and programs, project officials rule out the enactment of the much-needed law before six months.
For the last one-and-a-half decade, the governments have in their budget speeches and programs always deemed the SEZ program a high priority. And these governments include governments headed by the Nepali Congress, the CPN (Unified Marxist Leninist) and the United CPN (Maoist), that is, all the three major political parties that together are massively represented in the present Constituent Assembly.
“But, unfortunately, as soon as the political leaders shift to the opposition bench, they do not agree with the program,” said the official, lamenting that such behavior on the part of the political leaderships has rendered meaningless the millions of rupees of taxpayers´ money that the government spent on the SEZ.
The government has already spent over Rs 250 million in Bhairahawa, where the zone is almost complete , on half of the allocated 54 ropanis of land. This SEZ is estimated to eat up an additional Rs 250 million by the time it is completed.
Likewise, the government has already allocated a Rs 100 million budget for acquiring 61 hectares of land in Panchkhal for developing an SEZ there that would boost Nepal´s trade with Tibet and mainland China.
The government is also mulling over acquiring 200 hectares of land each in Jhapa and Dhangadi and is planning to spend over Rs 300 million on land acquisition alone. The largest SEZ, in Simara, close to Birgunj, where land development work has already started on 550 hectares of land, is estimated to cost over Rs 5 billion.
The price of the land alone on this site stands over a billion rupees, according to the project office. “Thus, the government, on the one hand, is spending billions of rupees of its hard earned money for SEZ development, but, on the other, it has done nothing to enact the much-needed law and to operationalize SEZ,” said the source.
The governments have pushed for the creating of the SEZ, because apart from promoting export and providing for labor flexibilities, the SEZ could help lure foreign investment in the country as well.
But in the absence of a law that backs these projects, the project office has not been able to respond openly to the 19 large-scale industries, including Nike Corp´s Korean manufacturing unit, that have an submitted expression of interest to set up plants in the SEZ in Bhairahawa.
Industries such as the 19 mentioned above have supported plans like these because of the attractions they offer industries. In the draft of the SEZ Act that the MoI had forwarded to the cabinet in 2006, there were provisions for lowering customs duty, and provisions for VAT exemptions and tax holidays to be given to industries in an SEZ. The draft also restricts workers from launching strikes that obstruct production and hamper industrial operations. In return, it provides for higher salaries, insurance coverage, child-care and other facilities to the workers in an SEZ.
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