It also commits state-support for the development of infrastructure up to factory sites for priority industries and special tax holidays for industries in rural and unindustrialized parts of the country. [break]
“Balanced industrial growth, backward linkages, protection and state-support to the industries are the key objectives of the policy,” said Yam Kumari Khatiwada (Baskota), joint secretary at Ministry of Industry (MoI). Its goal is to create more employment opportunities and reduce poverty through industrialization, she told myrepublica.com.
The new policy has replaced 18-year old previous policy. Of the major shifts, it promises simple and exit policy to the promoters, thereby freeing them from longer-term labor and other liability. Investors were otherwise subjected to such burdens and this was affecting flow of fresh investments.
The new policy also recognizes and allows sub-contracting of productions for the first time in the country´s history. This provision is expected to help create specialization in the manufacturing process and enable a party to meet international orders without investing further in his production units.
- Industries in rural areas to get tax holidays up to 10 years
- Local industries to get tariff protection
- Govt to facilitate exit, industrial infrastructure development
- Sub-contracting encouraged for manufacturing specialization
- SEZ, agro-export processing zone for export industries development
“Most importantly, this is expected to help foster backward linkages, mainly facilitating small scale industries, to incorporate in the larger manufacturing process,” said an MoI official.
The policy also provisions differential tariff rates for raw material imports and the import of finished goods. The aim of the provision is to promote domestic manufacturing over direct trade.
Officials said such protection rate (difference in tariff favoring local manufacturing over direct import) will be 25 percent. Similar protection, and duty and tax-discount incentives have also been promised for the industries using local raw materials and spurring higher value addition.
The policy entrusts the government to lay down industrial infrastructure, such as roads, electricity and telecommunication in different districts that have been identified as possessing manufacturing and processing potentials.
However, it calls for the private sector to share costs on the industrial security front. “Industries can deploy their own industrial security force and insure life and property, and the government will allow them to deduct such costs from their taxable income,” says the policy.
The policy pledges additional promotional incentive packages for export industries, particularly the small and medium enterprises (SMEs). It promises 25 percent income tax concessions to small, medium and large industries that directly employ 100, 300 and 600 persons respectively.
The policy has broadly categorized Nepal´s geographical regions into three groups -- highly underdeveloped, undeveloped and underdeveloped industrial regions -- and pledged tax holidays of 10 years, 7 years and 5 years, respectively, to the industries in those regions.
Apart from the existing Special Economic Zones (SEZs), the policy also envisages the development of Agro-Export Promotion Zone (AEPZ).
"Industries established in these zones will be exempted of excise duty and VAT (Value Added Tax) on raw and packaging materials," the policy states.
It also recognizes research and development and market promotion as an integral part of the industrial activities, and allows 5 percent income tax deduction for each purpose.
The policy considers IT, cement, hydropower, vehicle and motor parts, chemical fertilizer, bio-technology and adventure tourism as high priority industries, and agriculture, forest-based, Ayurvedic, and homeopathic medicine manufacturing, minerals and handicrafts as priority industries.
milan@myrepublica.com
Related story
DPR for three industrial estates to be ready in 7 months
