The Act mainly engrosses three broader principles: incentives to industries, one-spot service and labor flexibility in the zones, which are being developed to give impetus to the country’s export trade, stated a government source, who informed myrepublica.com about the today’s cabinet decision. [break]
Also the Act treats SEZ as a land where other domestic laws related to labor and industries would not be applicable. It has mooted an autonomous SEZ Authority to oversee its operations.
The source stated that the ratification of the Act, which had so far lingered due to the differences over the tighter labor provisions, had became possible after the seven parties recently agreed not to launch strikes in the industries or disturb productions.
“The Act allows workers to unite and practice collective bargaining, but prohibits them from undertaking activities that affect production and normal operations of industries,” said the source. It also allows the entrepreneurs to hire workers on a contract basis.
“Terms of recruitment, facilities and lay off will be governed by the agreement the worker and management will sign while accepting the job.” Initially, the draft had incorporated the ´hire and fire´ provision as demanded by entrepreneurs.
The Act provisions better facilities for workers in the SEZ than what workers receive outside of the zone. “SEZ Authority and the SEZ regulations will determine the extent of workers pay scale, medical and insurance facilities, among others,” reads the Act.
In order to lure investors in SEZ, the Act has provided them with facilities such as duty-free import of raw materials, exemption of value added tax (VAT) and free them from excise duty and other local taxes. The industries in SEZ have been provided with income tax holiday for five years.
“After five years also, they will continue to enjoy 50 percent discount on income tax,” said the source. In order to ensure investors, the Act says industries already into operation would continue to enjoy all the facilities, even if later amendments changed the structure and extent of facilities.
Going by the Act, only export-oriented industries can be set up in SEZ. Nevertheless, the government has allowed them to make domestic sales not exceeding 15 percent of their transactions.
Interested investors now can acquire land in the zone in lease for 30 years from the SEZ Authority, which will be led by an independent expert. Also, they will receive 50 percent, 40 percent and 25 percent discounts respectively on the lease rent for the first three years of investment.
After 30 years, lease agreement can be renewed in every 5 years.
The Act has asked SEZ Authority to provide one-spot services so that foreign and domestic investors would not have to take the trouble of approaching different government offices. “The vision of the Act is to provide services like visa, visa renewal, logistics and other facilities through a special office of SEZ Authority,” said the source.
The government had first conducted a study to set up a special industrial zone in 1983. A program to develop such a zone was first announced 17 years ago.
Currently, the SEZ project -- a special wing of Ministry of Industry -- is executing the government’s plan to develop SEZs in four different parts of the country. Besides Bhairahawa, where the project office has already completed the SEZ construction, it is also developing SEZs in Birgunj, Panchkhal and Nuwakot.
It has also undertaken studies to develop SEZ in other parts of the country as well.
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