Two decades on, SEZ fails to impress investors

Published On: December 7, 2019 12:44 PM NPT By: Dilip Poudel

BHAIRAHAWA, Dec 7: The government established Special Economic Zone (SEZ) in Bhairahawa two decades ago with hopes to attract investment, increase production, and boost exports. But the investors are yet to be impressed. 

Due to lack of the basic infrastructure for industrial production – electricity – the SEZ failed to generate interest among investors for long. On top of that, strict rules to export 60% of the production and unstable government policies have played the spoilsports to dissuade the investors to set up production plants in the SEZ. 

According to Kul Prasad Neupane, chairperson of Siddharthanagar Chamber of Commerce and Industry, the SEZ has been unable to provide suitable environment for investors. “The SEZ authorities say that investors will be provided all the necessary facilities. But it hasn't happened yet,” he said, “Due to unstable government rules and policies, investors are not convinced.”

Industrialists complain that the SEZ has lacked proper electricity, there are problems getting bank loans, there is no market assurance for export, and getting things done with the authorities is always a problem. “The government has not played an effective role in persuading the business community to invest in the SEZ,” said Neupane.

The government introduced the SEZ Act in 1996, and started land acquisition and construction works in Bhairahawa in 2000.

There are 68 plots for lease in the SEZ. Till now, only 50 plots have been leased. The SEZ has made agreements with 22 companies for operation of industrial units, but five of them have already backed off. Three companies have established production units and have already started production. Except for Vistar Global Limited, which has investment from India, no other foreign company has shown any interest in coming to the SEZ. Vistar has started producing steel utensils.

The government has spent more than Rs 850 million in constructing the SEZ. According to Dhruba Kumar Shrestha, vice chairperson of Panchakanya Group, the government should win the trust of investors to establish production units in the SEZ. “Construction of the required infrastructure for production units was delayed,” he said, “The government should guarantee that the investors' money is not wasted and they get a supportive environment to operate."

Sundar Thapa, spokesperson of the SEZ, acknowledged that work has not progressed as per the target. “We are creating a suitable environment for establishment of factories here,” he said, “We will move ahead by correcting whatever weaknesses there have been.”

Nepal Electricity Authority (NEA) has announced the end of load shedding in the country, but in Bhairahawa SEZ, electricity is not supplied as demanded by industrialists. 

The SEZ requires 33KV electricity transmission line, but only 11KV line is supplying power here. Most companies have used private generators to construct their factories. According to Saroj Kadel, director of 

S Plastic Products, electricity has been a big issue in SEZ. “We have developed infrastructure for our industries, but we have not received adequate electricity,” he said.

According to Megh Mani Gautam, a NEA official based in Bhairahawa, power could not be supplied as the SEZ has delayed construction of substation. “We will provide 33KV line to the SEZ within one or two months,” said Gautam, “But it is the responsibility of the SEZ to construct substation.”

The government has made a compelling provision to export majority of the production. At first, industries were required to export 75% of the production, but later on it was reduced to 60% as per the demand of industrialists. But still industrialists are not satisfied and have demanded to reduce it to 50%.

According to Ashutosh Agrawal, an official of Lit Light Manufacturing Industry, there has been uncertainty about export of products. “It would be better if there was rule to export 50% of the production,” he said, “There has been no support from the customs to release bank guarantee after the construction of factory and import of products.”

Five companies have exited from the SEZ, stating that there was lack of electricity and they were unable to meet the requirement of 60% export of their products. New Metal industries Pvt Ltd, Siddhartha Pipe Pvt Ltd, Siddhartha Pet Plast Pvt Ltd, and Sugam Nano Herbals have exited from the SEZ. According to Istiyak Ahmed Khan, an official of Sugam Nano Herbals, they canceled the agreement as there was not suitable environment to operate in the SEZ. “The government should facilitate for exports,” he said, “We saw difficulty in exports so did not establish the factory there.”

Industrialists complain that they have to go to the central authority of SEZ in Kathmandu for even a trivial matter. The office was run only by an office helper when the reporter reached the SEZ in Bhairahawa last Friday. The SEZ has a rule to have eight employees for daily operation, but they do not stay in office.

According to Laxman Thakur, project manager of Shakti Minerals Pvt Ltd, as the responsible officers do not stay there, they have to go to Kathmandu even for a small matter. “It is very difficult to get anything done instantly, as officials do not stay in the SEZ office,” he said.

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