Bhairahawa SEZ fails to welcome entrepreneurs

Kathmandu, June 17: As the private sector entrepreneurs did not show up at the Special Economic Zone (SEZ) in Bhairahawa even after showing their interest and applying for the establishment of export-oriented industries at the sole SEZ of the country, the SEZ Authority has warned to scrap their application and initiate a new process to invite new companies there.

The government has established the SEZ to promote export-oriented industries and reduce trade deficit through export promotion.

But it has been more than a couple of years the special zone is waiting for the establishment of any industry. Although the government had announced one-window service and various tax exemption incentives, the SEZ has failed to attract any industry so far.

There is 100 per cent income tax exemption for the first five years from the starting product transaction, and 50 per cent tax exemption for another five years.

Industries using more than 60 per cent Nepali raw materials will get 50 per cent tax waiver for the following 10 years.

Industries operating inside the SEZ also get Value Added Tax (VAT) waiver and discount on customs duty on importing required machineries, raw materials and packaging materials, said Dr. Chandika Prasad Bhatta, Executive Director of SEZ Authority of Nepal while speaking at a discussion programme organised by the SEZ Authority and Society of Economic Journalists-Nepal.

Similarly, foreign investors can repatriate the income they made from share transaction, dividend and capital and interest of foreign loan.

Presenting a paper on the status of Bhairahawa SEZ Dr. Bhatta said that 26 industries have applied for the locations there. Those industries have pledged to invest about Rs. 7.76 billion and create 5,452 jobs.

According to him, political instability, delay in the enactment of required laws, fragile economy, weak institutional capacity of SEZ, lack of confidence between the government and investors and poor access to the international markets are the reasons behind low attraction to the SEZ.

President of Confederation of Nepalese Industries (CNI) Hari Bhakta Sharma said that the government should charge the rent of only Rs. 5 per square feet at the SEZ instead of prevailing rate of Rs. 20 per sq. feet.

Initially, the government had proposed the rent of Rs. 150 per sq. feet.

“The government should work to promote industries and must not focus on the income from rent,” he said.

Former President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Pradeep Kumar Shrestha urged the government to win the confidence of the private sector.

The entrepreneurs who had applied for the industry establishment in the SEZ have urged the government to reduce the rent and amend the provision of mandatory export of 75 per cent to 60 per cent.

However, former vice chairman of the National Planning Commission Dr. Shankar Sharma said that the prevailing provision of mandatory 75 per cent export was appropriate.

Executive Director of the Nepal Electricity Authority (NEA) Kulman Ghishing pledged to provide necessary energy to the SEZ at the earliest.

“For the time being the NEA can provide 4-5 megawatt electricity to the industries at the SEZ, and if more energy is needed, it can be managed from the 33 KV transmission line that passes through the SEZ,” he said.

He also said that no entrepreneur had requested for additional energy.

Secretary at the Ministry of Industry Dinesh Bhattarai said that the government was mulling over reducing the rent and increasing the incentives for the industries in the SEZ.

Published in The Rising Nepal daily on 18 June 2018.