Nepal considers allowing foreign investors to establish SEZ under joint venture arrangement

KATHMANDU, June 13 (Xinhua) — The Nepali government is considering allowing foreign investors to establish Special Economic Zones (SEZs) in the country under joint venture arrangement, a senior official of the Industry Ministry said.

Nepal’s SEZ Act introduced in August 2016 has opened the door for foreign direct investment for the development of SEZ in the country with the provision that such zone could be established under public-private partnership as well as sole investment of private sector only.

“We have made provision in the draft of the regulation under SEZ Act that foreign investors could join hands with Nepali investors to establish SEZ in the country under joint venture arrangement,” Purusottam Nepal, spokesperson of the Ministry of Industry told Xinhua on Monday.

The draft regulation has been sent to the Law Ministry for its inputs. Once the regulation comes into effect, it clears any ambiguity in the act and helps the implementation of it.

A month after SEZ Act was introduced, Ping An Insurance (Group) of China in partnership with Lhasa SEZ had sought permission to conduct feasibility study of potential areas where a SEZ could be established and run, according to SEZ Development Committee, a government office overseeing the SEZ affairs.

Chinese firms had proposed to explore the areas in Nuwakot and Kavrepalanchowk districts in central Nepal as well as other potential areas.

It was the first time that any foreign investor showed interest to develop SEZ in Nepal, according to Chandika Prasad Bhatta, executive director of SEZ Development Committee.

“Lately, there is a communication gap with these Chinese investors because we had told them to inquire us after the SEZ regulation is introduced here,” Bhatta told Xinhua on Tuesday.

According to SEZ Committee, no other foreign investor has so far showed interest to develop SEZ here. Nepal government is preparing to develop SEZ in 17 locations in different parts of the country. But the infrastructure has only been developed in a single SEZ in Bhairahawa, a south western city of Nepal, so far.

According to SEZ Committee, it is now in the process of giving approval to 19 domestic industries to set up their factories inside Bhairahawa-based SEZ.

Nepal specifically aims to attract export industries inside SEZs and more foreign investment. For this, the SEZ Act has also offered several incentives.

The act has made provision of full income tax exemption for five years for the industries operating inside the SEZ. The industries that use at least 60 percent domestic raw materials will get 50 percent tax exemption for additional 10 years while others will get additional five-year tax exemption.

The law has also banned workers from holding any form of protests that could affect the production of the factories in the zone.

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