Kathmandu, May 19

The government has signed a memorandum of understanding (MoU) with China to construct a cross-border Special Economic Zone (SEZ) to facilitate trade and investment between the two countries.

An agreement to this effect was signed between the governments of the two nations during the recent visit made by Finance Minister Krishna Bahadur Mahara to the northern neighbour.

Following this agreement, the Ministry of Industry (MoI) has started necessary homework to capitalise on the agreement. “Development of SEZ plays a substantial role to uplift industrial sector of the country and promote exports,” Industry Minister Nabindra Raj Joshi said, adding that MoI will expedite the process to construct a joint-venture SEZ with China.

Chandika Bhatta, executive director of the SEZ Development Committee, informed that a Nepal-China joint committee would be formed to implement the project very soon.

“MoI is yet to direct SEZ Development Committee to implement the cross-border SEZ project with China. As soon as we receive MoI’s direction, we will start implementing the project,” Bhatta said.

According to him, the yet-to-be-formed joint committee will prepare the draft regarding the operation modality and business modality of the cross-border SEZ with China.

“After discussions with both the Nepali and Chinese governments, the committee will recommend SEZ Development Committee on the total bilateral investment required for the cross-border SEZ and the share structure of the two nations,” Bhatta added.

However, MoI officials said that such cross-border SEZ will have majority share of the Nepali government.

Earlier in December, the government had sought support from India and China to construct modern SEZs in the country. However, India has not responded to the assistance sought by Nepal in this regard.

Though the SEZ Act has opened the door for the private sector to invest in SEZ, the government sought support from India and China after domestic companies seemed reluctant to invest in setting up SEZ. Despite this provision, domestic firms had shown interest only to set up industries within the SEZ that the government has constructed.

It is estimated that construction of a normal SEZ requires almost Rs seven to eight billion while construction of a modern SEZ requires more than Rs 10 billion.

According to Bhatta, the cross-border SEZ will be constructed as per modern standards and facilities.

The government, in recent times, has been focusing on developing SEZs across the country. While MoI has already finalised the locations in seven different provinces where SEZ will be developed, the government plans to set up 14 SEZs across the country in the long run.

Industries are attracted towards SEZ as government offers various facilities for factories set up within the zone. However, construction of factories inside Bhairahawa SEZ — the first SEZ of Nepal — is yet to begin. The government has already authorised 22 domestic firms to build various factories inside Bhairahawa SEZ.