Kathmandu, March 8

After failing to attract industrialists to set up factories in the country’s first special economic zone (SEZ), the development committee that oversees the management of SEZs in the country has proposed slashing the rental charge at Bhairahawa SEZ by a whopping 83 per cent.

The amended draft of the Bhairahawa SEZ Operation Standard and Procedure has proposed fixing the rental fee at Rs 25 per square metre per month, significantly lower than the earlier rate of Rs 150 per square metre per month.

However, the proposed rental charge is still one of the highest in South Asia. “The rental charge per square metre per month in the SEZs in other South Asian countries range from two rupees to Rs 19,” admitted Chandika Prasad Bhatta, executive director of SEZ Development Committee. But he is optimistic that the revision of the rental fee will attract investors as they are being provided numerous incentives including rental charge rebate, duty free facility to import raw materials, and corporate tax exemption, among others.

The SEZ Development Committee, through its parent ministry — Ministry of Industry — has submitted the draft of the amendment to the Ministry of Finance for its consent before submitting it to the Cabinet for approval.

SEZ Development Committee has amended the Bhairahawa SEZ Operation Standard and Procedure, 2014, after it received lukewarm response from the private sector in setting up industries there. The Bhairahawa SEZ had called for expression of interest from investors, including foreign investors, after it was inaugurated on November 18, 2014. However, only around a dozen investors showed interest to set up factories there. There are altogether 69 plots in Bhairahawa SEZ.

The government has been developing SEZs to promote export-oriented industries in a bid to attain higher and sustainable growth by boosting exports. But lack of thorough market research, as evidenced in the initial rental charge fixed for Bhairahawa SEZ, could be the stumbling block in the success of such zones.

The private sector had also suggested SEZ Development Committee to bring down the rental charges and lobby for the approval of the SEZ Bill from the parliament to lure investors in SEZ.

“Most investors are in wait-and-see mode also because the proposed SEZ Bill is yet to be endorsed by the Parliament,” said Dinesh Shrestha, vice president of the Federation of Nepalese Chambers of Commerce and Industry.

In a bid to make the SEZs more encompassing, the draft of the amendment has also incorporated additional industries except security printing, arms and ammunition, among others listed in the negative list of the proposed Industrial Enterprises Bill. Earlier, only 17 types of industries were prioritised to set up factories in the Bhairahawa SEZ.

Moreover, the committee has also proposed scrapping the earlier provision requiring all plots to be leased at once and allow the interested industries to set up shop in Bhairahawa SEZ.