Investment Board Nepal (IBN) and Hongshi Shivam Cement are preparing to sign a project investment agreement (PIA) following the approval of the Nepal-China joint venture company’s foreign direct investment (FDI) proposal.

Currently, IBN is carrying out the final round of negotiations with Hongshi Shivam to finalise the PIA.

The PIA is a ‘marketing document’ to show that Nepal is a FDI-friendly country, according to IBN. The agreement is intended to attract FDI by providing many facilities to potential foreign investors.

FDI projects are entitled to receive equal treatment as domestic projects. They will also receive certain financial benefits if they provide a large number of jobs to Nepali citizens.

Similarly, they will receive benefits for subcontracting out portions of their projects to Nepali contractors.

Foreign investors need to pay certain fees to IBN before signing the PIA. According to IBN Regulations, investors have to pay a pre-negotiation and agreement execution fee of Rs100,000 or 0.2 percent of the project cost, whichever is higher. Investors have to pay 30 percent of the fee before starting final negotiations, and the rest when the PIA is signed.

“The cement factory has agreed to pay 30 percent of the fee for the ongoing negotiations,” said the IBN source. “It will pay the rest when signing the pact.” Once negotiations with the cement company are completed, the PIA template with be sent to the IBN board for its approval. 

Hongshi Shivam Cement has already started construction of the factory at Sardi in Nawalparasi district, and is planning to start production by May 2018. The cement factory will have a daily production capacity of 6,000 tonnes (120,000 bags). It plans to double output to 12,000 tonnes daily in the next five years.

The company has poured Rs36 billion into the project which is the largest Chinese investment in Nepal’s cement industry and the second largest after Nigeria’s Dangote Cement, which entered Nepal with a $550 million foreign direct investment pledge.

Hongshi Shivam’s foray into the domestic market means that its products will replace cement imported from India. The company also plans to export cement produced at its plant to India, Pakistan and Sri Lanka.

However, the government has been moving slowly to build an access road to the project site which is hampering construction of the factory, and it might push back the completion date.

The government had pledged to build a 28-km motorable road from the East-West Highway to the construction site at Sardi. The company has been complaining about the delay.