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Nepal defers pact signing with Chinese firm
The Investment Board Nepal has deferred the process of signing a crucial agreement with a Chinese company, which is all set to invest Rs37 billion in a cement factory in the country, ahead of Prime Minister Sher Bahadur Deuba’s official visit to India.Bibek Subedi
The Investment Board Nepal has deferred the process of signing a crucial agreement with a Chinese company, which is all set to invest Rs37 billion in a cement factory in the country, ahead of Prime Minister Sher Bahadur Deuba’s official visit to India.
Days before the PM’s visit to New Delhi was announced, the IBN had completed all the process required to sign the Project Investment Agreement (PIA) with the Nepal-China joint venture, Hongshi Shivam Cement. The IBN was planning to seal the deal, which would have protected interest of the foreign investor in Nepal, during Chinese Vice Premier Wang Yang’s visit to Kathmandu, which concluded on Thursday. But this could not happen.
Now the IBN is planning to sign the deal on September 3.
Sources at the IBN and the Ministry of Foreign Affairs told the Post that the IBN had deferred the plan to sign the agreement with the Chinese company during the Chinese vice premier’s visit as the government was concerned the issue would be raised during the PM’s meetings with the Indian prime minister and other key Indian political leaders and officials in New Delhi. PM Deuba is visiting India on August 23-27.
This concern was raised at a time when the government has not been able to expedite implementation of the India-funded mega projects such as Arun III and Upper Karnali hydroelectric projects due to the delay in acquisition of forest land.
“If we sign the agreement with Hongshi Cement before PM Deuba’s India visit, New Delhi may think we are deliberately delaying implementation of India-funded projects and giving undue priority to Chinese projects,” multiple sources said. “This could put PM [Deuba] in a difficult position during this visit.”
IBN Spokesperson Uttam Bhakta Wagle, however, did not agree that the deal was delayed because of the PM’s upcoming India visit.
“It was deferred for technical reasons,” he said without elaborating.
The PIA is a contractual document, which the IBN signs with foreign investors once their investment proposal is endorsed by the government. As per the PIA, projects being built through foreign investment will receive similar treatment as domestic projects. They will also get some financial benefits if they are able to generate significant number of jobs for Nepalis. The PIA will also entitle them to certain benefits if they contract out portions of projects to Nepali contractors.
The joint venture is building a cement plant in Nawalparasi at a cost of around Rs37 billion, 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 Cement has already started construction of the factory at Sardi in Nawalparasi district, and is planning to start commercial production by May 2018. The cement factory will have a daily cement production capacity of 6,000 tonnes (120,000 bags). It plans to double output to 12,000 tonnes per day in the next five years.
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.