Chinese firm to set up $140m cement factoryThe Investment Board Nepal (IBN) has started laying the groundwork to seal project investment agreement (PIA) with another Chinese cement manufacturer, which is planning to invest $140 million in the country.
The Investment Board Nepal (IBN) has started laying the groundwork to seal project investment agreement (PIA) with another Chinese cement manufacturer, which is planning to invest $140 million in the country. The move comes three months after the IBN entered into PIA with Hongshi-Shivam Cement, a Nepal-China joint venture, which will be investing $359.2 million in Nepal.
The representatives of China-led Huaxin Cement Nepal Private Limited, which is building a new cement factory in Nepal, had an informal meeting with IBN officials on Monday, during which few documents were shared.
“We have already started informal talks with the Chinese company on signing of the PIA,” said a highly-placed source at the IBN. “The formal negotiations on PIA will begin after the Chinese investor pays a pre-negotiation and agreement execution fee of 0.2 percent of the project cost.”
The PIA is an agreement foreign investors need to sign with the IBN to develop private projects in Nepal. According to the IBN, it is a ‘marketing document’ to show that Nepal is a foreign direct investment (FDI)-friendly country. Once the PIA is signed, foreign investors will be entitled to various facilities from the state. The PIA also protects the interest of foreign investors in Nepal and provides assurance for equal treatment among companies established with foreign and domestic capital.
The Chinese venture had obtained permission from the IBN to bring in foreign investment in January 2016. Since then, it has registered the firm at the Office of the Company Registrar. It intends to register the company at the Department of Industry (DoI) soon.
“Registration at the DoI will enable the foreign investor to bring in investment from abroad,” said the IBN source, adding, “We are waiting for the DoI registration process to conclude, because this will allow the company to transfer funds required to pay pre-negotiation and agreement execution fee.”
The IBN is planning to conclude PIA negotiations with Huaxin within December. “We have already signed PIA with Hongshi-Shivam and can use the document as a template. Therefore, it won’t take long to conclude the deal,” said the source. “Also, the Chinese company is very eager to sign the agreement. During informal talks with us, they have said they want to sign the PIA as soon as possible.”
The IBN, in September, signed the first ever PIA with Hongshi Shivam Cement, paving the way for investment of $359.2 million, the biggest foreign investment in the country’s manufacturing sector so far. 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 production capacity of 6,000 tonnes (120,000 bags) of cement. It plans to double the output to 12,000 tonnes per day in the next five years.