Entrepreneurs reluctant to move into Special Economic ZonesLack of interest among entrepreneurs to move their operations into the Special Economic Zones created to facilitate industrial development has put at risk the billions the government has poured into them. The government has brought into operation two Special Economic Zones in Bhairahawa and Simara.
Lack of interest among entrepreneurs to move their operations into the Special Economic Zones created to facilitate industrial development has put at risk the billions the government has poured into them.
The government has brought into operation two Special Economic Zones in Bhairahawa and Simara. Even though both places failed to receive an encouraging response from investors, the government has started the groundwork to construct another five Special Economic Zones in a bid to have one in each of the seven provinces.
The government launched the concept of Special Economic Zone in 2000 after acquiring 55 bighas of land in Bhairahawa. More than Rs850 million has been invested in the zone which contains three building blocks and 68 plots marked for factory units. However, only 20 factories have been set up in the zone.
Chandika Prasad Bhatta, executive director of the Special Economic Zone Authority, said most of the factories established in the Bhairahawa Special Economic Zone manufactured mineral-based products and kitchen utensils. According to him, these factories plan to invest Rs7 billion in total and are providing 3,000 jobs.
The authority has recently completed the construction of a Garment Processing Zone within the Special Economic Zone in Simara. On May 2, it called for applications from prospective industrialists to set up factories in the Garment Processing Zone, but there has been no takers more than a month after the notice was issued, said Bhatta.
The government invested Rs2.5 billion to construct the Garment Processing Zone that occupies 163 bighas out of the 843 bighas allocated for the Special Economic Zone in Simara, Bara. Entrepreneurs can rent plots ranging in area from 5,000 square metres to 12,000 square metres to set up production plants. The zone has sewerage facilities and regular supply of water and electricity. The Garment Processing Zone is larger than the Special Economic Zone in Bhairahawa. “We are building a gasoline station in the Garment Processing Zone while the Nepal Electricity Authority has also started the groundwork to install a 132 kV substation there to supply electricity to the factories there,” said Bhatta.
The Special Economic Zone Authority has slashed the rent, but readymade garment manufacturers are complaining that the rent is still higher than outside the Special Economic Zone.
Chandi Prasad Aryal, president of the Garment Association of Nepal, said entrepreneurs would come to the Special Economic Zone to operate their businesses only if the authority reduced the rent. “Besides, the authority should pay the cost of relocating the machinery from the current site,” said Aryal.
Aryal also sought assistance for small enterprises related to embroidery and dyeing to reduce the operating costs of garment factories. He urged the authority to provide one-stop service inside the Special Economic Zone to attract investors. The government established the Garment Processing Zone with the objective of reviving exports of Nepali readymade clothes which plunged in the last one and a half decades following the termination of the multi-fibre agreement by the US.
As per the association, there are around 50 garment factories currently in operation, a sharp fall from the 1,200 factories during the industry’s heyday. While the Special Economic Zones in Bhairahawa and Simara are having a hard time finding tenants, the government has moved to open similar zones in Jumla, Panchkhal, Gorkha, Dhangadhi and Biratnagar.
According to Bhatta, they have started the construction of Special Economic Zones in Jumla and Panchkhal, completed a detailed engineering study of the Biratnagar Special Economic Zone and conducted feasibility studies for zones in Gorkha and Dhangadhi. Trade analyst and former commerce secretary Purushottam Ojha said the government needed to offer product specific programmes through the Special Economic Zones. “In addition, the government needs to bridge the gap between market access and value chain to attract potential entrepreneurs to set up factories in the Special Economic Zones,” said Ojha.
Bimal Wagle, former chairman of the Public Enterprises Board, said the government should assess the possible rate of return on investments in the Special Economic Zones before pouring money into them. “Issues such as legal harmony, relocation costs, coordination among stakeholders and suitable infrastructures should be addressed properly to ensure a rewarding result from the government investment in Special Economic Zones,” said Wagle.