Bhairahawa special economic zone lies forlorn and emptyThe export-oriented enclave remains semi completed even though many ministers have come and gone.
Nepal established its first special economic zone in Bhairahawa nearly two decades ago, but the signature initiative aimed at promoting exports does not seem to have been able to impress investors.
There are few takers for the industrial plots at the export-oriented enclave, and the estate lies semi completed even though many ministers have come and gone in these years.
The much-hyped Bhairahawa special economic zone was built in 2003 and its administrative building was inaugurated in November 2014, that is, a full 11 years after construction started, by then deputy prime minister and home minister Bam Dev Gautam and industry minister Mahesh Basnet.
In 2017, the then industry minister Nabindra Raj Joshi inaugurated the facility for the second time.
Nearly two decades on, officials at the special economic zone claimed that construction work would be completed by this fiscal year which ends mid-July.
Proprietor of Shakti Minerals, Deepak Kumar Jha, who set up the first factory in the special economic zone, said that investors had not been provided the facilities promised.
"The operation law of the zone says that customs procedures will be completed within the premises, but it has not happened,” he said. “The main problem is the intermittent power cuts. I never thought that the special economic zone would have such a facility.”
According to Jha, no other tariff is levied on cargo vehicles arriving from India within 72 hours after paying customs duty. There is no charge for Indian vehicles coming to load goods at the customs premises. However, in the special economic zone, which gives priority to export-oriented products, customs duty of Rs1,700 per vehicle per day is levied on cargo vehicles going to India.
"I've been talking about the issue for two years and wrote an application as well," he said. “But it fell on deaf ears.”
Jha is not the only one with complaints. As the government has not been able to provide the required facility for years, some businessmen interested in setting up factories in the zone are in a 'wait and watch' mood.
Others have cancelled their agreements to operate plants complaining that even the minimum infrastructure is not available.
The zone lacks even basic infrastructure like electricity and water. The special economic zone authority has not yet been able to provide services to entrepreneurs through a one-door system. Entrepreneurs say the rules stated in the customs procedure and the zone conflict with each other. The zone authority has not been able to provide them facilities.
The special zone in Bhairahawa is spread over 52 bighas, and contains 69 industrial plots ranging in area from 1,400 to 3,700 square metres.
Currently, three plants are fully operational and six are under construction.
Shakti Minerals, Brilliant Lights and Bistar Global operating inside the estate have exported products worth Rs206.1 million to India in the first six months of the current fiscal year.
These three companies supplied goods valued at Rs72.8 million to the domestic market in the same period, said Arjun Pandey, engineer at Bhairahawa special economic zone.
According to the authority, only 22 out of the 69 plots allotted for industry have been utilised. Agreements to set up 22-23 factories have been signed, but construction has not started. Other plots lie vacant as no takers have come forward.
The Nepal Electricity Authority has been saying for years that the tender process for the construction of a substation inside the zone has reached the final stage and that other infrastructures are fully operational, but so far nothing has happened.
The budget allocated for the construction of the substation has been frozen for three consecutive fiscal years. As work to build the substation has not started, the possibility of the substation being completed this year too seems farfetched, traders say.
The government has not been able to provide services to industrialists as per the law, and it has not even drawn up the necessary rules and regulations.
The Special Economic Zones Act was amended two years ago, but the regulations have not been changed accordingly. The process of amending the regulations is ongoing, and it remains unclear what kind of factories will be allowed to operate inside the zone until they are completed.
Balram Rijal, executive director of the special economic zone who is also the joint secretary at the Ministry of Industry, Commerce and Supplies, said that the special zone would be revived as they have expedited the process by coordinating with all related agencies.
"In 20 years' time, a child will have become a young person, but the special economic zone in Bhairahawa has still not come into full operation,” he said. “There are complaints that the infrastructure has been overgrown with weeds, and that is true.”
He said the board of the special economic zone had passed a proposal to amend the regulations and sent it to the Ministry of Industry. "After receiving the consent from the Law and Finance ministries, we will table it at the cabinet for its approval."
He said that a notice had been published five days ago for entrepreneurs who have not started constructing their factories even after signing the agreement. For new factories, a notice will be issued within mid-March. Rijal added that they would also study the reasons why entrepreneurs are not starting the construction work even after signing the agreement.
He said that the construction work on the remaining physical infrastructure at the Bhairahawa special economic zone had started, and that a tender for the construction of the power substation had been prepared by the consultant and that it would be issued in a few days. "Everything will move forward by the end of this year," he said.
Five companies have cancelled their agreements to build factories citing delays in the operation of the special economic zone operation. Siddhartha Group of Industries, Sugam Nano Herbal and Numtal Industries are among the five companies.
Entrepreneurs have complained that 24-hour electricity supply, one-stop service system, initial environmental impact assessment, customs, bank, insurance, tax and other infrastructure that should be available inside the special economic zone are not available yet.
"I have decided to cancel the agreement after months as the government could not assure facilities inside the zone," said Istiaq Ahmed, proprietor of Nano Herbal.
Rajesh Agrawal, managing director of the Siddhartha Group of Industries, said that he cancelled the agreement as the operation of the special facility got delayed for years. “Still, the special zone has a problem with electricity.”