Kafkaesque bureaucracy ruins industrial estateOnly 25 of the 69 plots at Nepal's first special economic zone in Bhairahawa have been utilised as there are no takers for the rest.
Prakash Darshan of Gongabu, Kathmandu returned from Australia with an MBA degree under his arm and a plan to open an export-oriented factory in his head. He had chosen Nepal’s first special economic zone (SEZ) in Bhairahawa as the site for his project. But after getting the runaround from the SEZ bureaucracy, he quit in frustration.
"The SEZ was actually teasing us by promising big schemes to promote organised trade. After two years of struggling to open a factory, I gave up,” said Darshan.
Prashant Agrawal, proprietor of Tirupati Metal Industries who is preparing to set up a Rs500-million factory in the SEZ, has hit a wall. He has not received the facilities promised by the SEZ. Agrawal is now regretting his decision to open a factory inside the estate.
“The SEZ administration is not taking care of the entrepreneurs who are facing various problems to set up their factories. I too did not get any of the services promised by the SEZ,” he told the Post. “The staff at the SEZ are not responding to us. Entrepreneurs are forced to go to Kathmandu to sort out tiny things."
Agrawal planned to export goods worth Rs220 million annually from the SEZ. He had to travel to Kathmandu and stay there for three months just to register the company. “It was possible to register the factory within three months after I took the issue to the Industry Ministry.”
The much-hyped Bhairahawa SEZ was built in 2003, and its administrative building was inaugurated in November 2014, that is, a full 11 years after construction started, by the 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 had claimed that construction work would be completed by the last fiscal year which ended mid-July.
The government built Nepal’s first special economic zone in Bhairahawa to attract large investments and generate economic impact beyond their confines; but seven years after estate was set up, it has precious little to show for the effort.
The country's first export-oriented SEZ, which opened with a grandiose objective to attract dozens of factories to contribute to the country's manufacturing and industrial sector, has now turned into a wildlife habitat.
The blacktopped roads have crumbled. The premises are now covered with bushes and trees where wild animals like foxes, wild boar, blue bull and snakes take shelter.
People are scared to walk around the SEZ during the day time, according to entrepreneurs. The high-tension electrical wires strung inside the SEZ have loosened, increasing the risk of fire even when there is a normal wind.
Due to drainage problems, floods and inundation are normal occurrences during the monsoon. “The building structures have become dilapidated. No one is taking care of the premises,” they said, adding that most of the structures collapsed before the facility came into full operation.
Annually, a big chunk of the budget has been spent in the name of maintenance for the last seven years. The trend of ministers visiting the premises every year and making lofty promises has not stopped. The estate is spread over 52 bighas and contains 69 industrial plots ranging in area from 1,400 to 3,700 square metres.
"Entrepreneurs come to the SEZ to set up factories, but we can't do much. We can't say anything as we have little information," said Nira Bhattarai, a computer operator at the SEZ office. "We usually tell them to come back after the SEZ rental bids are opened.”
According to Bhattarai, a horde of Indian and Nepali investors have shown interest in setting up factories to produce vegetable ghee, garments, organic and herbal products, processed foods, plastic utensils and metals. There is no presence of any higher authority or employee at the SEZ.
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. Until the regulations are amended, it remains unclear what kind of factories will be allowed to operate inside the zone.
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 have not appeared yet.
According to Agrawal, the SEZ Act is also vague. “Entrepreneurs have been facing difficulties as there is no coordination between the Ministry of Finance and the Customs Office regarding the services mentioned in the SEZ Act.”
“SEZ officials are not working according to their responsibilities. The SEZ Act does not say that customs duty will be charged on goods imported for the establishment of factories inside the SEZ, but it is included in the customs rules," said Agrawal.
He said he spent Rs1 million on earth-filling work to make a way to reach his factory site.” If the infrastructure has to be built by the entrepreneurs themselves, why should the SEZ charge money?" he asked.
The SEZ is currently headless. It has been two years since the executive director Chandika Bhatta left, and nobody has been appointed to take his place.
Lavraj Joshi has been given the responsibility of spokesperson to listen to the grievances of the entrepreneurs. But there are complaints that he does not even pick up the phone.
"No one picks up the phone when there is a problem inside the SEZ," said Satish Kumar Sharma, assistant general manager of Shakti Minerals, the first factory to be set up in the Bhairahawa SEZ. "We are now regretting setting up a factory here in the hope of getting facilities," he said. “It would have been much better and easier to run the factory by leasing private land.”
As per the SEZ objectives, there should be a provision of one-stop service from registration to production and export. “But that’s a distant dream for the operators inside the SEZ,” said Agrawal.
Even though 10-12 CCTV cameras have been installed inside the SEZ, there is no staff to monitor them.
Sharma said that production has to be stopped due to power cuts every half an hour, and goods worth millions get destroyed due to intermittent voltage surges.
“There is no responsible official who can take care of things,” Sharma said. "We have to manage security for the factory, keep the internet connection running, and look after road management and other things by ourselves," he said.
Earlier, five companies had cancelled their contracts citing delays in SEZ operations.
"I had to cancel the agreement to set up a factory inside the SEZ as I came to Kathmandu many times carrying files to get them approved, but it did not happen,” said Istiaq Ahmed, director of Nano Herbal.
He said that government officials kept him going back and forth by saying that he lacked this or that paperwork.
According to the SEZ authority, only 25 out of the 69 plots allotted for factories have been utilised. The rest lie vacant as no takers have come forward.