The government has been deluged with applications from potential investors to establish factories inside Bhairahawa special economic zone (SEZ) after it slashed the rent by half.

Investors also saw their prospects brighten following the completion of a new international airport in Bhairahawa, which is expected to energise the local economy, officials said.

Gautam Buddha International Airport is slated to open on May 16 coinciding with the holiday of Buddha Purnima.

Because of the reduced rental fees and the modern airport, hopeful investors have suddenly become interested in setting up plants in the SEZ, which lay almost deserted since it was built two decades ago, officials said.

The SEZ was established with the objective of boosting exports, and companies receive varied privileges and streamlined services. Bhairahawa SEZ contains 69 industrial plots ranging in size from 1,400 to 3,700 square metres. Among them, 45 plots have remained unsold since the beginning.

“Since we announced the reduction in the rental fee, we have received 55 applications from investors to open factories,” said Chandika Prasad Bhatta, executive director of the Special Economic Zone Authority.

Their combined investment commitment is over Rs7 billion, and they will create 2,000 jobs, according to Bhatta.

Potential entrepreneurs did not seem to be impressed by the facilities promised at the industrial estate, and vast tracts have lain empty for years. The SEZ is known more for its vacant lots than humming manufacturing plants.

On February 27, the Special Economic Zone Authority invited proposals from would-be investors to establish factories in Block A of Bhairahawa SEZ and Simara SEZ. The deadline to submit applications ended on March 14.

Gautam Buddha International Airport in Bhairahawa is Nepal's second international gateway after Kathmandu. It was 10 years in the making.

Spread over 533 hectares, the airport has a 15,169 square-metre terminal building with a capacity to serve nearly a million passengers a year. Its 3,000-metre runway is long enough to handle large commercial jets.

Bhairahawa is poised to transform itself into one of Nepal’s largest tourism and industrial hubs with investors and the government pouring billions into infrastructure development.

The once sleepy market town in the Tarai plains was thrust onto the international stage after becoming the gateway to the pilgrimage destination of Lumbini. Proliferating factories and a rapidly spreading transportation network have turned Bhairahawa into an economic powerhouse.

In a bid to facilitate trade and promote exports, the Special Economic Zone Authority has unveiled several new strategies, including a reduction of the rental fees.

Companies are required to export 60 percent of their output from the second year of establishment under the Special Economic Zone Act, but the authority plans to have a progressive system, according to Bhatta.

“We are planning to set the export requirement at 20 percent in the second year, 40 percent in the third year and 60 percent in the fourth year to help manufacturers find buyers. We will be amending the Special Economic Zone Act 2016 soon,” said Bhatta.

"The decision to reduce the rental fees at the SEZ will be made official by the Special Economic Zone Board by mid-April."

Among the 54 applications, the highest investment pledge of Rs1.25 billion has been made by a company that wants to manufacture electric appliances, according to Bhatta.

“We have improved the infrastructure, and internal electrification work has been completed which had been creating problems,” Bhatta said.

Previously, many entrepreneurs had cancelled their agreements to operate plants, complaining that even the minimum infrastructure was not available due to the poor coordination between the zone authority and other government bodies, resulting in problems and hassles for those desiring to open factories inside the zone.

The government had launched several measures to attract businesses inside the zone by giving them full or partial discounts on customs duty on raw materials and income tax. Even then, the facility had not been able to attract investors.

As the number of applications exceeds the number of available plots, Bhatta said applicants would be selected on the basis of investment, creation of employment and export share. The applicants will be selected within two weeks, he said.

"With the new companies in the economic zone, its production will swell to around Rs10.50 billion annually," Bhatta said.

The Bhairahawa SEZ was built in 2003 and its administrative building was inaugurated in November 2014, that is, a full 11 years after construction started.

Factories making herbal products, garment, carpet, glassware, mineral processing, packaged food products like oatmeal, sugar, creamer and coffee mate, disposable spoon, aluminium foil box and toilet paper, among others, are planned to be opened in the SEZ, according to Bhatta.

"The SEZ is also in discussion with banks to provide project loans to investors with a clause that the infrastructure will be their collateral," Bhatta said. "All the proposed investments are from Nepali investors."

The Special Economic Zone Authority is under the Ministry of Industry, Commerce and Supplies.