Econ-ity » July 21, 2014

Daily Archives: July 21, 2014

‘Special’ no more?

SEZIndustrial growth, has, for long been seen as a premise for development in Nepal. While many among us have shown concerns over the state of industrial relations in the country and the not-so-strong-hold of law over issues, the idea that once made it to the headlines and now watches from the sidelines has been the formation of Special Economic Zones (SEZs). There was a time when recommendations for the betterment of industries in the country resounded with the proposition of SEZs. Totally commercial areas, especially established for the promotion of foreign trade, SEZs are meant to have more liberal economic laws in comparison to the laws of the land. Specifically delineated enclaves treated as foreign territory for the purpose of industrial, service and trade operations, SEZs come with features like relaxation in customs duties, a more liberal regime in respect to other levies, foreign investments and other transactions. Overall, it provides for special tax subsidies, fully facilitated buildings and physical infrastructures with all necessary services, necessary procedural service systems through a one door system, establishment of an export oriented industry and bringing in of FDI and modern appropriate production technology.

Keeping this and the endless recommendations in mind, the Government of Nepal (GoN) adopted the concept of Special Economic Zone (SEZ) to attract foreign and national investments for the establishment of industrial and business units. It formed Special Economic Zone Project (SEZP) on 2060/10/15 under Ministry of Industry, Commerce and Supply (MOICS) to formulate laws, rules and regulation, implement planning, design and construction of Special Economic Zones throughout Nepal. Special Economic Zone Ordinance-2005 and related rules were also formulated in accordance. The Ministry of Industry has also identified 10 areas to be developed as Special Economic Zone.

Said to be the first one, SEZ in Bhairahawa initially brought much hope to the industrialists. It was supposed to be have been completed by February, 2014. Alas, it hasn’t been. The construction in Bhairahawa is in a limbo after the contractor refused to complete it citing that the project has yet to clear out the payment worth NRs. 20 million for the works already finished. Looks like even ‘special’ zones are forgotten with time in this country.

And then there is the bill on SEZ, long under consideration. The government last year had decided to operate SEZ issuing a formation order after efforts to formulate an act had failed. The bill was opposed by the ruling party when the then government had tabled it in the parliament in 2008. The bill includes provisions like ban on workers inside SEZ to get into politics, and strikes, mass meetings, and working as a cadre of any party, and will implement the system of No Work No Pay.  This adds to the already existent financial burden.

The delay in the implementation of the project, whatever the endless reasons are, has meant much despair to the industrialists. For now, the SEZs seem far from meeting their three-fold objectives of attracting FDI, increasing exports and accelerating the country’s economic growth; those seem secondary—they better be set up first. Or before long, like everything else, they won’t be the priority anymore

Anita Krishnan

About Anita Krishnan

Krishnan holds dual degrees--in law and sociology. Currently, she works as a Research Associate at Samriddhi, The Prosperity Foundation.

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