Maoist faction's protest puts SEZ law in limbo

Although Special Economic Zone (SEZ) has long been acknowledged as one of the major vehicle for luring foreign investment and giving boost to exports, efforts of the industry ministry to enact SEZ Bill have failed even though the same was endorsed by the cabinet three years ago.

Initially, the lack of clarity over social protection and objection of trade union on provisions like ´no extreme forms of strikes´ in the zone had prevented its ratification. Now that trade unions have softened their stance on the bill, MoI was hopeful of getting the bill endorsed by the parliament.

However, its bid to retable the bill in the parliament has hit yet another roadblock. A faction of ruling UCPN (Maoist) has strongly protested it, terming it as an ´anti-national´ document. Maoist Chief Whip Dev Gurung has even warned of stalling the parliament if the MoI tabled it.

“After gathering dust in the parliament for three long years, we had taken steps to reintroduce the bill in the parliament, hoping positive outcome due to changed political context,” said industry minister Anil Kumar Jha.

However, Jha has rolled back his initiative following such strong-worded reaction from Gurung.

The Maoist party´s resistance has come despite Prime Minister Baburam Bhattarai´s clear statement that the bill was crucial to lure some $1 billion worth of foreign investment that he has targeted to achieve in the Investment Year 2012/13. Bhattarai is also the vice-chairman of UCPN (Maoist).

Bhattarai has also cited its enactment as one of his priority works in the Immediate Action Plan (IAP) for Economic Growth and Prosperity. “The bill of SEZ will be immediately approved by the Parliament,” reads the IAP.

Jha said Gurung´s reaction was surprising, mainly as it contravenes with what his own party leader has said.

Gurung, however, said his party has different opinion about the bill. “First, it was prepared by the World Bank. Secondly, it damns labors´ rights and protection of natural resources. It is not acceptable to us,” Gurung stated.

He even ruled out the necessity of SEZ law, arguing that there were already multiple laws in the country to encourage inward flow of foreign investment and exports.
However, officials having knowledge on the contents of the bill, said Gurung´s reaction was based on his naivety. “Obviously he has not studied the bill. Otherwise, he would have known, the bill protects the labor rights and is sensitive to other issues as well. If that was not the case, trade unions won´t have agreed to it,” a senior official at industry ministry said.

Rameshwar Khanal, economic advisor to the PM, agreed with him. “The only difference is that the SEZ bill does not allow workers to halt productions while striking. Otherwise, the labor rights, including collective bargain, are all protected in the bill,” he added.

The latest objection by the UCPN (Maosit), meanwhile, has deferred yet again the chances of early operationalization of already built SEZ and infrastructures, including SEZ in Bhairahawa, for which the government has already spent millions of rupees. It has also put the fate of other proposed SEZs, including those in Birgunj, Panchkhal, Jhapa and Dhangadhi, among others in limbo.

If the government dragged feet on enacting the law, officials stated it would adversely impact the Investment Year as well. “Deferring the long-committed law that pledges minimum basic assurances to investors will only taint our image. In such a situation, how can we push our case strongly to lure foreign investment?” wondered the MoI official.

Investment Board efforts to tap Japanese investment

Investment Board, an investment promotion arm of the government, has approached the Japanese government and investors hoping to attract investments in infrastructure development, mining and agro-businesses in the Investment Year 2012/13.
Radhesh Pant, CEO of the board who visited Japan last week in this connection, said the Japanese investors had shown keen interest to investment in various sectors, including mining and agro-businesses.
“In fact, a team of Government of Japan along with representatives from the private sector is visiting Nepal soon to explore and identify the spaces for investment,” Pant told Republica.
Pant was in Japan last week on invitation of the Japanese government.
During the visit, Pant met with senior government officials, private sector representatives and investors who were interested in investing their money in Nepal.
He briefed them about the new policy changes and priorities of the government, mainly highlighting the improvement of investment climate in the country.
“Japanese investors were keen to invest in areas like mining and minerals, hydropower, infrastructure development, tourism and agribusiness sectors,” Pant said.
With senior Japanese officials, Pant discussed issues like mutual cooperation and bilateral trade. He even requested for the review of Japanese government´s loan facility to Nepal.
“Pant met with Michihiko Kano, Minister of Agriculture, Forestry and Fisheries (MoAFF) of Japan, to discuss areas of mutual cooperation, financial and technical assistance that Japanese government and investors could provide to help Nepal harness its potential,” a statement issued by the board said.
Pant had meetings with representatives from organizations like, Japan External Trade Organization (JETRO), Japan Chamber of Commerce and Industries (JCCI) and Japan Foreign Trade Council (JFTC) among others.
He also interacted with Nepali Diaspora, appealing them to invest more in Nepal.
The government hopes to bring in foreign investment totalling US$ 1 billion during Investment Year 2012/13, and the board has been assigned to help materialize this target.

Over a dozen int'l firms knock IB door for investment

More than a dozen companies from China and India have approached the Investment Board (IB), showing interest to invest in different sectors ranging from hydropower to mining in Nepal.

Some half a dozen Indian companies have expressed strong interest to invest in airport, hydropower and transmission line, disclosed Radesh Pant, CEO of the IB.

Chinese firms approaching the board too have expressed willingness to put their money on long-term projects like hydropower, mining and infrastructure development.

“The companies are in regular discussion with us,” Pant told Republica.

He, however, refused to disclose the name of the companies, saying it would be inappropriate to name them until a final decision is made.

IB, which has been coordinating with the foreign investors in order to lure overseas investment for the upcoming Investment Year 2012/13, has also finalized its structure in order to facilitate overseas investors and deal with their issues.

Pant said the board will have five sub-divisions -- project assessment, investment generation, investor services, policy services and governance.

“Fundamentally, these units have been worked out in order to make IB a long-term professional arm of the government,” said Pant, who has been leading the government´s ambitious plan of attracting foreign investment amounting to $1 billion during the second half of 2011/12.

Pant is confident of achieving the ambitious target provided that there is conducive business environment in the country.

“Once we prepare all the legal frameworks to protect investment, I am sure we will start receiving foreign direct investment (FDI),” he said, further disclosing that investors from other countries like France, US and Japan too have shown interest to invest in Nepal.

Revision of FDI Policy

The government has taken initiatives to revise Foreign Direct Investment and One-Window Policy (FDI) policy 1992 to create a sound legal framework during the Investment Year 2012/13.

Ministry of Industry (MoI) in assistance with the United States Agency for International Development (USAID) has hired a team of experts to review the existing policy.

“We have taken service of a team of experts to get meaningful review of the existing policy,” Anil Kumar Thakur, joint-secretary of MoI, said, adding: “After getting the report, we will make necessary changes in the policy.”

Govt planning to bring in slew of new laws to bolster investment climate

The government is preparing to revise, replace and formulate around half a dozen laws including Industrial Enterprise Act (IEA) to make them in compliance with the Industrial Policy 2010 and offer new favorable legal framework to investors in the Investment Year 2012/13.
The Ministry of Industry (MoI) is working on amendment in IEA 1992 and Company Act 2006, and replacement of Nepal Standard (Certification) Act 1980, tuning them in line with the new Industrial Policy.
Likewise, it is formulating a new Nepal Accreditation Board Act, which will pave the way for establishment of an accreditation authority that will certify quality and standards of Nepali goods and services for exports.
“The existing Acts related to enterprises, establishment of companies and standards were formulated long before the new Industrial Policy. Hence, amendments are being worked out to make them in sync with the new policy,” Joint Secretary at MoI, Yam Kumari Khatiwada, told Republica on Monday.
The new Act on Nepal Accreditation Board, meanwhile, is being formulated as per the long time demand of the private sector.
So far, the ministry has prepared a draft of the revised IEA and circulated it among the stakeholders for consultation. “We will submit it to the Council of Ministers for endorsement once we incorporate the feedbacks received from all concerned,” she said.
Unlike the past, when a new would focus solely to serve the policy, the new amendments would also take into account government´s latest drive to lure more foreign investments, particularly in the upcoming investment year, and incorporate special provisions to make it more investment friendly.
Nepal Standard (Certification) Act would be completely replaced because it was formulated way back in 1980 and has turned obsolete amid changes in the way standards have been defined across the globe. “The new Nepal Standard Act 2012 that will replace the existing Act will help to accelerate promotion of Nepali products in the international market,” Khatiwada stated.
The Ministry has already initiated the process to draft the Act, but it is yet to give it a final shape.
New amendments in the Nepal Company Act 2006 are expected to make the Industrial Policy more functional.
Once new laws are put in place, MoI hopes the country to have a better investment climate. However, they will still not be able to address labor and security related problems that have been driving away the investors.
Moreover, the government will soon set up a new office to deal with Intellectual Property Right (IPR) issues. “A process for this has already begun,” said Khatiwada, elaborating that the office is being set up as per the new IPR policy. The ministry is also leveraging efforts to make effective the policy provision of single-window service for all business activities.