Govt prepares to enact SEZ bill through ordinance

The government is preparing to enact special economic zone (SEZ) bill -- which was long shelved in parliament due to differences among the political parties over some of its provisions -- through an ordinance.

“We have forwarded the bill to the Ministry of Law and Justice (MoLJ), seeking its clearance,” said Umakant Jha, secretary at the Ministry of Industry (MoI). “Once the MoLJ gives its consent, we will instantly forward it to the cabinet for approval and enact the bill through ordinance,” he told Republica.

The SEZ bill was already endorsed by the government in 2009. However, it failed to get endorsed in parliament as some of the trade unions, particularly the one associated with UCPN (Maoist), criticized the bill for not have provisions to protect the rights of laborers. A faction of the UCPN(Maoist) is still against enactment of the bill.

Among others, the bill mainly upholds three broader principles: incentives to industries, one-spot service and labor flexibility in the zones, which are being developed to give impetus to the country´s export trade.

It also cites that SEZ will be treated as a land wherein other domestic laws related to labor and industries would not be applicable. The bill allows workers to unite and practice collective bargaining, but prohibits them from undertaking activities that affect production and normal operations of industries.

“The workers of industries established in SEZ are not allowed to carry out any activities that would have a negative impact on the industry and its production,” reads the draft of the bill.
In order to address workers´ concerns, the bill provisions better facilities for workers in SEZ than what workers receive outside of the zone. “Autonomous SEZ Authority that will be formed to oversee the zone´s operations and SEZ regulations will determine the extent of workers pay scale, medical and insurance facilities, among others,” reads the bill.

A source at MoI disclosed that the bill also allows entrepreneurs to hire workers on a contract basis.

In order to lure investors in SEZ, the bill promises them with facilities such as duty-free import of raw materials, value added tax (VAT) exemption and waiver of excise duty and other local taxes.

The industries in SEZ have also been offered income tax holiday for five years. “After five years also, they will continue to enjoy 50 percent discount on income tax,” said the source. In order to safeguard investors´ interests, the bill says the industries established at present would continue to enjoy all the facilities, even if later amendments changed the structure and extent of facilities.



MoI proposes basket fund for developing SEZs


The Ministry of Industry (MoI) has proposed setting up a Basket Fund for developing special economic zone (SEZ) in the budget for the upcoming fiscal year 2012/13. 

“We have proposed creation of basket fund so that the state could prioritize, raise allocations and speed up constructions for developing SEZ in different parts of the country,” a high level official at the MoI told Republica.

The MoI pushed for the special fund mainly as the governments so far have been allocating only around a few hundred millions for developing SEZ. For instance, the government in 2011/12 has allocated just Rs 140 million for the purpose, and according to the officials the amount was too less to execute its plan to build such zones in different parts of the country including Panchkhaal, Simara, Jhapa, Kapilvastu, Jumla and Biratnagar, among others.

“The basket fund will be used to construct SEZ,” the official said. However, officials at the Ministry of Finance refused to comment as to how it would resond to MoI´s proposal.

SEZ bill through ordinance: Minister Jha

Minister for Industry Anil Kumar Jha on Monday said the government will enact the Special Economic Zone (SEZ) bill through ordinance before the upcoming session of parliament to address investors´ concerns and promote industries.
“I have already discussed the possibility of enacting SEZ bill through ordinance before the next session of parliament with the prime minister,” said Jha.
Speaking at a program organized to discuss on draft Industrial Enterprise Act (IEA), Jha said the government was prepared to enact the law through ordinance as opposition from a faction of UCPN Maoist forced him to withdraw the bill from regular agenda during the last session of the parliament.
“SEZ bill was the top agenda of the first parliament meeting of last session. But we had to withdraw it after Chief Whip of Maoist Dev Gurung warned his party would protest it strongly and even disrupt proceeding if the bill was added in the official business list of the house,” said Jha.
Jha said the government was holding talks with major political parties to put in place SEZ Act through ordinance. “I am also planning to approach President Ram Baran Yadav in this regard.”
SEZ bill was tabled in the parliament three years ago. Initially, labor unions protested saying it does not protect labor rights. But after trade unions softened their stance, resistance from a faction of Maoist emerged.
Gurung said the bill was against the national interest and would exploit natural resources and labor rights.
Industrialists, meanwhile, requested the government to implement the IEA through ordinance. “As the next session of parliament will begin only after few months, chances of IEA being ratified do not appear anytime soon. It might also face similar dilly dallying,” said Lawmaker and President of Confederation Nepalese Industries Binod Chaudhari said.
He also urged the government to provide all the facilities promised in the new Industrial Policy through upcoming budget for fiscal year 2012/13.
Commenting on the draft IEA which Ministry of Industry circulated for wider consultation, industrialists urged the government to list major manufacturing industries in the Act itself so there were confusion over facilities and incentives they should get.
“The draft should also incorporate a provision for forming Investment Promotion Trust and Technology Development Fund, which are incorporated in the Industrial Policy,” said Hari Bhakta Sharma, vice president of CNI.
In addition to that, entrepreneurs also demanded the government to clearly define small, medium and large scale industries and make the provisions of incentives more specific for them.

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.