Special Economic Zones to be run by development committee
KATHMANDU, FEB 06 -
The government has decided to run Special Economic Zone (SEZ) through a SEZ Development Committee after its attempt to introduce an ordinance failed. The Cabinet has okayed the order to form the development committee, and its first meeting is scheduled to be held on Wednesday.
The SEZ ordinance sent to President Ram Baran Yadav has not yet been approved. Since introducing a SEZ Act is not possible in the absence of Parliament, the Ministry of Industry is going ahead by forming the development committee. Meanwhile, construction of an SEZ in Bhairahawa has reached the final stages. “Our several attempts to get the SEZ Act passed through ordinance bore no results,” said Industry Minister Anil Kumar Jha. “Forming the SEZ through a development committee is the only option.”
However, the industrial community is not enthusiastic with the proposed model as the legal provision under the development committee would not be strong enough. The committee will only be able to recommend what facilities should be provided to the factories located in SEZs.
As per the proposed act, no other laws will be imposed on transactions carried out within SEZs. The act has also mentioned providing special treatment to factories inside SEZs. According to the proposed act, business transactions carried out in SEZs and tariffs, fees and taxes on goods and services produced there shall be given special treatment. It has also barred nationalization of factories inside SEZs.
The proposed act also has a provision that industries in SEZs will be exempted from income tax for five years from the date of commencement and a 50 percent exemption on the tax will be given for the next five years. “If an industry uses 60 percent domestic raw materials, the 50 percent discount on income tax will be extended for 10 years,” states the proposed act.
Also, no income tax will be levied on dividends distributed by industries inside SEZs for the first five years. Industrialist Manish Agrawal said if the government forms SEZs without ensuring the ‘essences’ of SEZs, there will be no difference for the private sector in having and not having SEZs.
Stating that SEZs are sought for some of the basic provisions like regular energy supply, labour flexibility and tax incentive, among others, Agrawal added, “There is no use of a SEZ that cannot ensure industrial productivity and competitiveness.”
Minister Jha, however, said that even if SEZs come into operation under the development committee, the ministry will ensure all necessary facilities to be provided to the industries there. He said that the government ’s first move would be to bring SEZs into operation and later ensure the necessary facilities by introducing an SEZ Act through Parliament.
Ministry officials said that the development committee would be automatically replaced by the SEZ Act after the proposed act is endorsed by Parliament and then the industrial sector would receive all the facilities accordingly.
Minister Jha said that his ministry would make every effort to ensure minimum basic facilities for the industries operating inside SEZs. “Moreover, it will take some years for any industry to complete construction,” he added. “It’s possible that the SEZ Bill might be approved by then.”
Industry secretary Krishna Gyanwali said that though the development committee would not have the power to provide facilities directly, it will have the authority to recommend them. “The Finance Ministry has also agreed to fulfil the recommendations made by the development committee,” he said. He added that the ministry would appoint an executive director for the committee. “Till then, a joint secretary from the ministry will act as executive director.”
The committee will consist of representatives from the ministries of Energy, Commerce and Supplies, Home and Labour and the Investment Board, among others.
Source: The Kathmandu Post
