Motrex Signs Agreement with IBN to Establish Hyundai and KIA Vehicle Assembly Plants

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Motrex Signs Agreement with IBN to Establish Hyundai and KIA Vehicle Assembly Plants

December 12: The Investment Board Nepal (IBN) has reached an initial agreement with Korean company Motrex to allow the latter to assemble vehicles in Nepal. CEO of IBN Maha Prasad Adhikari and CEO of Motrex Lee Hyung-hwan signed the Project Investment Agreement (PIA) to this effect amid a function in the capital on Wednesday, December 11.

As per the agreement, the company will set up a vehicle assembling plant with an investment of USD 105 million at the Motipur-based industrial estate in Butwal.

Before that, investment boards of Nepal and South Korea will have to approve the  initial agreement signed between IBN and Motrex. Similarly, the Korean company is also required to prepare the environment impact assessment (EIA) report within seven months after signing the final agreement to establish the plant after which Motrex will set up the plant within three years and start assembling vehicles in Nepal, according to IBN CEO Adhikari. As per the proposal submitted by Motrex, the company will assemble Hyundai and KIA four-wheelers in Nepal. 

The company had submitted its proposal to establish the vehicle assembling factory in Nepal to the Investment Board on February 8, 2019. A meeting of the board headed by its chairman and Prime Minister KP Sharma Oli had approved the proposal on March 15, 2019.

The company had then put forward its terms and conditions demanding that the government should not allow any other companies to assemble vehicles in Nepal for the next seven years. Another demand of the company was to exempt it from paying customs duty and income tax.  The process of establishing the plant was halted as the board did not agree to these demands.

Nepal Automobile Dealers Association (NADA) had raised strong objection to the terms and conditions set by the Korean company. IBN CEO Adhikari said that the agreement does not include provision to allow the company’s monopoly for seven years. He further said that the board has also not agreed to the demand of the company not to allow any other company to set up vehicle assembling plant in Nepal after seven years with an investment less than Rs 12 billion.

However, the company has not budged from its stance of 100 percent exemption from tax and customs duty.  But no agreement has been reached in this regard as well.

“The law is not clear about vehicle assembling plants. So we haven’t taken any decision on income tax and customs duty yet,” added Adhikari.

The issue will be addressed by the Financial Bill in the upcoming fiscal year.


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