With the government's decision to develop two Special Economic Zones (SEZs) under the Public-Private Partnership (PPP) model, Chinese investors have expressed interest in these projects.

The Cabinet has approved the development of the Simara SEZ (Blocks B and C) and the Panchkhal SEZ under the PPP model, with an estimated total cost of Rs 12.25 billion. The SEZ Authority has drafted guidelines for implementing the PPP model and submitted them to various government agencies for review. Additionally, the Authority is preparing to issue an Expression of Interest (EOI) to attract potential investors. Amid these preparations, some Chinese investors have already initiated discussions regarding possible investments.

"Both Chinese and domestic investors have approached us for discussions on potential investments," said Chhatra Bahadur Katuwal, Executive Director of the SEZ Authority. "For the Panchkhal SEZ, about two-thirds of the interested investors are Chinese, and discussions are ongoing."

According to Katuwal, Chinese investors are exploring opportunities in agriculture, electric vehicles, herbal products, and SEZ infrastructure development, with a particular focus on the Panchkhal SEZ. The government has designated this SEZ for industries such as ready-made garments, bamboo products, electrical goods, leather goods, animal product processing, noodles, plastic, and dairy products, with plans to develop 56 plots for industrial use.

Chinese investors have also shown interest in Simara SEZ’s Blocks B and C. However, they have approached the Authority individually rather than as a group. Katuwal declined to disclose the names of the interested Chinese companies but noted that some have proposed setting up a bone mill in the Simara SEZ. The government has identified potential industries for this SEZ, including animal feed, cement, yarn, textiles, fruit and vegetable processing, lentil mills, noodles, herbal products, and dairy industries. A total of 172 industrial plots are planned for development in this zone.

Some Nepali industrialists have also expressed interest in the PPP model, Katuwal said. "We prepared the draft of directive as soon as the PPP model was proposed for SEZs. Once approved, we will issue an EOI and formally invite domestic and foreign investors."

He further emphasized that the private sector will play a key role in the development, operation, and management of SEZ infrastructure. After a prolonged delay since the implementation of the Special Economic Zones Act, the government has now taken steps to attract private investment in SEZs. Currently, the government is responsible for developing basic infrastructure to support industrial operations within these zones.

Under the PPP model, SEZs will be operated by the private sector for 30 years, with a provision for a 10-year extension. A Cabinet meeting on January 20 approved the development of Blocks B and C of the Simara SEZ under this model. The development will take place on government-provided land, with private investment in infrastructure, as per Section 6 of the Special Economic Zone Act, 2016, and Clause (a) of Rule 3 of the Special Economic Zone Regulations, 2018. Earlier, on December 31, the Cabinet had approved the development of the Panchkhal SEZ under the same model.

Section 6 of the Act states that "the establishment and operation of a SEZ may be carried out by the private sector." The legal framework allows private entities to establish, operate, manage, and develop SEZ infrastructure.

The estimated cost of Blocks B and C of the Simara SEZ is Rs 7.21 billion. The project, spanning 178.5 bighas, will be developed under the PPP model. Similarly, the Panchkhal SEZ, covering 100 ropanis, is estimated to cost Rs 5.04 billion.

The Panchkhal SEZ was also showcased at the third investment summit held in April 2022. Rajesh Kumar Agrawal, President of the Confederation of Nepalese Industries (CNI), said that since last year, the organization has been advocating for PPP implementation not only in SEZs but also in other industrial zones proposed by the government.

Agrawal stressed that merely allocating land will not ensure the success of SEZs and industrial zones. "Investors will only come once the necessary infrastructure is in place. Therefore, private sector participation must be emphasized. India has also facilitated private sector involvement in SEZs," he noted.

He further highlighted that while SEZs have land, environmental approvals, and infrastructure investments, their success has been limited. "SEZs should not function merely as rent-collecting entities. The government’s decision to implement the PPP model is a positive step," he said. "Bringing in operators with international experience and expertise, along with providing necessary facilities, would be beneficial."

The government launched the SEZ project to promote export-oriented industries and has already made the ‘A’ blocks of Bhairahawa and Simara operational. It has been developing SEZ infrastructure and inviting industrialists through public notices to establish and operate industries. Once infrastructure is in place, industrialists can acquire plots and set up industries as per the prescribed process.