Bhairahwa and Simara SEZ Likely to Attract Industries after Amending Laws

After the inauguration of the Bhairahwa Special Economic Zone (SEZ) in April 2016, Kiran Shoes Pvt Ltd, the manufacturer of the popular domestic footwear brand 'Goldstar', applied for a plot in the Bhairahwa SEZ. However, the company could not establish its factory as it was denied permission to relocate old machines to the new industrial zone. Now aiming to export shoes to India, Kiran Shoes has reapplied for entry into the SEZ. According to Vidushi Rana, the company’s executive director, production is set to begin soon, as the government’s amendment to Section 7 of the Special Economic Zones Act, 2073, allows industries like Goldstar to transfer old machines to the SEZ. This amendment has paved the way for Goldstar’s entry into the Bhairahwa SEZ. The revised law states, "Industries operating outside SEZ can, after registration or obtaining permits under current law, relocate used machines, tools, or equipment into the SEZ." “We were ready to move into Bhairahwa SEZ within a few years of its opening,” said Rana. “However, at that time, we were barred from transferring old machines. With the policy change now in place, we have reapplied.” Kiran Shoes plans to start production within six months, aiming to produce 9.6 million pairs of shoes and slippers annually with an investment of Rs 540 million in the Bhairahwa SEZ. Following the amendment of law, Chaudhary Group has also applied to set up a factory in Simara SEZ within six months. On May 12, 2024, the SEZ Authority invited applications from industrialists for the vacant plots in Block ‘A’ of both Bhairahwa and Simara SEZs. Several industries have applied, although previous applicants had failed to secure contracts due to disagreements over terms. The authority has reissued the notice for the available plots, emphasizing that only applicants agreeing to the terms will be accepted. Acting Executive Director of SEZ Authority, Tulsiram Marasini, confirmed that applications have been submitted to fill all vacant plots. However, despite the industrial infrastructure being ready, Bhairahwa and Simara SEZs are not yet operating at full capacity. A total of 136 plots are available across the two SEZs—68 in Bhairahwa and 69 in Simara, with one plot in Simara designated for administrative purposes. Chinese investors have also shown interest in Simara SEZ, with plans to invest Rs 1.5 billion across six industries focusing on electric vehicle assembly, metal recycling, tile manufacturing, herb processing, and shoe production. Two Chinese industries have already begun production. Marasini noted the increased interest from industrialists, with some offering to take up plots despite missing initial deadlines. “In Block ‘A’ of Simara SEZ, all infrastructure is now ready, and the recent law changes have made the SEZ more attractive to industries,” he added. The requirement for exports has also been reduced, further boosting interest. Previously, industries outside the SEZ were prohibited from relocating, but the new regulations have spurred a surge in applications. Marasini expects that the SEZ will soon operate at full capacity. According to the authority, ten industries have proposed to invest Rs 5 billion in Bhairahwa, while twelve have proposed Rs 6 billion in Simara. The SEZ Authority’s May 12 notice has urged industrialists to submit proposals to establish factories on the vacant plots in both SEZs. Marasini remains optimistic, stating, "If agreements are made with industrialists within 120 days, no SEZ plot will remain vacant." He believes the previous trend of applications failing due to disagreements will not continue, as large industries like Chaudhary Group and Goldstar have now entered the SEZ, alongside Chinese investors. Santosh Sapkota, executive director of Mountain Moringa and Herb's Nepal Pvt. Ltd., which has applied for a plot in Bhairahwa SEZ, emphasized that its strategic location and government concessions make it attractive. Sapkota, whose company has been producing herbal products in Rupandehi since 2015, said, "Our focus is on export. Although income tax is exempted in the SEZ, rent remains high. However, we are hopeful that the facilities for machine imports and a one-stop system will help streamline exports." He plans to invest Rs 250 million to produce herbal products such as moringa powder, tea bags, and ginseng.