Going is tough for Chinese investor in Nepal
The Nepal government has hailed its two-day Investment Summit that ended on Saturday as a resounding success with the signing of 15 deals with foreign investors.
However, here in Nawalparasi the experience of a Chinese investor in a state-of-the-art cement plant does not bode well for the future of foreign direct investment (FDI) in the country.
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China’s Hongshi Cement had signed An FDI deal with the government during the first tenure of Prime Minister K P Oli during a similar summit in 2017. Inaugurating this year’s summit on Saturday, Oli told investors that the government would help them in every possible way with permits, infrastructure, and repatriation of profit.
But faced with obstacles every step of the way, Hongshi tied up with Nepal’s Shivam Cement hoping that the involvement of a local partner would remove bureaucratic hurdles along the way. But even though the government had assured Hongshi Cement factory of a road, transmission line and other infrastructure it has not kept its promise.
The plant is located 26km from the East-West Highway, and Hongshi opened a dirt track itself because it would have taken too long to wait for the government. However, the road has not yet been blacktopped, and none of the bridges have been built as per the agreement.
The Chinese have also built another 12km road to its limestone quarry from where it sources raw material. The company says it has spent Rs1.2 billion of its own money to build roads the government had promised.
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Similarly, the Nepal Electricity Authority was supposed to extend its transmission line from the Bardaghat Substation with the installation of 21 pylons. But this has not happened either.
Hongshi would have bought 40MW of power from the NEA grid, but since the transmission lines are not yet ready it has to generate its own expensive electricity from diesel-thermal captive plants.
The factory employs 520 Nepali engineers, managers and workers, and although Hongshi’s agreement with the government allows it to produce 12,000 tons of cement a day, it only brings out 5,000 tons because of the lack of electricity supply, according to manager Liu Xuguwang.
China’s Hongshi Cement owns 70% of the venture with Shivam having 30% of the shares in the $330 million project. This is the largest foreign joint venture investment project in Nepal today, and although it is touted as a model, it is clear that unless Nepal can reduce red tape, and keep its side of the bargain, other investors at this weekend’s Summit are likely to be reluctant.
Some 600 foreign delegates from 36 countries took part in the Nepal Investment Summit during which some 15 deals were signed in hydropower, solar energy, tourism, 5G telecommunication, and other projects.