SEZ in Birgunj-Nepal

NEW DELHI, DEC 5 : In a first-of-its-kind assistance to a neighbouring country, India has decided to help Nepal put in place an institutional mechanism to develop a special economic zone (SEZ) in Birgunj.
This is significant given the rapid strides rival China has taken to boost economic activity in the Indian neighbourhood. India has now strategically decided to extend aid to build infrastructure in neighbouring countries. Since China has an edge over India in making a success story of SEZs, India seems to be in an overdrive to not let countries like Nepal take Chinese cooperation for SEZs.

There were reports that Nepal was trying to get Chinese help in developing an SEZ at its China border near Tibet. This is aimed at providing Nepal’s products direct access to the Chinese market. Authorities here had informed their Nepalese counterparts that India would offer its expertise and commission a study on the feasibility of an SEZ in Nepal, as well as explore possibilities of financial help to develop more such SEZs at a later stage, commerce ministry officials told FE.
Since the Nepal government is in the process of framing an enabling legislation regarding SEZs, it has not yet decided how much land should be allocated for setting up the Birgunj project.
Confirming that the matter was discussed at an inter-governmental committee meeting in August, the officials said India had also encouraged Nepal to opt for a public-private partnership model to develop SEZs rather than go in for a fully state-owned model. Besides, India had asked Nepal to send a team here to study the progress made by Indian SEZs and also the problems such zones faced, the officials said.
Developing an SEZ, like the one proposed at Birgunj, along the Indo-Nepal border, makes business sense for Nepal as several of its products come to India through border trade. However, since this was not the case with India, the government was not for developing any SEZ on the Indian side along the Indo-Nepal border at this stage, they added. But India is wary about China taking advantage of low duties in the South Asian Free Trade Agreement and routing its products through neighbouring countries to India without much value addition.
Recently, in response to India extending a $100-million line of credit to Nepal, China had offered similar credit worth double that amount. Also, last month, China inked a pact with Pakistan to have a free trade area in an effort to triple bilateral trade to $15 billion from the current $4 billion in a decade-and-a-half. Besides, China recently overtook India, in terms of trade with Bangladesh.