Following three rounds of negotiations, Investment Board of Nepal (IBN) has finally signed an initial agreement with Motrex Co Ltd for an investment worth $105 million – approximately Rs 11.95 billion at Wednesday's exchange rate – for setting up a plant in Nepal to assemble four-wheeler vehicles in the country.
The board and the South Korean company were holding negotiations for nearly nine months, after the board approved proposal in mid-March, according to the chief executive officer (CEO) of the board Maha Prasad Adhikari. “The board has finalised the project investment agreement with Motrex, subject to approval from their respective boards,” he said, adding that the agreement will pave the way for the South Korean company to set up the four-wheeler assembling plant in Nepal. “The company plans to manufacture four-wheelers in Nepal in the long-run.”
The South Korean company is mainly engaged in manufacturing and distribution of automotive parts. “Its products include audio-visual navigation (AVN), audio video (AV), around view monitor, head up display and rear seat entertainment (RSE),” according to the company.
Under the project, the company will import vehicle parts and assemble in Nepal. “The company has a target to assemble 1,000 four-wheelers in the first year of operation,” according to its proposal. “The environmental impact assessment and plant set up will take nearly three years.”
However, the Korean company was seeking infant industry protection for seven years to block any competitor for certain period of time. The auto dealers in Nepal are opposed to the condition of restricting entry of competitors.
“We have convinced Motrex that market competition was in their interest,” Adhikari said, adding that the company agreed to drop the condition. “The board has turned down the company's demand for entry restriction of competitors investing below Rs 10 billion.”
The board has way-out for most of other conditions too.
According to the board, the company has been seeking 10 per cent to 15 per cent waiver on the import and excise duties of equipment, machinery or any other parts needed for the assembling of four-wheelers in Nepal.
Though the board is positive towards providing waiver on the import of certain equipment, machinery or parts, the tax break has to be addressed through a separate act, according to the board. “The board has also urged the South Korean company to use at least 30 per cent of local materials in its assembled products, after a certain period of time.”
The board and the South Korean company were holding negotiations for nearly nine months, after the board approved proposal in mid-March, according to the chief executive officer (CEO) of the board Maha Prasad Adhikari. “The board has finalised the project investment agreement with Motrex, subject to approval from their respective boards,” he said, adding that the agreement will pave the way for the South Korean company to set up the four-wheeler assembling plant in Nepal. “The company plans to manufacture four-wheelers in Nepal in the long-run.”
The South Korean company is mainly engaged in manufacturing and distribution of automotive parts. “Its products include audio-visual navigation (AVN), audio video (AV), around view monitor, head up display and rear seat entertainment (RSE),” according to the company.
Under the project, the company will import vehicle parts and assemble in Nepal. “The company has a target to assemble 1,000 four-wheelers in the first year of operation,” according to its proposal. “The environmental impact assessment and plant set up will take nearly three years.”
However, the Korean company was seeking infant industry protection for seven years to block any competitor for certain period of time. The auto dealers in Nepal are opposed to the condition of restricting entry of competitors.
“We have convinced Motrex that market competition was in their interest,” Adhikari said, adding that the company agreed to drop the condition. “The board has turned down the company's demand for entry restriction of competitors investing below Rs 10 billion.”
The board has way-out for most of other conditions too.
According to the board, the company has been seeking 10 per cent to 15 per cent waiver on the import and excise duties of equipment, machinery or any other parts needed for the assembling of four-wheelers in Nepal.
Though the board is positive towards providing waiver on the import of certain equipment, machinery or parts, the tax break has to be addressed through a separate act, according to the board. “The board has also urged the South Korean company to use at least 30 per cent of local materials in its assembled products, after a certain period of time.”
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