Largest Chinese FDI pledge comes in cement

- SANJEEV GIRI, Kathmandu
Largest Chinese FDI pledge comes in cement

Mar 17, 2015-

In the largest foreign direct investment (FDI) pledge from the northern neigbour so far, China’s Hongshi Hodlings Group on Tuesday signed a joint venture (JV) agreement with Shivam Holdings Nepal to set up a Rs30 billion cement factory.

The Hongshi Holdings will invest Rs21 billion (70 percent) in the project while the Nepali partner will inject Rs 9 billion. Hongshi Holdings’ investment will be the third largest FDI in cement

industry after the Nigeria-based Dangote Group and Reliance Cements of India.

The JV will be named Hongshi-Shivam Cement Private Limited. An agreement to this effect was signed by Vishwonath Goel, chairman of Shivam Holdings, and Xu Youyuan, executive vice-president of Hongshi Holdings, in Kathmandu on Tuesday.

The Hongshi-Shivam JV will produce 6,000 tonnes (120,000 sacks) of cement per day. Initially the company will be manufacturing 33-, 43- and 53-grade cement.

Though the company has not revealed probable mining and manufacturing locations, its promoter said they plan to start production in three years.

“We aim to start production within next three years if the government clears the process and electricity is made available on time,” said Goel. “The new plant will employ more than 2,000 people directly.”

According to Youyuan, the plant will help Nepal become self-reliant in cement manufacturing ultimately. The annual demand for cement at present is estimated at 3.5 million tonnes while the country produces 2 million tonnes on its own.

The largest privately owned cement manufacturer in China, Hongshi Holdings has a footprint in 11 Chinese provinces and has annual production capacity of 70 million tonnes.

Six prominent Nepali business groups—Sharda Group, Lucky Group, Goel Group, Maru Group, Bhimsariya Group and Mundra Group—are part of the Shivam Holdings. The Nepali investors already have a separate venture that produces Shivam Cement.

Hongshi Holdings’ entry marks a new shift in Chinese investment in Nepal.

It shows Chinese investors are shifting towards large infrastructure projects with huge investments. Earlier, they were limited to hotels and restaurants.

In the past few years, Chinese FDI in Nepal has been growing along with a surge in tourist arrivals from the world’s most populous country. Chinese companies are now emerging as major players in Nepal’s energy sector, with the CWE Investment Company, a subsidiary of the China Three Gorges International Corporation, set to establish a company to develop the 750-megawatt West Seti project.

Along with investments in Upper Madi and smaller hydel projects, Chinese investors are also coming into the construction sector through a joint venture with a Nepali company and are involved in real estate projects. For Nepal’s tourism, China is the second largest source country after India.

Fittingly, Finance Minister Ram Sharan Mahat termed the Hongshi-Shivam JV as a new landmark in Nepal-China economic ties. “In the last three days, I’ve attended three major events. This indicates the strengthening of economic ties between the two neighbours,” Mahat said while addressing the signing ceremony. “This also signals that investment climate is improving in Nepal.”

Chinese Ambassador to Nepal Wu Chuntai said the largest FDI commitment from China will help continue promoting the friendship and partnership between the two countries. “We hope this agreement conveys a positive message to prospective Chinese investors,” said Chuntai.

With Chinese companies seeking timely clearance of the environment impact assessment

process, construction of access road to the project site and support in land acquisition, Mahat assured the investors of full government support.

With the country looking for major infrastructure developments, mainly in hydropower and road sectors, cement has emerged as a lucrative sector for foreign investors. The Dangote Group has already pledged Rs70 billion to set up a cement plant while India’s Reliance Cement is investing Rs40 billion for another plant.

 

Published: 18-03-2015 08:48

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