IBN signs $359m pact with Chinese venture

  • Mega cement deal
  • Foreign investment biggest ever in manufacturing
- Post Report, Kathmandu

Sep 4, 2017-The Investment Board of Nepal on Sunday signed a project investment agreement worth $359.2 million (approximately Rs36.8 billion) with Hongshi-Shivam Cement, a Nepal-China joint venture, to set up a mega cement factory in Nepal.

The deal was signed between IBN CEO Maha Prasad Adhikari and Lai Weipeng, director and general manager of Hongshi-Shivam Cement. The signing was witnessed by Finance Minister Gyanendra Baha-dur Karki and Chinese Ambassador Yu Hong.

“The signing of the agreement is a signal to the private sector, both external and internal, that [Nepal] has a sufficiently good business climate,” said Karki.

The agreement signed on Sunday reminds the government and the joint venture of their obligations, and protects the interest of the foreign investor in Nepal. The pact also assures that the joint venture, despite drawing huge foreign investment, will receive treatment as a domestic company in Nepal.

The agreement, which is the first of its kind signed by the Investment Board with a private sector company, will expire in 15 years. “If the joint venture seeks further government support even after 15 years, we will renew the pact,” said the board, a government agency formed to promote investment in the country.

Hongshi-Shivam Cement is a joint venture between the Nepal-based Shivam Holdings, which also produces Shivam brand of cement, and Hong Kong Red Lion Cement No 3, a subsidiary of Hongshi Group, the biggest building material enterprise in China. The Chinese company owns 70 percent stake in the joint venture, while the Nepali partner holds the remaining 30 percent share in the company.

The investment made by the joint venture is the biggest foreign investment in the country’s manufacturing sector so far.

The joint venture plans to begin commercial production of cement by 2018, although the project investment agreement obligates the company to start production within 36 months of signing the pact.

“We’ll rely on dry process manufacturing, a new technology in cement production....to manufacture high-grade cement,” said Satish Kumar More, a representative of Shivam Holdings.

The Nepal-China joint venture has already started construction of the factory at Sardi in Nawalparasi district. It initially plans to produce 6,000 tonnes of cement per day and raise the daily output to 12,000 tonnes in the future.

“But how early the company begins commercial production will depend on our [the government’s] ability to build the access road and transmission line to the sites where the plant and the mine are located,” Investment Board CEO Adhikari said.

The government has pledged to build a 40km access road from Dumkibas to Palpa, where the mine is located. It has also promised to build a transmission line along that stretch.

“The track for the road has been opened. We’ll soon blacktop it,” said Adhikari. “But construction of transmission line is in the initial phase. We will request concerned authorities to build it as soon as possible as committed in the project investment agreement.”

The signing of the project investment agreement has added another feather to the Investment Board’s cap. The board had not been able to seal any major deal since the signing of project development agreements with developers of the 900-megawatt Upper Karnali Hydroelectric Project and the 900MW Arun-3 Hydroelectric Project in 2014.

The latest agreement has opened the opportunity for foreign companies to confidently invest in Nepal, said Adhikari.

Published: 04-09-2017 07:37

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