Meanwhile DHI-Infra hands back three Industrial Estates to govt over land ownership and price issues
Bhutan’s Industrial Estates, which were mentioned in the 10th plan and expected to be an engine of Industrial growth, could never really take off even after land acquisition mainly due to budget issues as only Nu 200 mn was allocated for it.
Now, the government says that they have secured around Nu 800 mn from the Government of India (GoI), to start developing three of the four estates. The total cost of developing basic infrastructure in these three estates is around Nu 1.6 bn.
Additional funding will explored from GoI as work progresses. A senior official said, in an encouraging sign, GoI officials had indicated they would give more support if Bhutan could first finish the Nu 800 mn given.
These three projects are 733 acres Jigmeling in Sarpang, 349.06 acres Dhamdum in Samtse and 110.34 acres Bondeyma in Mongar. The government will be developing the fourth on its own which is the 145.52 acres Motanga project in Samdrup Jongkhar.
Prime Minister Tshering Tobgay said, “The government is taking up the Industrial Estates with a sense of urgency, and I have asked the MoEA to go ahead with the money available.”
The Minister for Economic Affairs Lyonpo Norbu Wangchuk said that the Industrial Estates would mainly be timed and synced to be completed when the 720 MW Mangdechu and 1,200 MW Punatsangchu I projects come on line in mid 2016 and 2017 respectively.
This would be important as currently the biggest obstacle for Bhutan’s power intensive industries is the limited amount of power available especially in the winter months.
Meanwhile an interesting development is that DHI-Infra, which was originally given charge of the projects in January 2011 by the former government, handed back the three Industrial Estates to the Ministry of Economic Affairs in December 2014.
DHI-Infra CEO Dorji Namgay, said that happened since it was found that though the Land Act permitted leasing of land from MoEA to DHI-Infra it did not permit sub -easing by DHI Infra to others.
The only way possible for DHI-Infra to continue would have been to get the land ownership transferred from MoEA for which the ministry was not willing.
The main reason why the former DPT government transferred the three projects to DHI-Infra was because the then government did not have much budget of its own, and so DHI was supposed to invest its own money and also make it a Public Private Partnership (PPP), getting in foreign investors to pitch in the rest.
MoEA Minister Lyonpo Norbu Wangchuk clarified, apart from the land issue, the Ministry thought that if DHI developed the project commercially it would become very expensive for the domestic private sector.
Dorji Namgay, agreeing with this assessment, said that given that DHI would have to source its own funds and get a private partner for the estates, the rents would be more expensive. He said the original plan was for the government to subsidize the lease rates for the domestic industry.
Lyonpo said that the government’s policy is to develop the private sector and industries in an affordable manner, and handing the estates over to a commercial partnership entity would push up costs.
The Minister said that, moreover, unlike in the past, the government now had mobilized substantial funds and could take up the creation of the Industries on its own like Pasakha was done in the past.
Apart from land issues DHI-Infra’s efforts to get a foreign partner or investor was going nowhere. The company in December 2012 once floated a global request for proposal (RFP) tender trying to get foreign investors to invest and develop Jigmeling Industrial Estate.
The offer included the developer being able to commercially use or lease 433 acres for a period of 30 years and fiscal incentives like tax holiday till 2030, for not only the developer, but also any company coming into the estate. DHI Infra would be requesting Nu 400 to 500 mn from the government for developing ancillary facilities like roads, power and water to the site. The understanding was that the developer will have to hand back 300 acres to the government and also at least 2 percent of the revenue.
However, despite such generous terms, there was no interest shown by any investor even by the last date of 1st April 2013.
According to the Department of Industries’ officiating Chief Industries Officer K.B Bishwa, DHI Infra while handing back the work had done substantial planning work on it. He said that DHI-Infra had designed the Master Plan and had also done the Environmental Impact Assessment (EIA) report both of which is being used by the Department of Industries.
The Master plan basically plans out the nature of the estate and indentifies which areas are to be given to which type of industries and also the necessary infrastructure.
Bishwa admitted that given the budget constraints of the past, the only activity that could be achieved by the ministry in the 10th plan was acquiring the mainly government land for the Estates, surveying it and getting it registered in the name of MoEA.
The Estates will, however, face some challenges as in addition to currently not having the full budget, the Industrial Estates section only has five engineers to execute such a major project. The government has also lost around a year in DHI-Infra now transferring the projects back to MoEA. While DHI-Infra was set up as a specialized agency to handle such projects the Department of Industry while having some institutional experience with Pasakha will have a lot on its hands.
Jigmeling’s (733 acres) EIA report is under review by National Environment Commission (NEC) as additional information and clarification is required. Of its total budget of Nu 800 mn around Nu 327 mn has been mobilized.
Design and drawing of the boundary fencing has been completed by DHI-Infra and handed over to the Department of Industries. Its Lag-thram is currently under process with the National Land Commission.
A request for proposal to draw up the Detailed Project Report is also being drawn up and will be done by this month.
The DPR is to be initiated and completed with the first half of 2015. The compound fencing and landscaping will be started in 2015 and completed by 2017. Road works and water supply works are to be started in the first half of 2016 and storm water drainage and other amenities in the second half. The electrical works will be initiated in 2017.
The Dhamdum Estate (349.06 aces) is also at a similar state as Jigmeling. It is also the only project for which the full budget of Nu 300 mn has been acquired.
The detailed DPR including an EIA study will be completed within the first half of 2015 followed by road works, storm water drainage and river training works in the second half. Landscaping, fencing, water supply system, electrical system, building and other amenities and waste water and affluent treatment plant will be started in the second half of 2016. The remaining works will be initiated in the second half of 2017.
The project (110.34 acres) is at a more advanced state with its Environment Clearance already given last year. Detailed designs and estimates for the road and bridge have been completed and tender documents finalized. Construction Development Corporation Limited will be awarded the works.
Also, the allotment of an Industrial plot to Mountain Hazelnut Venture Private Limited has been initiated. The road and bridge are to be completed by 2017 and construction of internal road and storm water drains will be initiated in the second half of 2016.
Of the required Nu 500 mn around Nu 197 mn has so far been mobilized.
This is the only Industrial Estate that the government will be building with its own funds. With 145.52 acres the work plan for the Estate is still under progress. As of now within 2015 -2016 there will be river protection works and storm water drainage works carried out.
The MoEA Minister said that industrial plots in all the Industrial Estates will be allotted as and when there is a suitable level of infrastructure and it will not be deferred till the completion of construction of all infrastructure. In this way the first few industries would be able to carry out their individual construction works and may be even be operational on completing the development of the Industrial Estates. A new standardized allotment guideline with proper criteria will be developed for the allocation of plots.
Currently Bhutan’s only Industrial Estate is the 267 acre Pasakha Industrial Estate of which only 50% is useable due to the steep terrain.