Lhakpa Quendren

Samtse—The Dhamdhum Industrial Park in Samtse, designated for clean-tech industries, is on course after several years of stalled progress.

Launched in August 2016, the park has struggled due to delays caused by defaulting tenants or leaseholders. Over the past eight years, around 80 unreliable tenants were terminated for failing to commence operations despite assurances.

Now, with the influx of potential and committed investors rushing for the vacant plots, the industrial park is expected to make major progress within the next two years, according to the Department of Industry.

“We are currently scrutinising the applicants to offer opportunities to those who are serious about starting their projects,” said an official. “We now have very limited vacant plots left, and allocation is still ongoing.”

The delay has resulted in overgrown bushes and damage to road infrastructure

The Dhamdhum Industrial Park spans 234 acres and is divided into three zones: Pocket A (143 acres), Pocket B (65 acres), and Pocket C (25 acres).

Of the 45 allocated plots, 18 factories are completed, 11 are under construction, and 16 are in the documentation phase.

However, Pocket B, which is potentially at risk of flooding from the Dhamdum River, has not been developed and is being monitored. Currently, seven acres in this area are leased to two crusher plants.

The industrial park features a range of industries, including two large-scale enterprises, which are foreign direct investment companies—Dralha Bamboo Revolution Private Limited and Eco-Synth Fibers—along with 19 large-scale, 17 small-scale, and three cottage industries.

However, the delay in project implementation has resulted in overgrown bushes and damage to road infrastructure.

The promoters of the factories suggest immediate maintenance of the park’s infrastructure to prevent further damage and deterioration. And some have raised concerns over potential risk of fronting practices.

“Many promoters leased large areas because the lease rate was low, and some might be seeking funding sources to begin their work. Otherwise, they should have started their work like others,” a promoter said.

Another promoter said that some tenants who took loans for factory construction may not have used it for the intended purpose. “Now it is time to repay the loans but many of them have not even started their projects,” he said.

Lease rate revision causes financial strain

Meanwhile, following an appeal from the promoters of the industrial park to reduce lease rents on March 25, the Department of Industry is reviewing the lease rent for the industrial parks in collaboration with the National Land Commission (NLC) and the Bhutan Chamber of Commerce and Industry.

The official from the department said that the revision is being considered for the industrial parks at Dhamdhum and Norbugang in Samtse, and Motanga in Samdrupjongkhar.

“We are discussing it and expect to finalise it soon. We understand their issues, but at the same time, they must also understand the challenges faced by the government,” said the official.

The NLC revised the estate land lease rates from Nu 0.15 per square feet to Nu 4.1 per square feet per year, effective this year. Although the Land Act of Bhutan 2007 mandates a revision of land lease rates every five years, it had remained unchanged for over 14 years.

With only 99 acres available in Pocket A and Pocket C, excluding 70 acres for basic amenities, recovering the Nu 300 million invested in park development at the current rate would take approximately 17 years.

The park incurs over Nu 160,000 monthly in electricity costs alone, not including maintenance expenses. The Department of Industry is exploring ways to cover these costs through lease rents.

Under the new lease rates, a promoter with one acre of land will see their annual rent rise from Nu 6,534 to Nu 178,356, plus a security deposit of the same amount.

Promoters have leased plots ranging from 30 decimals to 4 acres.

Promoters now have to pay significantly higher rents, with some seeing over 800 percent hikes. This financial burden is expected to strain many potential promoters, as many are yet to start their projects.

Nabin Basnet, the promoter of Hutah Fresh, an upcoming processed cheese plant, said that the country’s economy is yet to pick up, and the current situation is particularly dire for emerging manufacturing units.

“The government could consider raising rates more rationally once we reach the break-even point and start generating profits, which, under the current circumstances, is expected to take at least five years,” he added.

Pallavi Furniture Manufacturing Unit, which occupies 1.5-acre plot, has to pay an additional Nu 350,000 under the revised lease rate.

The manager of Pallavi Furniture Manufacturing Unit, Krishna Pradhan, said that the lease rent, which was previously Nu 10,000 per year, has now increased to Nu 30,000 per month. “This sudden hike is difficult to manage. A reduction to a more feasible level would be greatly appreciated,” he said.

The factory, which generates Nu 600,000 to Nu 700,000 monthly and employs seven staff, faces financial strain due to the increased lease rates.

However, some promoters believe that higher lease rate is justified, given the substantial investment required to develop and maintain the park’s infrastructure such as boundary walls, reliable power and water supplies, road connectivity with underground street lights, drainage system, and cable trenches.

A promoter of a wood-based industry, Tshering, said that the increased lease rate will prompt investors to expedite their construction. “However, for the greater good, the government should consider reducing the lease rent at least during the construction period.”