Govt to soon finalize SPV as part of Act East Policy to help firms set up projects in CLMV nations

In the Budget, Finance Minister Arun Jaitley said that the ‘Act East’ policy of the government endeavors to develop extensive economic and strategic relations in South-East Asia. In order to catalyse investments from the Indian private sector in this region, a Project Development Company will, through separate Special Purpose Vehicles (SPVs), set up manufacturing hubs in CMLV countries.

The government would be soon finalizing the structure of Special Purpose Vehicles, as a part of its ‘Act East Policy’ to help domestic firms set up projects in CLMV countries (Cambodia, Laos, Myanmar and Vietnam).

Commerce Secretary Rajeev Kher said that they are quite hopeful that in the next 3-4 months, they should be ready with the entity and they would have done the procedure for taking up the transfer of resource for acquisition.

The ministry is at an advance stage on the process of structuring that mechanism. The mechanism will operate through a SPV which the EXIM Bank will create in collaboration with a private sector company. The mechanism will then have a project development facility (PDF).

The PDF will be funded by the government and then that PDF will invest in (one of these countries) say in acquiring land or a SEZ and then develop it and start allocating it to business entities in India against the payment.

The SPV will buy the land and government will provide the project financing facility. It is a simple financing mechanism of Indian government till the point private sector comes in and pays back. It is also a short term credit facility. It is essentially a trade facilitation measure with capital content in it, said Kher.

The secretary further added that domestic firms do not want to take the first step as they are not confident about the stability or certainty of that market. If you have a SEZ say in Vietnam — get your yarn exported there, get a apparel made there and then access the American market through the TPP route and take advantage of the duty and standard benefits.

The Trans-Pacific Partnership (TPP) is a proposed regional free trade agreement among 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.