The government has, reportedly, decided to go aggressive in wooing the private entrepreneurs to invest in the economic zones (EZs) of the country. Of the 17 EZs approved, three will be developed as private economic zones and one each exclusively for Chinese and Japanese investors in the first phase.
The government has planned to set up some 100 EZs on 30,000 hectares of land over the next 15 years.
A full-range incentive package is on the cards for developers of private EZs. According to reports, these include tax holiday facility for 10 years, tax exemption from dividend income, and income tax waiver on service charges.
The incentive package was approved at the latest board meeting of Bangladesh Economic Zone Authority (BEZA). Under the tax incentive package, both EZ developers and investors will reportedly get tax relief.
Value Added Tax (VAT) on their electricity generation and procurement of equipments will be exempted for 10 years. Purchase of products from local market will be VAT-free for the investors for setting up EZs. There will be no customs duty on import of equipments, not available in the country, for developing EZs.
The package offered to the private investors also includes tax-benefit on payment of VAT, customs duty and income tax. The Prime Minister's Office (PMO) has recently asked the National Board of Revenue (NBR) to take necessary steps, so that BEZA can offer the facilities to the developers and investors.
To attract long-term investments, the government had earlier incorporated a set of tax benefits in the Bangladesh Economic Zone Act 2010. The revenue board is expected to issue Statutory Regulatory Order (SRO) to allow developers of EZs enjoy the facilities.
For overseas entrepreneurs, their investment in the EZs will not be restricted through ceiling. They are likely to enjoy full repatriation of capital and dividend. The foreign investors will be exempted from export tax; can enjoy 50 per cent rebate in land registration fees, and 20 per cent VAT exemption on utility service bills.
On the other hand, foreign investors in EZs will be allowed to bring 5.0 per cent of a factory's workforce from their own countries. Foreign workers having technical expertise in respective fields would be allowed to enjoy 50 per cent income tax exemption for five years.
Since the passage of the Bangladesh Economic Zones Act five years ago, there was hardly any work done to facilitate establishment of EZs across the country. The good news is that the government has, of late, laid thrust on attracting private investment offering a whole bunch of incentives.
However, there are widespread speculations about the establishment of such zones becoming a long-drawn process as the country is passing through political turmoil now. For any EZ to prosper, infrastructure and political stability are critically important. Lately, the ongoing unrest appears to be easing a bit.
The negative side of the issue is that none of the proposed EZs has infrastructure like roads, power and gas which are needed for their smooth operation. There is also an issue of protecting the investment made in the zones after their arrival here. Nobody should be under any illusion that because of the incentives package, private and overseas investors will automatically rush in huge number.
In fact, the main aim of the EZ policy was to help materialise the Vision-2021 of the long term perspective plan and sixth five-year plan, expedite growth through industrialisation and alleviate poverty and balanced development of the country. All these are yet to be materialised and remain 'dream' as yet.
Countries like Vietnam, Myanmar and China have already gone for setting up special economic zones (SEZs) replete with physical infrastructure including power, road and rail links to woo foreign investment. Vietnam has already established 400 SEZs. Recently, Myanmar is making fast progress, to catch the waves of global investors. Bangladesh is lagging far behind in this race.
In order to attract private and foreign investors, more things need to be done. The government should protect their interests after they set up their own industries. These include reducing taxes and duty structure on services, easing visa and work permit with extension of visa tenure.
However, a complete township should be built in the proposed EZs to give the workers a better life, better access to education and health. Analysts say attracting FDI will not be a problem if the country can set up EZs with all required facilities.
The EZs are supposed to be running under the concept of public-private partnership (PPP). The government will provide the required land, infrastructures and utilities to the prospective investors. It will allow the private sector to own, develop and manage EZs as well as establish infrastructure and provide commercial services to factories operated in the zones.
Besides export, the investors inside the EZs will be allowed to sell their produce in the local market which is not allowed in case of the Export Processing Zone (EPZs). The idea of EZs differs from the concept of EPZ, as the former offers freedom to investors to cater to the needs of both domestic and global markets beyond concentrating on export markets.
There are vast tracks of unutilised lands in the Bangladesh Small industries Corporation's (BSCIC) existing industrial units.
The government needs to consider these lands for selecting the feasible sites of the proposed EZs. Efforts should have been made to locate some of the EZs in such industrial estates of the BSCIC where the land is now being used for anything other than industrial operations.
All-out efforts should thus be made to speed up implementation process of the EZs. It will be otherwise difficult for the government to keep pace with the required growth momentum. The country will definitely be deprived of private and foreign investments if such zones are not established with maximum speed.
szkhan@dhaka.net
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