BEPZA on look-out for private fund for new industrial parks

FE Team | Published: November 10, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

A Z M Anas
The Bangladesh Export Processing Zones Authority (BEPZA) is on the look-out for commercial funding to set up new industrial parks, as the government has thrown cold water on its proposal seeking public money to establish such ventures.
"The government has made it clear that it will no longer provide money for establishing export processing zones (EPZs) in the country," BEPZA executive chairman Yusuf Abdullah Ashraf said in an interview.
"The demand continues to grow â€¦ We're now trying to convince donors and commercial banks to come forward to financing our new ventures. Similarly, the option of public-private partnership in setting up new industrial parks is being studied," Ashraf added.
As the number of industrial parks across the country is not adequate, the BEPZA chief said they have primarily selected two sites and are trying to mobilise financing, even commercial funding, for setting up new EPZs.
The BEPZA officials said a number of donors, including the World Bank, have shown interest to extend financial support for establishing special economic zones. But money will be forthcoming if BEPZA operates more on a commercial basis, they added.
But Ashraf pointed out that the future EPZs would no more operate in the way now they do, with his agency actively considering scaling down the incentive package designed for investors.
Currently, a total of eight publicly-financed and-managed EPZs are operating in the country, with foreign investors flocking to the economic zones to bank on a slew of fiscal and non-fiscal incentives.
Bangladesh's export-oriented industrial parks have also emerged as magnets for foreign investors who are capitalising on the country's lower labour wages.
Of the fiscal incentives, notable are tax holiday for 10 years, duty-free import and export, relief from double taxation, and trade preferences and duty and quota-free access to the European Union (EU) and some industrialised nations.
The non-fiscal facilities include investment protection, permission of 100 per cent foreign ownership, no ceiling on foreign investment, and full repatriation of capital and dividend.
Although he did not specify about what incentives would be dismantled and the impact of the new move that has a bearing on foreign investors at EPZs, Ashraf said demands of industrial plots from Asian investors are surging.
The BEPZA chief noted that Asian investors, particularly from China, Taiwan, Hong Kong and Malaysia, have shown interest to set up textiles, electronics and other engineering units.
The sources said the BEPZA recently sought government funds to create new industrial parks immediately to meet the growing demand for plots by foreign investors.
The BEPZA officials said during the recent visit of the Robert Zoellick, the World Bank's president, to the Dhaka Export Processing Zones Authority (DEPZ), they sought support from the multilateral capital donor for establishing new EPZs.
Top executives of the International Finance Corporation (IFC), the World Bank's private sector lending arm, accompanied the group's president during his visit to the export-oriented economic zone.
The IFC officials said the corporation is ready to finance establishing new EPZs provided that the BEPZA runs on a commercial basis in the near future and scales down various incentives provided to investors.
According to official figures, the publicly-managed EPZs netted nearly $1.1 billion in investment between 1983 and 2005, accounting for nearly 20 per cent of annual exports, and 25 per cent of the country's total foreign direct investment.
But the WB, in a report focussing on economic zone reforms, suggested that the spillover effects of EPZs on the economy would have been "much higher" had Bangladesh modernised its economic zone regime.
The report also noted the impact of the smaller BSCIC (Bangladesh Small and Cottage Industries Corporation) industrial estates is even "more limited," with their main achievement being generation of employment for 96,000 workers.