Adamjee EPZ: The industrial landscape of future
Monday, 17 November 2008
Shahiduzzaman Khan
THE conversion of the Adamjee Jute Mills (AJM) to an export-processing zone (EPZ) was a remarkable event for at least one simple reason -- it is a great example of the reallocation of resources, which lies at the heart of a dynamic economy. In fact, orderly liquidation of non-viable enterprise is very common in developed countries and that happened in Bangladesh.
Foreign investors have flocked to the Adamjee EPZ in large numbers so far. They don't want to wait for long for investments. They prefer such EPZs, SEZs and industrial parks that provide an assured supply of infrastructure and a hassle-free regulatory environment. These are potentially useful as a means of developing this critical mass of firms in a shorter timeframe, than waiting for the overall economy to improve its performance in regulatory and infrastructure terms.
Also, it is very important to build these economic zones well. A new model of zones is emerging worldwide with emphasis on private sector participation in the development of the zone and in the management of the zone, and in the provision of a wider range of facilities that has been in practice conventionally. There's also an increased emphasis on forging links with firms within the zones and with those outside, so that good practices, technology and other things can be disseminated.
With the opening of the country's seventh export processing zone on the grounds of the once-hallowed Adamjee Jute Mills, the place is again reverberating with the humming of machines, the footsteps of workers, and the growls of trucks carrying raw materials and finished goods. The old Adamjee was for long a symbol of the hemorrhage that had plagued Bangladeshi industry -- the million of taka spent each year to keep afloat state-owned enterprises, which had long lost their rationale. The new Adamjee represents the industrial landscape of the future. The enterprises that inhabit the new Adamjee EPZ do not require subsidies to stay alive. They are competing in the global markets and many are opening new niches for Bangladeshi products.
Earlier, on June 30, 2002, the government closed the Adamjee Jute Mills after it had incurred a loss of Tk 12 billion since its nationalisation in 1972. The jute mill had some 25,000 workers when the axe fell on it. The government took the decision to hand over the total area and assets of the closed mill to BEPZA for establishing an EPZ on December 1, 2004.
Sir Adamjee Dawood set up Adamjee Jute Mills on 295 acres of land on the bank of the Shitalakhkha at Shiddhirganj in Narayanganj in 1950. Adamjee Brothers contributed 50 percent of the share capital while the Pakistan Industrial Development Corporation (PIDC) sanctioned the rest of the capital. The PIDC arranged for import of machinery and equipment for the mill with government grants of foreign exchange and by June 1955, the mill was ready for commissioning and had 3000 looms and 31200 spindles. After the independence, the jute mill was nationalised and handed over to Bangladesh Jute Mills Corporation (BJMC).
After liberation of the country, overall infrastructure was in peril, communications -- both road and riverine -- were in disarray and the government was not stable. As such, foreign entrepreneurs were not interested to invest in Bangladesh. Only nominal investment in some sectors was made until the early eighties. In fact, when some infrastructure development took place and a number of major projects in the communication sector were implemented, overseas investors began to come in looking for substantial gains.
The government identified certain areas exclusively for them. Land and other utility services were made available to them at reasonable costs. In this way, export-processing zones (EPZs) sprang up in various places of the country. Its exclusive aim was to attract foreign investors. The idea got some immediate responses. Investors for the USA, Japan, the UK, South Korea, China, Taiwan, India etc., set up industries in the EPZs. While they earned profit, the industries in those exclusive zones generated employment opportunities for the people.
The latest EPZ has been set up at Adamjee Nagar on the ruins of now defunct Adamjee Jute Mills (AJM). It was hard to believe that the world's largest jute mill is no more and on its premises, many of the overseas industries are now thriving. Indeed, the then government took the right decision in closing it down. The AJM was incurring colossal losses after the country's independence when jute began to lose demand in the world market. Mismanagement and corruption also contributed to making it a 'white elephant.' Even after floating of tender for several times for its sale as a mill, there could be found no taker. At last, the authorities took the painful decision of closing it down. The AJM was closed down in spite of stiff resistance from its workers and employees. The agitation continued for several days. But nothing did work; the mill died its natural death and became extinct for good.
At a high level meeting after two years, it was decided that the AJM premises would be turned into an industrial park. One wonders how the decision took such a long time - more than seven long years - to be implemented. In Bangladesh, things move at a snail's pace, papers don't change tables without speed money. Everybody knows how unbridled corruption is eating into the vitals of the economy. The climate for investment will improve once such vices could be eliminated for good.
The performances of all EPZs are not similar. Some zones are doing pretty good, some are not. The performance of EPZs in the northern districts is not that much satisfactory. The Chittagong EPZ is doing excellent. South Korea's giant business conglomerate - Yuangon Corporation - has built an exclusive economic zone in Chittagong. Of late, labour unions have been introduced in the EPZs. In order to continue to enjoy the generalised system of preference (GSP) in the European and the US markets, Bangladesh gave its approval to labour unions in the EPZs. So far, no harmful deed has occurred. Labourers' rights are being well protected.
Earlier, the government offered 20 per cent cash incentive for the foreign entrepreneurs in the EPZs to invest in agro-based industrial sector. Yet the country's export processing zones -- mostly new ones -- received very limited response in this regard. It is now assumed that the investment in the country is unlikely to pick up ahead of the next election in December. Prospective investors may prefer to see how the political situation develops in the run-up to the election. Generally businessmen feel reluctant to go for new investment before a general election.
In such a situation, the government has initiated a process to convert 717 acres of land of three closed-down giant state-owned mills into industrial parks. The lands of these mills in Dhaka, Chittagong and Khulna will have around 700 industrial plots, largely for garments-related industries and chemicals and electronic industries. Some of the plots will host foreign investment. The government is also planning to turn the premises of some more closed-down mills into industrial plots. The cabinet committee on economic affairs earlier gave the green signal to hand over 223 acres of the Chittagong Steel Mills (CSM) to Bangladesh Export Processing Zone Authority (BEPZA) for expanding the Chittagong Export Processing Zone (CEPZ) and to sell plots to entrepreneurs.
Of the 294 acres of Adamjee land, 214 acres house industries while the rest 80 acres accommodate infrastructure facilities including a pollution treatment plant, medical facilities, offices of banks and insurance companies and a container yard. There are 457 industrial plots -- 319 for garment industries, 84 for weaving units and 54 for dyeing units. Work on the industrial park has already begun.
The government is exploring some options with a view to boosting foreign investment. Setting up of three special economic zones (SEZ) to attract prospective entrepreneurs is on the cards. The SEZs are being designed in such a way that attracts both domestic and foreign investment in a big way. The government would initially develop the Kaliakoir hi-tech park under a donor-funded project in a bid to attract huge investment from global technological giants.
The Adamjee EPZ has been able to entice foreign investors and make Adamjee Nagar vibrant with economic activities. By changing mind-set of the people and helping to create conditions that allow more flexible movement of resources from low-productivity to high-productivity uses, the conversion of Adamjee may indeed be viewed as a landmark in Bangladesh's industrialisation.
...................................................................
szkhan@thefinancialexpress-bd.com
THE conversion of the Adamjee Jute Mills (AJM) to an export-processing zone (EPZ) was a remarkable event for at least one simple reason -- it is a great example of the reallocation of resources, which lies at the heart of a dynamic economy. In fact, orderly liquidation of non-viable enterprise is very common in developed countries and that happened in Bangladesh.
Foreign investors have flocked to the Adamjee EPZ in large numbers so far. They don't want to wait for long for investments. They prefer such EPZs, SEZs and industrial parks that provide an assured supply of infrastructure and a hassle-free regulatory environment. These are potentially useful as a means of developing this critical mass of firms in a shorter timeframe, than waiting for the overall economy to improve its performance in regulatory and infrastructure terms.
Also, it is very important to build these economic zones well. A new model of zones is emerging worldwide with emphasis on private sector participation in the development of the zone and in the management of the zone, and in the provision of a wider range of facilities that has been in practice conventionally. There's also an increased emphasis on forging links with firms within the zones and with those outside, so that good practices, technology and other things can be disseminated.
With the opening of the country's seventh export processing zone on the grounds of the once-hallowed Adamjee Jute Mills, the place is again reverberating with the humming of machines, the footsteps of workers, and the growls of trucks carrying raw materials and finished goods. The old Adamjee was for long a symbol of the hemorrhage that had plagued Bangladeshi industry -- the million of taka spent each year to keep afloat state-owned enterprises, which had long lost their rationale. The new Adamjee represents the industrial landscape of the future. The enterprises that inhabit the new Adamjee EPZ do not require subsidies to stay alive. They are competing in the global markets and many are opening new niches for Bangladeshi products.
Earlier, on June 30, 2002, the government closed the Adamjee Jute Mills after it had incurred a loss of Tk 12 billion since its nationalisation in 1972. The jute mill had some 25,000 workers when the axe fell on it. The government took the decision to hand over the total area and assets of the closed mill to BEPZA for establishing an EPZ on December 1, 2004.
Sir Adamjee Dawood set up Adamjee Jute Mills on 295 acres of land on the bank of the Shitalakhkha at Shiddhirganj in Narayanganj in 1950. Adamjee Brothers contributed 50 percent of the share capital while the Pakistan Industrial Development Corporation (PIDC) sanctioned the rest of the capital. The PIDC arranged for import of machinery and equipment for the mill with government grants of foreign exchange and by June 1955, the mill was ready for commissioning and had 3000 looms and 31200 spindles. After the independence, the jute mill was nationalised and handed over to Bangladesh Jute Mills Corporation (BJMC).
After liberation of the country, overall infrastructure was in peril, communications -- both road and riverine -- were in disarray and the government was not stable. As such, foreign entrepreneurs were not interested to invest in Bangladesh. Only nominal investment in some sectors was made until the early eighties. In fact, when some infrastructure development took place and a number of major projects in the communication sector were implemented, overseas investors began to come in looking for substantial gains.
The government identified certain areas exclusively for them. Land and other utility services were made available to them at reasonable costs. In this way, export-processing zones (EPZs) sprang up in various places of the country. Its exclusive aim was to attract foreign investors. The idea got some immediate responses. Investors for the USA, Japan, the UK, South Korea, China, Taiwan, India etc., set up industries in the EPZs. While they earned profit, the industries in those exclusive zones generated employment opportunities for the people.
The latest EPZ has been set up at Adamjee Nagar on the ruins of now defunct Adamjee Jute Mills (AJM). It was hard to believe that the world's largest jute mill is no more and on its premises, many of the overseas industries are now thriving. Indeed, the then government took the right decision in closing it down. The AJM was incurring colossal losses after the country's independence when jute began to lose demand in the world market. Mismanagement and corruption also contributed to making it a 'white elephant.' Even after floating of tender for several times for its sale as a mill, there could be found no taker. At last, the authorities took the painful decision of closing it down. The AJM was closed down in spite of stiff resistance from its workers and employees. The agitation continued for several days. But nothing did work; the mill died its natural death and became extinct for good.
At a high level meeting after two years, it was decided that the AJM premises would be turned into an industrial park. One wonders how the decision took such a long time - more than seven long years - to be implemented. In Bangladesh, things move at a snail's pace, papers don't change tables without speed money. Everybody knows how unbridled corruption is eating into the vitals of the economy. The climate for investment will improve once such vices could be eliminated for good.
The performances of all EPZs are not similar. Some zones are doing pretty good, some are not. The performance of EPZs in the northern districts is not that much satisfactory. The Chittagong EPZ is doing excellent. South Korea's giant business conglomerate - Yuangon Corporation - has built an exclusive economic zone in Chittagong. Of late, labour unions have been introduced in the EPZs. In order to continue to enjoy the generalised system of preference (GSP) in the European and the US markets, Bangladesh gave its approval to labour unions in the EPZs. So far, no harmful deed has occurred. Labourers' rights are being well protected.
Earlier, the government offered 20 per cent cash incentive for the foreign entrepreneurs in the EPZs to invest in agro-based industrial sector. Yet the country's export processing zones -- mostly new ones -- received very limited response in this regard. It is now assumed that the investment in the country is unlikely to pick up ahead of the next election in December. Prospective investors may prefer to see how the political situation develops in the run-up to the election. Generally businessmen feel reluctant to go for new investment before a general election.
In such a situation, the government has initiated a process to convert 717 acres of land of three closed-down giant state-owned mills into industrial parks. The lands of these mills in Dhaka, Chittagong and Khulna will have around 700 industrial plots, largely for garments-related industries and chemicals and electronic industries. Some of the plots will host foreign investment. The government is also planning to turn the premises of some more closed-down mills into industrial plots. The cabinet committee on economic affairs earlier gave the green signal to hand over 223 acres of the Chittagong Steel Mills (CSM) to Bangladesh Export Processing Zone Authority (BEPZA) for expanding the Chittagong Export Processing Zone (CEPZ) and to sell plots to entrepreneurs.
Of the 294 acres of Adamjee land, 214 acres house industries while the rest 80 acres accommodate infrastructure facilities including a pollution treatment plant, medical facilities, offices of banks and insurance companies and a container yard. There are 457 industrial plots -- 319 for garment industries, 84 for weaving units and 54 for dyeing units. Work on the industrial park has already begun.
The government is exploring some options with a view to boosting foreign investment. Setting up of three special economic zones (SEZ) to attract prospective entrepreneurs is on the cards. The SEZs are being designed in such a way that attracts both domestic and foreign investment in a big way. The government would initially develop the Kaliakoir hi-tech park under a donor-funded project in a bid to attract huge investment from global technological giants.
The Adamjee EPZ has been able to entice foreign investors and make Adamjee Nagar vibrant with economic activities. By changing mind-set of the people and helping to create conditions that allow more flexible movement of resources from low-productivity to high-productivity uses, the conversion of Adamjee may indeed be viewed as a landmark in Bangladesh's industrialisation.
...................................................................
szkhan@thefinancialexpress-bd.com