Economic zones to help spur investment

Bangladesh lags far behind many other comparator countries in setting up economic zones (EZs). Even several years after the enactment of separate laws for such zones, works for developing EZs in the country are moving at a snail's pace. Five EZs are scheduled to go into operation by 2016.
The authorities concerned, according to a report in FE this week, have so far issued only a request for proposals (RFP) for the Mongla-site. The site, with a land area of 205 acres, belongs to Bangladesh Economic Zones Authority (BEZA). The developers are expected to construct necessary infrastructures on the Mongla site; thereafter, they are to invite investors for setting up plants in the zone.
However, the authorities are to blame for the inordinate delays in formulating necessary regulations that could have expedited the process for implementation of the EZs.
Vietnam, to mention, has built more than 400 economic zones since 1990s, while China, Malaysia and Indonesia have hundreds of such zones for their investors, both local and foreign. Recently, Myanmar is also making fast progress to catch the waves of global investors.
Meanwhile, the Mongla-site, according to a number of local investors, will not be that much attractive to the investors as salinity on the surface there is too high. They say the government had earlier tried much to woo investment to Mongla Export Processing Zone (EPZ) but all such efforts could yield no worthwhile results. A study, commissioned by BEZA, advised the government to roll out the Sherpur Economic Zone first as the required infrastructure -- power, water and gas -- is in place there.
Yet BEZA is set to go for developing Sirajganj site soon, though the land issue is yet to be settled there. The proposed land area for the site is over 1000 acres, just adjacent to the Bangabandhu Bridge over the Jamuna river. The progress on the remaining three sites -- two in Chittagong and one in Moulvi Bazar -- is reportedly at the primary stage. The authorities are expected to conduct feasibility studies on the three sites soon. But, in any case, investment in the said zones would take a long time.
On its part, BEZA has claimed that it has already prepared detailed guidelines for the economic zones. The guidelines are in the process of vetting by the ministry of law. As per the guidelines, the BEZA is scheduled to provide land and the developers will construct the required infrastructures.
It will launch international tenders to pick 'developers and operators' who will invest in the EZs. All investments will come from the developers and operators. The government may make some investment when private land has to be acquired, but it will recoup the cost from the investors later. The zones will be leased out for 30 years, having the scope for renewal.
However, achieving the national goal of becoming a middle-income country by 2021 is dependent, to a considerable extent, on successful implementation of economic zones in the country. Bangladesh, as the economists have pointed out, will be deprived of investment if EZs are not set up right in time; and without investment, the required job creation and income generation will not be possible for Bangladesh to accomplish.
Amidst the severe problem of space for facilitating industrial expansion, foreign investment flow showed a sluggish growth trend in the last fiscal year. The government is now developing economic zones, on top of the export processing zones, to help accelerate the pace of investment activities. This will allow both domestic and export-oriented companies to develop industries within the economic zones.
In fact, the country urgently needs such EZs for the providing jobs to its vast multitude of the unemployed and underemployed workforce and also to those migrating from the rural areas who are still living below the poverty line. Many Asian countries have come out of poverty by developing such economic zones. Bangladesh can largely help address its problems such as poverty and unemployment by doing the same in the way it has been done by countries such as Thailand and Indonesia in the last 25 years.
Experts, however, have recommended for setting up a complete township in the proposed EZs to give workers a better life and their families better access to education and health. In this context, the need for conducting a comprehensive Environment Impact Assessment (EPA) in order to ensure that natural resources are not damaged due to the economic zones, must not be relegated to the background. The experience of the Bangladesh Export Processing Zone Authority (BEPZA) can also drawn upon, while advancing such zones.
However, some economists have expressed their reservations about the government's so-called poor strategic efforts at spurring investment. They say the government has several industrial plots that are lying underutilised under the Bangladesh Small and Cottage Industries Corporation (BSCIC) and also has substantial areas of land, falling under the operational jurisdiction of many state-owned enterprises (SoEs) that have a poor performance track record. Much such plots and areas can be utilised by private industries if infrastructural and utility supports are given.
Although the EZs are intended to creating employment opportunities, some observers do also suggest that the government does need to make a proper evaluation of costs and benefits, considering the importance of agricultural lands in a land scarce country. While pointing out that economic zones and similar concepts are prescriptions of international organisations for promoting private sector growth and ensuring profitability, a section of corporate groups, multinational companies and the vested interest groups within the country, they further note, do try to make most of the gains in the process.
On its part, the authorities have made it clear that such zones would provide equal opportunities for both the general enterprises in the domestic market and the export industries, with facilities to boost local trade and investment. Besides exports, the manufacturers inside the EZs, according to them, will be allowed to sell their produce in the local market which is not allowed in case of EPZs. The zones, managed by a central authority, will offer facilities like common infrastructure and utilities, streamlined administrative process and faster issuance of permits.
Besides attracting foreign direct investment, the proposed economic zones are purported to bringing in millions of dollars in Bangladeshi diaspora investment. If all such things happen, the EZs will certainly be able to generate a substantial number of jobs and boost the domestic economy. In that context, the spill-over effects of the EZs in the form of job creation, investment and transfer of management skills and technology will, of course, be much greater than those from traditional industrial parks.
szkhan@dhaka.net