Study suggests more perks for SEZs in lagging regions

The Special Economic Zones (SEZs) located in the country's rather backward regions need more lucrative incentive packages compared to the SEZs in the developed areas to attract investors, a study opined.
The investors will be able to overcome locational disadvantages, if the government offers more attractive incentives for them, it also suggested.
Currently, the investors of the country's SEZs enjoy equal fiscal benefits irrespective to their locations.
The Center on Budget and Policy of Department of Development Studies of University of Dhaka conducted the study with the support of UKaid and Asia Foundation.
The study has also found that accommodating the small and medium enterprises (SMEs) in the SEZs is a challenge for the government.
"To what extent the small and medium-sized enterprises can get access to the SEZs and how their participation can be ensured is also a policy challenge," the study paper mentioned.
Dr Mohammad A Razzaque, economist and independent consultant for the Overseas Development Institute (ODI), London, and former head of the International Trade, Commonwealth Secretariat, UK, recently presented the study findings to the Bangladesh Economic Zones Authority (BEZA).
The study on 'Promoting inclusive growth in Bangladesh through special economic zones' suggested promoting exports from the SEZs in the backward regions to increase employment generation, including for women.
It also recommended focusing on a few major SEZs in the lagging regions to ensure adequacy of incentives.
Too many sub-optimally-sized SEZs would not be able to exploit agglomeration economies, especially when these were established in urban centres, it noted.
The study suggested implementing the planned 100 SEZs by the government in phases, terming it a 'practical option'.
Connectivity of the SEZs in the lagging regions with the economic corridors and well-functioning infrastructure should be considered seriously, it said.
"Considering Bangladesh's policy target of generating additional exports of US$ 40 billion from the SEZs, simulation results show that without any targeted intervention, most of the increased production will concentrate in relatively better off greater Dhaka and Chittagong regions, given the current excessively skewed distribution of manufacturing export production in favour of these regions."
The lagging districts in the west still benefit from economy-wide linkages and increased demand for labour, according to the study findings.
However, since half of the targeted exports are generated in the SEZs located in the north-west and south-west districts, the impact of poverty reduction for these regions is much higher, it added.
The study also found that ensuring availability of skilled workforce for the SEZs, particularly in the less-developed regions, is a challenge.
The study closely reviewed the SEZ-related regional development issues, undertook policy experiments to assess the potential impact of pursuing different types of investment scenarios for the lagging regions, and provided some recommendations for making the SEZ policies effective.
"The strategy delineated in Bangladesh's Seventh Five-Year Plan (7FYP) for tackling regional disparities strongly suggests attaching priority to the divisions in the western part of Bangladesh. This is yet to be matched by the progress of SEZ development so far."
The study also suggested aligning the strategy with the actual zone development work on the ground.
"Proper utilisation of allotted serviced plots, rather than catering for sheer rent-seeking objectives, is critical."
The researchers of the study opined that utilising the SEZ policies for balanced regional development will need analytical policy work, for which Bangladesh currently lacks sufficient and good quality data.
Talking to the FE, BEZA Executive Chairman Paban Chowdhury said there is better incentive on land prices for investors in the SEZs in the lagging regions.
"We have made three categories for land prices. It is a big incentive for investors."
He welcomed the initiative of conducting study on the country's SEZs, and hoped to utilise its findings in future research work of BEZA.

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