WB suggests greater public-private partnership in economic zones
Tuesday, 3 July 2007
FE Report
The World Bank has suggested modernisation of its economic zone regime by Bangladesh through enhanced public-private partnership, reflecting international best practices.
"Bangladesh should pursue reforms that leverage the benefits of public-private partnerships, combining public sector regulation with private sector-driven economic zone development along principles of demand responsiveness and commercial viability," says a bank report to be launched Thursday next.
"In the medium-term, by scaling up reforms nationwide and maximising linkages between zones and the economy at large, economic zones can create a multiplier effect on growth," added the report on Piloting Reform through the Development and Management of Economic Zones.
Although the Export Processing Zones (EPZs) are publicly- managed, new generation zones in other countries, developed and operated by the private sector, offer a better range of services to tenants and reduce the fiscal burden on the public sector.
The report said that increased direct and indirect impacts could be realised if the zones regime was modernised to reflect international best practices, including public-private partnerships in development, private management.
Prescribing reforms, the bank said the impact of EPZs has so far been limited, so is in case of smaller industrial estates managed by BSCIC (Bangladesh Small and Cottage Industries Corporation).
"Rather than being a part of an integrated private sector development strategy, the EPZs regime in Bangladesh has been more of a stand-alone initiative and has led to modest impacts," the report maintained.
The publicly-managed EPZs have attracted investment and in contributing to exports leading to $890 million in total investments, accounting for nearly 20 per cent of annual exports, while bringing in 25 per cent of total FDI. The industrial parks also employed over 160,000 people.
But the impact of the smaller BSCIC industrial estates is even more limited, with their main achievement being employment for 96,000 workers.
The World Bank said the most successful economic zones tend to be those used as one tool in a broader growth strategy that includes complementary reforms in areas such as transportation, public administration, land use, labour relations, and internal security.
"Economic zones can offer an oasis of regulatory simplicity amidst administrative complexity and hassle, a liberal policy environment in an otherwise restrictive trade and overall policy regime, and serviced industrial land to investors, which is a rare commodity in infrastructure- and land-starved countries like Bangladesh," the report noted.
Referring to the examples of other countries, the report pointed out that zones in the Dominican Republic account for over 80 per cent of total exports, in China employ millions of people, in Malaysia account for 61 per cent of total inward FDI, and in Mexico generated $1.2 billion in total investments in 2003 alone.
Moreover, zones in Taiwan and South Korea were used as tools for export diversification, in China to test financial, legal, labour, and pricing policy reforms, and in Jordan to catalyse investment policy liberalisation and regulatory streamlining in the rest of the economy.
By examining the strengths and weaknesses of the existing economic zones framework in Bangladesh, policymakers can better understand the opportunities for reforms that would increase their attractiveness to investors and maximise their contribution to the economy, the report suggested.
Room for significant improvement also exists in fostering linkages with the domestic economy, creating a better incentives regime, and further streamlining of administrative processes, according to the report.
Given the required time for a more comprehensive economic zone reform program, the report advised the government to accelerate private development by launching one or more pilot BOT projects under the current regime while the broader reform effort is formulated.
Other option would be to reform the legal and organisational basis for industrial park and EPZ development to allow a broader range of medium-sized zone activity to develop in Bangladesh.
"This could include development of different forms of industrial parks as well as the introduction of more liberal free zones to replace the current EPZ regime," the report noted. "The regime would be flexible enough to accommodate 'hybrid' developments, in which an industrial park includes both a free zone area and related infrastructure and facilities."
In the new free zone regime, accountability for duty-free inventories and production processes should shift from the current input/output controls to post-audits of inventory and in-process stocks, it suggested.
The report insisted that only private investment in public infrastructure could bridge financial resources, efficiencies, and know-how required to make economic zones a success.
The World Bank has suggested modernisation of its economic zone regime by Bangladesh through enhanced public-private partnership, reflecting international best practices.
"Bangladesh should pursue reforms that leverage the benefits of public-private partnerships, combining public sector regulation with private sector-driven economic zone development along principles of demand responsiveness and commercial viability," says a bank report to be launched Thursday next.
"In the medium-term, by scaling up reforms nationwide and maximising linkages between zones and the economy at large, economic zones can create a multiplier effect on growth," added the report on Piloting Reform through the Development and Management of Economic Zones.
Although the Export Processing Zones (EPZs) are publicly- managed, new generation zones in other countries, developed and operated by the private sector, offer a better range of services to tenants and reduce the fiscal burden on the public sector.
The report said that increased direct and indirect impacts could be realised if the zones regime was modernised to reflect international best practices, including public-private partnerships in development, private management.
Prescribing reforms, the bank said the impact of EPZs has so far been limited, so is in case of smaller industrial estates managed by BSCIC (Bangladesh Small and Cottage Industries Corporation).
"Rather than being a part of an integrated private sector development strategy, the EPZs regime in Bangladesh has been more of a stand-alone initiative and has led to modest impacts," the report maintained.
The publicly-managed EPZs have attracted investment and in contributing to exports leading to $890 million in total investments, accounting for nearly 20 per cent of annual exports, while bringing in 25 per cent of total FDI. The industrial parks also employed over 160,000 people.
But the impact of the smaller BSCIC industrial estates is even more limited, with their main achievement being employment for 96,000 workers.
The World Bank said the most successful economic zones tend to be those used as one tool in a broader growth strategy that includes complementary reforms in areas such as transportation, public administration, land use, labour relations, and internal security.
"Economic zones can offer an oasis of regulatory simplicity amidst administrative complexity and hassle, a liberal policy environment in an otherwise restrictive trade and overall policy regime, and serviced industrial land to investors, which is a rare commodity in infrastructure- and land-starved countries like Bangladesh," the report noted.
Referring to the examples of other countries, the report pointed out that zones in the Dominican Republic account for over 80 per cent of total exports, in China employ millions of people, in Malaysia account for 61 per cent of total inward FDI, and in Mexico generated $1.2 billion in total investments in 2003 alone.
Moreover, zones in Taiwan and South Korea were used as tools for export diversification, in China to test financial, legal, labour, and pricing policy reforms, and in Jordan to catalyse investment policy liberalisation and regulatory streamlining in the rest of the economy.
By examining the strengths and weaknesses of the existing economic zones framework in Bangladesh, policymakers can better understand the opportunities for reforms that would increase their attractiveness to investors and maximise their contribution to the economy, the report suggested.
Room for significant improvement also exists in fostering linkages with the domestic economy, creating a better incentives regime, and further streamlining of administrative processes, according to the report.
Given the required time for a more comprehensive economic zone reform program, the report advised the government to accelerate private development by launching one or more pilot BOT projects under the current regime while the broader reform effort is formulated.
Other option would be to reform the legal and organisational basis for industrial park and EPZ development to allow a broader range of medium-sized zone activity to develop in Bangladesh.
"This could include development of different forms of industrial parks as well as the introduction of more liberal free zones to replace the current EPZ regime," the report noted. "The regime would be flexible enough to accommodate 'hybrid' developments, in which an industrial park includes both a free zone area and related infrastructure and facilities."
In the new free zone regime, accountability for duty-free inventories and production processes should shift from the current input/output controls to post-audits of inventory and in-process stocks, it suggested.
The report insisted that only private investment in public infrastructure could bridge financial resources, efficiencies, and know-how required to make economic zones a success.