SEZs to spur industrialisation

Helal Uddin Ahmed | Published: June 15, 2015 00:00:00 | Updated: July 04, 2015 11:51:14

A new hope for accelerated industrialisation along with concomitant new investments as well as rise in exports and employment has been generated in Bangladesh in recent times due to some pragmatic initiatives taken by the government. These include establishment of Special Economic Zones (SEZ). SEZs are similar to modern industrial townships founded on sustainable operation of manufacturing and service industries. All necessary urban infrastructure like housing, commercial buildings, social amenities, cultural, educational and recreational facilities are also available in SEZ.
The term was first used by the Chinese, who defined Special Economic Zone (SEZ) as a "delineated area within the country where more liberal and flexible policies are used to promote export-oriented investments". The Indians have defined it as "a specifically delineated duty-free enclave within the country, deemed to be a foreign territory for the purposes of trade operations, duties and tariffs". The Indonesians have defined it as "a special area designed to create a hub of economic activities governed by a single zone authority to administer efficient custom, import and export operations. It also provides the best practices in investment services for businesses in the zone".
The academic definition of SEZ is: "It is characterised, in general terms, as a geographical area within the territory of a country where economic activities of certain kinds are promoted by a set of policy instruments that are not generally applicable to the rest of the country." Â
A SEZ can be a pure industrial park, a modern industrial township, an agricultural enclave, tourism-cum-resort compound, a resort zone with tourism and residential development and an island with a complete mix of economic activities. The main purposes of SEZs are to attract foreign direct investment, boost exports, generate employment locally, bolster economic multipliers and experiment with new policies. A country usually seeks to develop SEZs when the existing investment climate is not very competitive, complexities have to be faced in land acquisition, the problem of unemployment is acute and there is urgent need for socio-economic growth. Industrial SEZs are considered to be a foreign territory or a duty-free enclave that mainly focuses on manufacturing for exports, applies simplified operational procedures, offers investment incentives and tax concessions, extends efficient infrastructure and enjoys a higher degree of autonomy. A SEZ resembles Free Trade Port Areas (FTPA) in terms of manufacturing and processing, trade and logistics, and duty-free import, the only difference being it may not have provision for seaport operations. The main difference of SEZs with Export Processing Zones (EPZs) is that the latter do not have trade and logistics facilities.
The reasons why investors prefer special economic zones for investments are as follows: (a) large land parcels at low price; (b) reduced taxes; (c) abundant workforce at competitive wages; (d) high-quality trainable manpower; (e) good logistics connectivity; (f) abundant natural resources; (g) conducive manufacturing environment; (h) sense of safety and security. There are many examples of successful SEZs in Southeast and East Asia including Batamindo Industrial Park in Indonesia and Suzhou Industrial Park in China.
BANGLADESH PERSPECTIVE: The Bangladesh Economic Zones Authority (BEZA) is now working hard for setting up four different kinds of SEZs in the country, viz. public, private, foreign-owned and joint collaboration (g2g). The government aims to build 100 special economic zones within the next 15 years. Of these, primary approval has already been given to 30 SEZs. In his budget speech for 2015-16, Finance Minister AMA Muhith disclosed that the proposed 100 SEZs would bring export earnings of 40 billion US dollars per year and would generate employment opportunities for 10 million workers.
Bangladesh Economic Zones Act was passed by the Jatiya Sangsad in August 2010. The first meeting of its Board of Governors was held on April 18, 2012 under the chairmanship of Prime Minister Sheikh Hasina. A project titled 'Development of Economic Zones in Bangladesh' was also undertaken by the government for developing SEZs. The prime minister is the chairperson of the BEZA Board of Governors.
According to BEZA sources, work is now progressing fast on establishing eight economic zones. Of these, construction of fencing for five has almost been completed. Work on land acquisition is being done for the other three. The Mongla Economic Zone is located beside the Mongla Port on 1,041 acres of government-owned land. Besides, 7,716 acres of land has been acquired at Mirsarai of Chittagong, 635 acres at Anwara of Chittagong and 352 acres at Moulvibazar district. BEZA currently owns a total of 5 thousand 120 acres of land. Another 10 thousand acres would come under its possession within this year.
BEZA sources have disclosed that six SEZs are currently being implemented by the private sector. Of these, the Meghna Group is implementing two projects at Sonargaon of Narayanganj - one is the 72 acresÂ Meghna PEZ and the other the 22-acres Meghna Industrial Zone. Besides, the Abdul Monem PEZ is being set up on 216 acres of land at Gazaria of Munshiganj, while the A K Khan PEZ is being set up at Palash of Narsingdi. These four PEZs have been awarded registration licences by BEZA during February-May period of this year. In addition, BGMEA Industrial Park is being established on 500 acres of land at Gazaria of Munshiganj, while another PEZ is being set up on 81 acres of land at Rampal of Bagerhat. BEZA plans to award licences to four more private companies within this year for setting up SEZs.
The Finance Minister said in his budget speech that two SEZs have been kept reserved for China and Japan and another is under consideration for India. During the recent visit of Indian Prime Minister Narendra Modi, MoUs have been signed with India for setting up two SEZs, one at Bheramara of Kushtia (477 acres) and another at Mongla of Bagerhat (110 acres). A SEZ for China is being built on 844 acres of land at Anwara of Chittagong. The China Harbour Engineering Company is implementing it on behalf of the Chinese government. The SEZ for Japanese investors is being built on 510 acres of land at Sripur of Gazipur. According to the BEZA sources, the SEZs for India would be built on the basis of G2G contract. The law has to be amended for facilitating its implementation.
Two specialised SEZs will be built at Sabrang of Cox's Bazar and Keraniganj of Dhaka. The former on 28 acres of land will focus on tourism while the latter on 105 acres of land will focus on information technology. Besides, land is being acquired for another 4 planned SEZs at Subarnachar of Noakhali (350 acres), Moinamati of Comilla (103 acres), Fulbaria of Mymensingh (114 acres) and Patuakhali district (113 acres). Outside these, land will be acquired for building SEZs at Jamalpur (488 acres), Narayanganj (891 acres), Bhola (304 acres), Ashuganj of Brahmanbaria (328 acres), Panchagarh (610 acres), Narsingdi (690 acres), Manikganj (300 acres), Agoiljhara of Barisal (300 acres), and Nilphamari (107 acres).
The private sector entrepreneurs as well as local and foreign investors are optimistic that the setting up of 100 SEZs within the next 15 years will usher in a new era of industrialisation in the country. The government is hopeful that this, in turn, would accelerate the pace of socio-economic growth and lift the nation to the status of a middle-income country by 2021, coinciding with the silver jubilee of Bangladesh's independence.
Dr. Helal Uddin Ahmed is a senior civil servant and former editor of Bangladesh Quarterly.Â hahmed1960@gmail.com