The creation of Special Economic Zones (EPZs) by Bangladesh is mainly motivated by the desire to attract foreign direct investment (FDI). The benefits a company gains by being in an EPZ may mean it can produce and trade goods at a globally competitive price. Mandated by the Bangladesh Economic Zones Act, 2010, the Bangladesh Economic Zones Authority (BEZA) was officially instituted by the government on November 09, 2010 with the objective of establishing economic zones in all potential areas in the country, including backward and underdeveloped regions, to encourage rapid economic development. Several Export Processing Zones (EPZs) have been established across Bangladesh since the 1980s, and the government plans to establish one hundred special economic zones. The aims of the zones include: increased trade, increased investment, job creation and effective administration. To encourage businesses to set up in the zone, financially liberal policies are introduced. These policies typically relate to investing, taxation, trading, quotas, customs and labour regulations. While many countries have set up special economic zones, China has been the most successful in using SEZs to attract foreign investment. In fact, China has even declared an entire province (Hainan) to be an SEZ. At the backdrop of lands becoming scarce for developing manufacturing as well as industrial installations, it has been a cardinal responsibility of the public policy makers of Bangladesh to create economic zones to facilitate investments. The industrial policies of the government envisaged provisions for economic zoning in all regions of Bangladesh. Very prudently indeed, the government adopted the policy of developing SEZs across the country to create jobs for millions, to tap potentials for economic development and to ensure use of available infrastructure in a coordinated manner. Since 1996, when the private EPZ Act was legislated by the then government, many initiatives that were planned to be taken dwindled because of failures in putting in place the required infrastructural support, removing bureaucratic bottlenecks, delay in the delivery of decisions and approvals as well as inconsistencies in public policies. At the current juncture of new initiatives for establishing about 100 SEZs, much attention will have to be given to ensuring governmental support not only in sprit but also in reality. Time must be a guiding factor and substantial support should be crucial for implementation. In order to render investment in SEZs economically viable and to make the facilities advantageous to and competitive for the prospective entrepreneurs — both local and foreign, the zones should be located on undisputed land ( meaning legally cleared) having proper connectivity (through either navigable river route or road and or both) with water, gas and power supply. Banking facilities as well as fiscal incentives (both tariff and taxation) must be in place to help the SEZs become sustainable. SEZs in Bangladesh are needed to be developed in areas where foreign and domestic companies can invest, manufacture and trade without the same control and regulations outside the zones. These areas should be designed to encourage domestic and overseas investment in Bangladesh and boost the country’s economic growth. Nobody will deny the fact that Bangladesh government aims to encourage domestic and foreign investment in the SEZs by introducing more relaxed regulations in these areas but the scheme should not have a rocky beginning. Proper regulations concerning wages, employment and the firing of employees, labour union laws and above all simplified procedures should be in place. Given the longer term funding constraints, the government’s strategy should be to encourage the private sector to play an active role through public-private partnership (PPP) in the development and operation of the SEZs. This offers the potential for a number of different models, such as:
* Assembly of land parcels with secure title and development rights by the government for lease to private zone development groups;
* Build-Operate-Transfer (BOT) approaches to on-site zone infrastructure and facilities with government guarantees and/or financial support;
* Contracting private management for government owned zones or lease of government owned assets by a private operator.
The industrial infrastructure developed within the SEZs is expected to leverage FDI and private investment and achieve increased exports of value added products, measurable improvement in levels of localisation and related value chains, increased use of mineral and agricultural resources, increased job opportunities and creation of industrial hubs, clusters and value chains in underdeveloped areas. A designated SEZ fund may be created which will be available for pre- and post-designation to: (1) applicants that are currently operating an EPZ or SEZ with a valid operator permit, subject to confirmation that an investor that requires infrastructure support has been signed and the investment is in line with the programme objectives; (2) applicants in the process of setting up an SEZ subject to submission of a comprehensive business/concept proposal determining clear socio-economic benefits; (3) applicants that are licensees in terms of the BEZA Act; (4) SEZ operators in terms of the BEZ A Act ; (5) a registered entity in terms of the Companies Act. Therefore, the SEZ policy parameters in Bangladesh will require adopting a more flexible approach to using the instruments and infrastructures of economic zones in the most effective way to leverage sources of comparative advantage of the growing economy and to ensure flexibility to allow for evolution of the zone programme over time. More fundamentally, this will require a change in the mind-set away from the traditional reliance on fiscal incentives and wage restraint, with focus on facilitating a more effective business environment to foster investor-cum-firm level competitiveness, local economic integration, innovation, and social and environmental sustainability. It also will require proactive, flexible and innovative policy approaches to address today’s significant macroeconomic constraints and the many unanticipated challenges that no doubt will shape the environment in the future.
