A new optimism has been generated in Bangladesh in recent times in the areas of rapid industrialisation and concomitant new investments, as well as rise in exports and employment due to some pragmatic initiatives taken by the government. These include establishment of Special Economic Zones (SEZs). These are similar to modern industrial townships founded on sustainable operation of manufacturing and service industries and supported by necessary infrastructures such as housing, commercial buildings, social amenities, cultural, educational and recreational facilities.
The term was first coined by the Chinese, who defined SEZ as a "delineated area within the country where more liberal and flexible policies are used to promote export-oriented investments". The Indonesian definition says, "It is 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".
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" (W. Ge, 1999).
An SEZ can be a pure industrial park, modern industrial township, agricultural enclave, tourism-cum-resort compound, a zone with tourism and residential facilities, and an island with a complete mix of economic activities.
The main purposes of SEZs are to attract foreign direct investment (FDI), 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 are faced in land acquisition, the unemployment problem is acute, and there is urgent need for socio-economic growth.
Industrial SEZs are considered to be a foreign territory or duty-free enclave that mainly focuses on manufacturing for exports. It applies simplified operational procedures, offers investment incentives and tax concessions, extends efficient infrastructure and enjoys a higher degree of autonomy. An SEZ resembles Free Trade Port Areas (FTPA) in terms of manufacturing and processing, trade and logistics, and duty-free import. The only difference is that 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 logistic facilities.
The reasons why investors prefer special economic zones include large land parcels at low price, reduced taxes, abundant workforce at competitive wages, high-quality trainable manpower, good logistic connectivity, abundant natural resources, conducive manufacturing environment, and sense of security.
There are many examples of successful SEZs in Southeast and East Asia including the Batamindo Industrial Park of Indonesia and Suzhou Industrial Park in China. According to the UNCTAD, there were 176 SEZs in 47 countries in 1986 and the number has now jumped to 5,400 in 147 countries around the world.
Bangladesh Economic Zones Authority (BEZA) was set up after 'Bangladesh Economic Zones Act' was passed by the Jatiya Sangsad (national assembly) in August 2010. BEZA has been working for setting up four different kinds of SEZs, viz. public, private, foreign-owned, and joint collaboration.
'Bangladesh Private Economic Zones Policy 2015' has also been adopted for attracting private investments in the SEZs. The policy seeks to promote investments in agro-based and manufacturing enterprises, services, trade and commerce, tourism, housing, entertainment and power sectors. It also identifies the infrastructure facilities at the SEZs. Work has picked up at BEZA since Paban Chowdhury, a brilliant civil servant and business graduate from the famed IBA of Dhaka University, joined the body as its executive chairman in June 2014.
BEZA is now working hard to generate employment opportunities for 10 million workers and exports worth $40 billion from 100 SEZs by the year 2030. BEZA has already accorded approval to 88 SEZs, of which 27 are privately-owned.
According to a recent BEZA report, investment proposals worth $17.85 billion have already been made at three (03) public and 10 private SEZs. Some of the 77 companies in the three (03) public SEZs have started construction of factories. The private SEZs are ahead as 20 companies have already started production. Of these, exports have commenced from four (04) SEZs, with the cumulative figure being $100 million.
The SEZs have reduced hassles in procuring land, and there are assurances of prompt electricity and gas connections as well as other services on a priority basis. Work is now progressing fast in 28 SEZs, of which 13 are in the public and 15 in the private sectors.
Till now, the highest investments have been attracted by Bangabandhu Sheikh Mujib Industrial Town, which stretches from Mirsarai to Feni. Investment proposals worth $12.39 billion have already landed here and 69 enterprises have taken possession of land. Maheshkhali SEZ has investment proposals of $2.48 billion and Srihatta SEZ has proposals worth $1.31 billion.
The investors are constructing factories in six (06) SEZS. These include 10 in Meghna Economic Zone, 15 in Meghna Industrial Economic Zone, six (06) in City Economic Zone, one (01) in Abdul Monem Economic Zone, five (05) in Aman Economic Zone and two (02) in the Bay Economic Zone.
Of the 39 factories, production has started in 20. The companies include many globally renowned brands like Honda and Nippon Steel of Japan, SK Gas of South Korea, Meigo of USA, Eurasia Foods of the UK and some big Chinese enterprises.
According to BEZA, work is now progressing fast on land development and utilities connection in the public SEZs. Getting land for investment is usually quite difficult and time consuming in Bangladesh. The SEZs are eliminating these difficulties in obtaining land for investment. They are also expected to override typical problems faced due to unplanned industrialisation, lack of infrastructure, environmental pollution, etc.
Both local and foreign investors are optimistic that the establishment of 100 SEZs within the next decade will usher in a new era of industrialisation in the country. This, in turn, would accelerate the pace of socio-economic growth and help lift the nation to the status of an upper middle-income country in the foreseeable future.
Dr. Helal Uddin Ahmed is a retired Additional Secretary and former Editor of Bangladesh Quarterly.