The government has launched an ambitious programme to establish 100 economic zones (EZs) to accelerate the pace of the country's economic development. It plans to create jobs for 10 million people through these EZs within the next 15 years, according to reports.
Prime Minister Sheikh Hasina, addressing the fourth meeting of the governing board of Bangladesh Economic Zones Authority (BEZA) this month, said ensuring overall development of the country is her government's main goal and that is why maximum efforts are being given to gear up efforts for promoting industrial development and creating more employment opportunities.
Besides creation of jobs, the EZs are expected to boost the country's export earnings by $40 billion a year, encourage industrialisation, increase production and diversify export basket. So far, the government has approved 59 sites across the country for EZ development. Out of such earmarked areas, the development of 10 EZs has recently begun with 'renewed zeal'.
The trend suggests that the work for setting up of EZs for local and foreign investors is finally gaining momentum, following the approval of 24 new zones and the sanction of nearly Tk 4.50 billion to acquire land for a special zone. It is critically important to smoothly implement the policies and guidelines for setting up the EZs countrywide.
One of the objectives of establishing EZs is to attract foreign direct investment (FDI) to the country. Such overseas investment, however, has reportedly been on the decline. It dropped 32 per cent year-on-year in the first quarter of the year due to what, analysts note, uncertain business climate. The FDI also decreased over the previous quarter by 24 per cent.
Economists and businessmen squarely blamed the infrastructural bottlenecks, administrative barriers and uncertain business climate for the declining FDI inflows. If uncertainty persists in a country, attracting foreign investment is very difficult. This problem has arisen now, in a more pronounced manner than before in Bangladesh, particularly after the recent terror attacks in Gulshan, Sholakia and other places.
In fact, foreign investors take into account what the World Economic Forum (WEF), the International Finance Corporation's (IFC) Ease of Doing Business and the Logistics Performance Index say about Bangladesh. The position of the country has not otherwise improved to any marked extent, in terms of rankings, particularly in the sectors critical for the economy.
In the latest World Bank's (WB's) ease of doing business ranking, Bangladesh's position dropped two rungs to 174 out of a total of 189 countries covered under it, due to its stalled regulatory reforms. The overall private investment rate has also declined as a ratio to the country's gross domestic product (GDP), according to reports.
Bangladesh's ranking is very low when it comes to getting electricity connection, property registration, contract enforcement and dispute settlement. Alternative systems to resolve dispute and recover defaulted bank credits are not functioning properly.
There has, of late, been some progress in the preparatory work for the special EZs by way of signing contracts. The BEZA, in its recent governing body meeting, took a decision that a policy would be formulated to provide one-stop services to those who would invest in EZs. But it is not clearly known whether the BEZA enjoys enough power to ensure this
Many countries around the world have benefited tremendously from EZs. For example, Vietnam has enormously boosted its industrial output through 200 EZs developed during the last 16 years. If Vietnam can do such a huge job, why not Bangladesh? Myanmar is also right on track now to woo the global investors. Yet unfortunately, Bangladesh is lagging far behind.
The government has also selected four exclusive economic zones for three countries -- Japan, China and India -- as they have been looking for opportunities to set up industrial plants in separate zones, for quite a long time. As reports in the media indicate, Japanese investors are expected to get land in Narsingdi and Narayanganj. Chinese investors will also be given another zone in Chittagong. Two special economic zones -- one in Bheramara and another in Mongla -- have been marked for Indian investors,
In order to attract long-term investments, the government did offer tax benefits. Developers of the EZs are supposed to enjoy such facilities. Investment of foreign entrepreneurs will not be restricted through ceiling. They will enjoy full repatriation of capital and dividend. The foreign investors will also be exempted from export tax; they can enjoy 50 per cent rebate in land registration fees, and 20 per cent value added tax (VAT) exemption in cases like utility service bills.
Added to this, foreign investors in EZs will be allowed to bring 5.0 per cent of a factory's workforce from their own countries. Foreign workers having technical expertise in respective fields will be allowed to enjoy 50 per cent income tax exemption for five years.
However, in order to attract private and foreign investors, as the analysts consider, more things do need to be accomplished. There should be reduction of taxes and duty structure on services, easing visa and work permit with extension of visa tenure for the overseas investors. A satellite township also needs be built in the EZs to give the workers a better life through better access to education and health.
Under the circumstances, maximum efforts should be given to speed up the implementation process of the EZs. Otherwise, it will be a daunting task for the government to keep the economy on track for sustaining the growth momentum that is needed to achieve the coveted status of a middle, middle income country. The country will certainly be deprived of private and foreign investments if such zones are not set up with all necessary facilities as expeditiously as possible.