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Export Processing Zone Introduction: The Bangladesh Export Processing Zone Authority (BEPZA) is an agency of the Government of Bangladesh

and is administered out of the Prime Minister's Office. Its objective is to manage the various export processing zones in Bangladesh. The Government provides numerous incentives for investors for opening factories in EPZs. For example, new factories enjoy tax holidays for 5 years. Also, labor unions and other activities that are often viewed detrimental to productivity, are banned inside the EPZs. EPZ is the acronym for Export Processing Zone. According to the United Nations Industrial Development Organization, “An export processing zone (EPZ) is defined as a territorial or economic enclave in which goods may be imported and manufactured and reshipped with a reduction in duties / and/or minimal intervention by custom officials”. However, an Export Processing Zone is an industrial area that constitutes an enclave with regard to customs’ tariffs and the commercial code in force in the host country. History of EPZ in Bangladesh: After the independence the stagnant economy of the war ravaged country was desperately seeking private capital, technical knowhow to facilitate the industrialization process to achieve economic growth. During the initial years it could not happen. However, a visit by the than World Bank Vice President Mr. Robert McNamara in the early eighties to Bangladesh transmitted the concept of EPZs to us. Since then EPZs, in tune with the liberal industrial policy of the government along with investment friendly legal & institutional framework like Foreign Private Investment (Promotion and Protection) Act’1980, have made significant progress. Pioneer EPZ of the country Chittagong EPZ started functioning in the year 1983 in the Port city of Chittagong, seeing its unprecedented success the second one came into being in 1991in Dhaka. Presently there are as many as eight operational EPZs and two proposed EPZs in different locations of the country contributing to the overall economic development process of Bangladesh through promotion of export and FDI (Foreign Direct Investment), generation of employment, transfer of technology, and development of forward and backward linkage industries and so on. About BEPZA: In order to stimulate rapid economic growth of the country, particularly through industrialization, the government has adopted an 'Open Door Policy' to attract foreign investment to Bangladesh. The Bangladesh Export Processing Zones Authority (BEPZA) is the official organ of the government to promote, attract and facilitate foreign investment in the Export Processing Zones. The primary objectives of an EPZ are to provide special areas where potential investors would find a congenial investment climate, free from cumbersome procedures.

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Export Processing Zone Objects of EPZ in Bangladesh: The objective of setting up EPZs was to provide investors with a congenial investment climate free from excessive procedural complications. The main objectives are given below; Types of EPZ: EPZ can be three types. They are given below; 1. Manufacturing 2. Warehousing. 3. Combination of both. EPZs of Bangladesh are of manufacturing type. Currently around 900 Export Processing Zones throughout the world enable manufacturers, assemblers, importers or exporters to benefit from a variety of privileged facilities. Investors Types of EPZ in Bangladesh: Category - A: 100% Foreign ownership 174 (60%) Category - B: Joint venture 39 (16%) Category - C: 100% local venture 70 (24%) Promotion of foreign (FDI) & local investment Diversifications of export Development of backward & forward linkages Generation of employment Transfer of technology Upgradation of skill Development of management

24%

100% Foreign ownership 60% Joint venture 100% Local venture

16%

Fig: Percentage ratio of Investors types

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Export Processing Zone Lists if country invested in Bangladesh: South Korea Bangladesh Japan China Malaysia Taiwan U.S.A U.K Italy Canada Netherland Germany BR. India Sweden Singapore Pakistan Panama Switzerland Belgium Denmark France Thailand Sri-Lanka Indonesia Australia Nepal Mauritius Ireland U.A.E. Turkey Ukraine Marshal Island

Brand products made in Bangladesh EPZ: NIKE, REEBOK, LAFUMA, H&M (SWEDEN), GAP, BROUKS, J.C. PENNY, WALMART, KMART, OSPIG (GERMANY), MOTHER CARE (UK), LEE, WRANGLER, DOCKERS, NBA, TOMMY, HILFIGER, ADIDAS, MILES FALCON( (GERMANY), USA), AMERICAN EDIE EAGLE, BAUYER, HI-TECH EAGLE, (UK), RELEIGH PHILLIP(UK), MAURICE EMMILEE, (UK), FREE WINS MORE, SPIRIL DECATHLON. (UK),

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Export Processing Zone EPZ of Bangladesh: 1. 2. 3. 4. 5. 6. 7. 8. EPZ- CHITTAGONG EPZ- DHAKA EPZ- MONGLA EPZ- ISHWARDI EPZ- COMILLA EPZ- UTTARA EPZ- ADAMJEE EPZ- KARNAPHULI

Reason to invest in Bangladesh EPZ: There are some reasons which are important for the investors to invest in Bangladesh EPZ. They are given below; 1. 2. 3. 4. 5. 6. 7. 8. Law & order situation Infrastructure facilities Reduction of lead time Cost of doing business Friendly policy of government Incentives Signatory of MIGA (Multilateral Investment Guarantee Agency) Signatory of ICSID (International Centre For Settlement Of Investment Dispute) 9. Member of WIPO (World Intellectual Property Organization) 10. Member of OPIC (Overseas Private Investment Corporation) 11. Asia's low cost production base

Incentives and Facilities of EPZ in Bangladesh: In the EPZ of Bangladesh, there are various facilities for the investor countries to attract them to invest in our country. They are given below; Fiscal Incentives 10 years tax holiday Duty free import of construction materials Duty free import of machineries, office equipment & spare parts etc. Duty free import and export of raw materials and finished goods

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Export Processing Zone Relief from double taxation Exemption from dividend tax GSP facility available Accelerated depreciation on machinery or plant allowed Remittance of royalty, technical and consultancy fees allowed Duty & quota free access to EU, Canada, Norway, Australia etc.

Non – Fiscal Incentives; 100% foreign ownership permissible Enjoy MFN (most favored nation) status No ceiling on foreign and local investment Full repatriation of capital & dividend Foreign Currency loan from abroad under direct automatic route Non-resident Foreign Currency Deposit (NFCD) Account permitted Operation of FC account by 'B' and 'C' type Industries allowed.

Facilities;

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No UD, IRC, ERC and renewal of Bond license Work permits issued by BEPZA Secured and protected bonded area Off-Shore banking available Import on Documentary Acceptance (DA) basic allowed Bank of Back L/C Import and Export on CM basis allowed Import from DTA (Domestic Tariff Area) 10% sale to DTA (Domestic Tariff Area) Customs clearance at factory site Simplified sanction procedure Sub-contracting with export oriented Industries inside and outside EPZ allowed Relocation of foreign industries allowed Accords Residentship and Citizenship One Window same day service and simplified procedure.

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Export Processing Zone Infrastructure & Support Services:

Infrastructure Support Services Business: Bank, Courier, Post office, C&F Agent, Shipping Agent, MTO etc. Administrative: Customs Office, Police Station, In-house Security, Fire Station, Public Transport, Medical Centre etc. Others: Restaurant, Health Club, Investors Club, Recreation Centre, School and College, Sports Complex, Exclusive Telephone Exchange, Electricity Sub Station, Business Centre, Anglers Club etc. Basic Infrastructure: Electricity, Water, &Gas Fully serviced plots available Factory building available on rental basis Enclave for workers Dormitory & Day Care Centre Warehouse/Godown-available

Investment Guarantee: Foreign Private Investment (Promotion and Protection) Act, 1980 secures all foreign investment in Bangladesh. OPIC's (Overseas Investment Corporation, USA) insurance and finance programmes operable. Security and safeguards available under Multilateral Investment Guarantee Agency (MIGA) of which Bangladesh is a member. Arbitration facility of the International Center for the Settlement of Investment Dispute (ICSID) available.

EPZs growing contribution to Investment, Export & Employment: Foreign Direct Investment (FDI) the acquisition of managerial control by a citizen or corporation of a home nation over a corporation of some other host nation. Corporations that

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Export Processing Zone widely engage in FDI are called multinational companies, multinational enterprises, or transnational corporations. FDI traditionally implies export of real capital from home to the host nation, but even when economic investment results from FDI, capital may not be transferred from the home nation to the host one. Rather, multinational corporation may acquire/utilise real capital from local (or a third-nation) sources. On the demand side, however, Bangladesh invites FDI for industrial growth, in particular welcoming establishment of manufacturing firms and service sector enterprises that would sell their products within the country and also export outside it. Diversification & Generation Employment, Absorption of huge unskilled and skilled workforce in the export driven labor intensive manufacturing sector of EPZs have facilitated rapid industrialization process and accelerated the real economic growth. Increasing FDI in the manufacturing activity has important bearing on the development of market access skill and transfer of technology. Vibrant economic activities of EPZs are inducing domestic economy through expansion of tertiary businesses, increased domestic consumption, outsourcing of goods and services from tariff area. Simultaneously with the primary objective of employment generation, EPZs have also facilitated diversification of the product base by adding new sectors like electronic, shoes, engineering products other than RMG. Backward integration to textile is taking place in EPZs to backup RMG sector in the competing global market. Technology Transfer, The field survey reveals that in a relatively simple industry with no proprietary technology, such as RMG and footwear, technology transfer takes place readily both inside and outside the EPZs, though on a very limited scale. The transfer is from foreign technicians and managers working together on factory floors, from foreign buyers to local firms, and through consultants, movement of employees, visits to plants abroad, and so forth. But in industries, such as electronic components, with internationally established firms resist challenging, fast-changing, and largely proprietary technology, transfer of technology to Bangladesh is very limited. In any case, firms in Bangladesh are not capable of mounting a competitive challenge without a lot of help. In such industries, the direct transfer of product and process technologies through the EPZs has been very small, except in simple industries, such as RMG. Skill Transfer: Technology transfer is intertwined with skill transfer. The field survey reveals that skill transfer to the rest of the economy occurs mainly through the movement of people who have received training in foreign and joint-venture firms in the EPZs and through learning by locally owned firms there. Interviews with a number of factory managers in the EPZs indicate that the factories in the EPZs contribute significantly to workers’ technical production and factory management skills even though the acquisition of broader management capability or marketing skills is very slow.

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Export Processing Zone Year wise Employment of EPZs in Bangladesh: Table: Year wise local employment of EPZ in Bangladesh Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-2011 (NOV,2010) Year wise Export of EPZs in Bangladesh: Table: Year wise Export of EPZ in Bangladesh Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-2011 (NOV,2010) Export in Million US Dollar Current Cumulative 1548.68 10003.62 1836.18 11839.80 2063.67 2063.67 2429.58 16333.04 2581.70 18914.74 2822.54 21737.28 1309.55 23046.82 Local Employment in Total Current Cumulative 15802 154,788 23,021 177,809 23,360 201,169 17,130 218,299 16,394 234,693 28,064 262,757 10,707 273464

Year wise Investment of EPZs in Bangladesh: Table: Year wise Investment of EPZ in Bangladesh Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-2011 (NOV,2010) Investment in Million US Dollar Current Cumulative 118.52 867.01 112.89 979.89 152.37 1132.26 302.19 1434.45 148.03 1582.47 221.99 1804.46 87.58 1892.21

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Export Processing Zone Product wise Enterprise: Table: Product wise enterprise of EPZ in Bangladesh

EPZs contribution to the national economy: Apart from export earning objectives employment pattern shows that EPZs have been making significant contribution to the gradual empowerment of women which supports the objective of Millennium Development Goal (MDG).This financial and social empowerment of women has far reaching effect on the country’s poverty reduction initiatives as the increasing number of young girls and woman are joining the productive workforce of EPZs migrating from poverty prone remote rural areas of Bangladesh linking the rural economy with industrialization process. BEPZA has also accelerated the privatization effort of the government successfully by converting two loss making State Own Enterprises (SOEs) of the country namely Chittagong Steel Mills and Adamjee Jute Mills Ltd in to EPZs. Once abandoned projects are now vibrating with activities. Mention may also be made that investors from thirty three countries have already invested in the EPZs of Bangladesh. The leading nations among them include South Korea, Japan, China and the host Bangladesh.

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Export Processing Zone

36% Female 1,28,677 64% Male 72,381

Fig: Percentage ratio of employment Challenges of EPZ of Bangladesh: BEPZA has been striving hard to upgrade its operational efficiency to a level which would cater the diversified needs of the investors. To achieve this objective challenges ahead for BEPZA would be: a. Development of improved physical infrastructures, integrated environment and water management, power generation, commercial complex on Public Private Partnership (PPP) basis. b. Development of a productive and sound industrial relation environment. Compliant industrialization and full right of workers union as per international best practice benchmarking. c. Achieve organizational excellence by developing online capabilities and automation to ensure quality and expeditious delivery of services to the investors. Ensure full implementation of E-governance in all EPZs. d. Create more zones in the strategically located sites to accommodate the increasing demand of the existing investors.

Conclusion: With the changing global business and investment scenario the EPZs of Bangladesh have revised its expansion strategy and in tune with the varied needs of the present day businesses, Bangladesh EPZ Authority (BEPZA) is customizing its investment incentives and facilities. Opening up of new sectors of investment have provided an excellent opportunity to prospective investors. New zones in strategically located places with state of art industrial facilities and proinvestment institutional frame work providing the right kind of environment to grow. BEPZA believes that investors from all around the globe would find the EPZs of Bangladesh as a truly attractive investment destination. For better export performance international market access of Bangladeshi product is of prime important. Bangladesh has got huge potential in respect of natural resources, skilled manpower and investment friendly atmosphere. Development partners should come forward to find market for Bangladeshi products in the developed countries.

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