Export Diversification and Role of Export Processing Zones in Bangladesh

1
Export Diversification and Role of Export
Processing Zones in Bangladesh
Presentation By
BRIG GEN MD. ZAKIR HOSSAIN psc, G (Retd)
2
Introduction

• At the onset, I like to inform the audience that
  since independence Bangladesh inherited an
  unprecedented trade gap, massive unemployment,
  acute shortage of foreign currency, dearth of
  capital investment and lack of technical
  know-how.
• These lead the economy to import control by
  imposing tariff barriers, import substitution by
  encouraging indigenous industry, adoption of
  suitable exchange rate policy and export
  promotion policies.
• During that trail and error game of economy,
  the Government has decided to establish Export
  Processing Zone in Bangladesh.

3
SCOPE

• Overview of overall Export Performance and
  Export Diversification of Bangladesh.
• Focus on the Performance of EPZs in details.

4
Economic Profile Bangladesh

• Last years GDP was recorded at US61.41 billion
  with 5.40 annual growth. Industry, agriculture
  and service sector represents 28,22 and 50
  respectively.

5
Export Performance

• During 2004-05 export performance of Bangladesh
  raised upto US 8654.52 million (13.83 growth).
• Most contributors to the exportable items are
  RMG (Woven Garments and Knitwear), Frozen food,
  Home textile, Computer Service, bicycle and
  ceramic.

Fig 1 Bangladesh Export by Major Products
6
Major Export Base

• Bangladesh exporting 140 items in the global
  market. Share of major export items are

1. RMG 74.16 5 Items
2. Frozen Foods 4.86 5 Items
3. Jute goods 3.55 5 Items
4. Leather 2.55 5 Items
5. Raw Jute 1.11 5 Items
Total Total 86.23 5 Items
7
Regional Market Share

• Bangladesh Exporting to 165 countries of the
  Global markets

1. American region 30.1
2. EU region 56.6
3. Other region 13.3

• Shifting of markets from Asia/Africa to America
  EU markets.

8
Textile
Fig 2 Growth of RMG Exports from Bangladesh
(1981-82 to 2004-2005) in million US
9
Export Diversification

• Since the economy of Bangladesh is agro-based,
  its export base was set on primary commodities
  like raw jute, tea, frozen food, agro product etc.

1972-73 1977-78 1982-83 1987-88 1992-93 1997-98 2004-05
1. Raw Jute 133.841 96.933 109.813 80.534 74.326 107.767 96.185
2. Tea 9.688 45.270 46.575 38.953 41.143 47.467 15.843
3. Frozen Food 3.061 19.448 72.054 139.651 165.340 293.836 420.744
4. Fish 1.414 .306 .894 3.717 5.687 6.510 7.840
5. Shark fins Fish maws .021 .724 .747 1.494 3.667 2.378 .006
6. Agricultural products .713 3.865 7.016 19.094 14.528 39.137 82.468
7. Animal Feed .032 1.326 2.384 - - - -
8. Animal casings .011 .118 .191 .117 .092 .154 .002
9. Crude fertilizer .201 .391 .399 .066 1.623 .072 -
10. Other primary com. .678 1.686 3.090 2.465 7.502 4.597 25.201

Total Primary Com. 149.775 170.072 243.164 286.690 313.908 501.917 648.290
Fig 3 Primary commodities export from Bangladesh
(Value in Million US)
10
Export Diversification continues
Fig 4 Primary commodities Export Growth
(Million US)
11
Export Diversification continues
1972-73 1977-78 1982-83 1987-88 1992-93 1997-98 2004-05
1. Jute Goods 179.257 249.006 319.692 302.415 292.370 281.425 307.477
2. Leather 16.182 45.378 58.456 147.170 147.906 190.260 220.933
3. Leather goods .018 .001 .001 - 10.724 48.106 -
4. Petroleum by Products - 11.656 30.833 11.975 36.806 10.927 35.080
5. Readymade garments - .069 10.842 433.924 1240.481 2843.327 3598.205
6. Knitwear .006 - - - 204.545 940.307 2819.472
7. Chemical products .06 .231 11.680 26.527 55.005 74.176 197.185
8. Paper and allied products 3.054 8.668 4.628 11.873 2.631 .042 -
9. Handicrafts .039 1.761 2.479 3.756 5.431 5.995 5.125
10. Engineering products - .161 2.492 2.809 17.512 19.643 85.020
11. Specialized textile and Household linen - - .625 .679 29.008 76.325 220.932
12. Molasses - .642 .631 .745 .226 - .087
13. Electronics - - - - 849 3299 22.400
14. Stainless steel cutlery - .001 .034 - .291 .434 -
15. Handloom products - - 2 - - - -
16. Glass Sheet - - 1 - - - -
17. Other mfd. commodities .024 6.274 1.037 2.620 25.300 159.976 482.882
Total mfd. Commodities 198.642 323.669 443.432 944.511 2068.985 4659.285 8006.234
Fig 5 Manufactured commodities export from
Bangladesh (value in million US)
12
Export Diversification continues
Fig 6 Manufactured Commodities Export Growth
(Million US)
13
EPZs of Bangladesh

• In late 70s Bangladesh EPZ has emerged to
  attract capital investment in EPZ.
• The manifested target to set up EPZ has been
  fixed up at rapid industrialization, employment
  of human resources, transfer of technology and
  foreign exchange earning by boosting up export.
• With this end in view, some targeted efforts
  have been taken to attract foreign investment and
  promotion of exports through creation of special
  infrastructures and support service facilities,
  giving fiscal and non-fiscal incentives and
  ensure free trade environment within the EPZ.

14
EPZs of Bangladesh continues

• Economic Rationale for a better Export
  Performance of the Zones

• EPZs are special enclaves, separated from the
  Domestic Tariff Area (DTA) by fiscal barriers and
  are intended to provide an internationally
  competitive duty free environment for export
  production at low cost.
• EPZs are benefited usually from the following
• Modern and efficient infrastructure
• General fiscal and non fiscal concessions to
  firms
• Better governance due to single window
  facilities to ensure corruption and red tape free
  business environment.

15
MISSION OF BEPZA
TO STRENGTHEN THE ECONOMIC BASE OF BANGLADESH BY
PROMOTING INVESTMENT GENERATION OF EMPLOYMENT
16
 
MANAGEMENT OF BEPZA
BOARD OF GOVERNORS CHAIRED BY THE HONBLE PRIME
MINISTER
EXECUTIVE BOARD   CHAIRED BY THE EXECUTIVE
CHAIRMAN
BEPZA   HEADED BY THE EXECUTIVE CHAIRMAN
EPZ   HEADED BY GENERAL MANAGER
 
17
ORGANOGRAM OF BEPZA
EXECUTIVE CHAIRMAN
MEMBER (ENGG.)
MEMBER (FINANCE)
MEMBER (IP)
CA FO
SECRETARY
GM Investment Promotion
CHIEF ENGR.
18
EPZs of Bangladesh continues

• Mode of Investment

• BEPZA pursues an open door policy in matters of
  foreign investment in its EPZs.
• Bangladesh Export Processing Zones Authority is
  a statutory body but very different from other
  autonomous organization.
• It enjoys complete freedom of action in its
  decision making process independently of any
  Administrative Ministry.

19
TYPES OF INVESTMENT
Investors from 30 countries
A - 100 FOREIGN OWNERSHIP 144 61 B -
JOINT VENTURE 37 15 C - 100 LOCAL
VENTURE 56 24
TOTAL IN OP. 237
100 U/IMP WITH LA
71

SANCTIONED IND.
57 365
20
EPZs of Bangladesh continues
Fig 7 EPZs of Bangladesh
21
EPZs of Bangladesh continues

• Investment

• Despite world wide recession FDI has increased
  in the EPZs during the last 48 months.
• In June, 2001 the cumulative investment in EPZs
  was US 475.20 million but up to June-2005 the
  investment stands at US 867.01 million.
• The volume of investment has increased to US
  391.81 million with a growth ratio of 82.45.
• In 2004 BEPZA alone attracted 73.08 of
  countrys total manufacturing FDI.

22
EPZs of Bangladesh continues

• Investment National (Comparative Analysis)

FDI Component BOI Registered In million US BEPZA In million US Financial Inst. In million US Total In million US BEPZA Share
a. Manufacturing 55.676 151.146 - 206.822 73.08
Textile 14.995 101.893 - 116.888 87.17
Chemical 19.681 27.642 - 47.323 58.41
Leather Rubber 8.666 10.026 - 18.692 53.64
Agro-based 7.284 1.752 - 9.036 19.39
Food Allied 3.212 - - 3.212 -
Glass Ceramics 1.28 - - 1.28 -
Printing Publications 0.558 - - 0.558 -
Misc/NEC - 9.833 - 9.833 100
b. Service 374.252 0.354 66.518 441.124 0.08
Telecommunications 237.41 - - 237.41 -
Energy Power 133.045 - - 133.045 -
Power Generation 15.676 - - 15.676 -
Oil, Gas, Coal 117.369 - - 117.369 -
Other Services 3.797 0.354 66.518 70.669 0.5
Financial Institutions - - 66.518 66.518 -
Others 3.797 0.354 - 4.151 8.53
c. Engineering 0.771 12.089 - 12.86 94
Total (abc) 430.699 163.589 66.518 660.806 24.76
Fig 8 Extended Sectoral Distribution of FDI
during 2004 (BOI Survey, 2004)
23
EPZs of Bangladesh continues

• Investment International (Comparative Analysis)

   Year Investment (Million ) Investment (Million ) Investment (Million ) Employment (Number) Employment (Number) Employment (Number)
   Year Sri Lanka Bangladesh India Sri Lanka Bangladesh India
1978 20.9 5876 3300
1983 50.4 (28.2) 0.9 24093 (62.0) 624 13000 (58.8)
1988 100.2 (19.7) 17.2 (362.2) 69.9 46104 (18.0) 4207 (114.8) 25625 (19.4)
1993 221.6 (24.3) 131.0 (132.3) 84058 (16.5) 26336 (105.2) 45885 (15.8)
1998 261.2 (3.6) 391.8 (39.8) 223.8 (22.0) 91404 (1.7) 84074 (43.8) 77795 (13.9)
2003 292.3 (2.4) 749.1 (18.2) 388.0 (14.7) 104237 (2.8) 144147 (14.3) 88977 (2.9)
Source Ministry of Commerce, Government of
India Mondel (2002). Bangladesh EPZ is on the
top in attracting Investment and creation of
Employment.
Fig 9 Total cumulative investment and employment
and growth rates in 1983-2003
24
YEAR WISE INVESTMENT (CUMULATIVE) UP TO Mar 06
25
EPZs of Bangladesh continues

• Export

• Bangladesh has achieved phenomenal export
  success through the EPZs.
• In the total foreign exchange earnings of the
  country through exports, the share of EPZs
  increased from a microscopic low of 0.02 in
  1983-84 to a spectacular high of 17.88 in
  2004-05.

• The enterprises of EPZs have exported goods
  worth of US 10,003.62 million up to June, 05 and
  it was US 4823.79 million till June 2001.
• During the last 4 years the export volume
  increases to about US 5179.83 million with an
  increase of 107.38.
• The export earnings from EPZs crosses billion
  dollar mark in the last four years. BEPZA
  represents average 18 of total national export
  during the last four years.

26
EPZs of Bangladesh continues

• Export continues

Year Total export of Bangladesh (m US) Total export of EPZs (m US) of BEPZAs contribution (m US)
1994-1995 3473 228 6.56
1995-1996 3882 337 8.68
1996-1997 4418 463 10.48
1997-1998 5161 636 12.32
1998-1999 5313 712 13.40
1999-2000 5752 891 15.49
2000-2001 6467 1068 16.51
2001-2002 5986 1077 18.00
2002-2003 6548 1200 18.33
2003-2004 7603 1354 17.80
2004-2005 8654 1548 17.88
Fig 10 BEPZAs contribution towards total
national Export
27
YEAR WISE EXPORT (CUMULATIVE) UPTO MAR 06
28
YEAR WISE EMPLOYMENT (CUMULATIVE) UPTO MAR 06
29
RATIO OF EMPLOYMENT
TOTAL 165,692
30
EPZs of Bangladesh continues

• Productivity Performance of EPZ Workers

• During 2004-2005 the export performance of EPZ
  workers in textile cluster stands US 9952.00
  per worker whereas export performance of one DTA
  worker in the same sector recorded US 2886.43.
• Therefore, EPZ workers productivity performance
  is 3.5 times than the DTA workers.

SECTOR DTA DTA DTA EPZ EPZ EPZ
SECTOR EMPL (NOS.) EXPORT US m EXP/ EMPL US EMPL (NOS.) EXPORT US m EXP/ EMPL US
TEXTILE CLUSTER 18,00,000 5195.595 2886.43 1,40,187 1395.195 9952.00
Total Export Bangladesh 8.654 b 100
Total Export EPZ 1.548 b 17.88
RMG Knit Export Bangladesh 5.195 b 100
RMG Knit Export EPZ 1.395 b 26.86
Fig 11 Productivity Performance
31
EPZs of Bangladesh continues

• Export Performance on Investment

SL PRODUCT UNIT INVEST M US Export US Exp Per M US Inv.
1 GARMENTS 42 222.921 698.15 3.13
2 TEXTILE 26 212.262 314.12 1.48
3 TERRY TOWEL 15 27.749 39.21 1.41
4 KNIT OTHER TEXTILE 19 73.915 106.99 1.45
5 GARMENTS ACCS. 25 60.096 81.86 1.36
6 CAPS 7 37.548 99.67 2.65
7 TENT 4 21.71 55.22 2.54
8 ELEC ELECTRONICS 12 48.807 45.58 0.93
9 FOOTWARE LEATHER 12 50.08 46.67 0.93
10 METAL PRODUCT 11 18.287 13.95 0.76
11 PLASTIC GOODS 12 19.384 12.54 0.65
12 PAPER PRODUCT 2 0.776 0.84 1.08
13 FISHING REAL GOLF 1 31.07 10.07 0.32
14 ROPE 2 5.913 5.39 0.91
15 SERVICE ORIENTED INDUSTRIES 4 4.567 1.81 0.40
16 AGRO PRODUCT 10 2.786 7.12 2.56
17 MISCELLANEOUS 17 29.139 8.94 0.31
Gr. Total 221 867.01 1548.13 1.79
Fig 12 Export Performance on Investment
32
EPZs of Bangladesh continues

• Brand Products

The enterprise are exporting world famous brand
products like Nike, Reebok, Lafuma, H M
(Sweden), GAP, J.C. Penny, Walmart, Kmart, OSPIG
(Germany), Mother Care (UK), Lee, Wrangler,
Dockers, NBA, Tommy Hilfiger, Out Door, Adidas,
Falcon (USA), Edie Bauyer, Eagle, Releigh (UK),
Emmilee, Free Spiril (UK), Miles (Germany),
Brouks, American Eagle, Hi-Tech (UK), Decathlon,
Phillip- Maurice (UK), Federated, Styles Co, SAG
Harbour (USA), Wins More, H M (SWEDEN), LL
Bean, Target, Autica, Disley, Vans, Vftnfcamera
Lens (IO Parts) Konika, Minolta, Golf Shafts, Abu
Garcia, Mobile Parts of Sony, Automobile Parts of
Nissan, Mitsubishi Hino.
33
BRAND LOGO




33
34
BRAND LOGO




34
35
EPZs of Bangladesh continues

• Diversification of Export

• Diversification of Bangladeshi export started
  with RMG product in early 80s. With the influx
  of FDI in EPZs, RMG sector gives a fresh thrust
  in boosting national export.
• RMG and textile cluster alone represented 90 of
  EPZ export and 26 of national RMG export in
  2004-05.
• BEPZA could attract substantial amount of FDI
  for Tent, Camera parts, Golf Shaft, Bi-cycle,
  Zipper manufacturing plant.

36
EPZs of Bangladesh continues

• Diversification of Export continues

• There is no single manufacturing unit of this
  kind outside EPZ. BEPZA is expecting big
  investment particularly FDI in composite textile,
  home textile and Ceramics in near future.
• Obviously, more investment will lead to
  diversification of countrys export basket.
• During the last four years BEPZA has been
  maintaining a steady growth rate of national
  export.

37
EPZs of Bangladesh continues

• Development of Linkage Industries in DTA

• One of the major activities of setting up EPZ
  is to encourage linkage industries outside EPZ
  which will expedite establishment of industrial
  base in the DTA.
• EPZ manufacturing units prompted establishment
  of multiple number of linkage industries in DTA.
• 2004-05 fiscal EPZ enterprises made export and
  import transaction with DTA enterprises to tune
  of US 528.310 million.
• This huge volume of transaction with DTA
  industries marked about 26 of export earnings by
  the EPZ enterprises during 2004-05.

38
EPZs of Bangladesh continues

• Development of supportive Industries and
  services in DTA

• Apart from manufacturing activities private
  sector enterprises participation in Banking,
  Insurance, CF agent, courier, catering,
  sub-contracting, transporting, container
  handling, cell phone operator, shopping mall,
  medical center, school, college are being made in
  different EPZ.
• It is expected that BEPZA will be able to
  attract private sector investment in power, water
  generation and distribution, effluent treatment,
  telecom operator and dormitory in EPZs.

39
ZONE WISE STATISTICS (UP TO MAR 2006) ZONE WISE STATISTICS (UP TO MAR 2006) ZONE WISE STATISTICS (UP TO MAR 2006) ZONE WISE STATISTICS (UP TO MAR 2006) ZONE WISE STATISTICS (UP TO MAR 2006) ZONE WISE STATISTICS (UP TO MAR 2006)
EPZ Industry Industry Investment (US in M) Export (US in M) Employment (No.)
EPZ In Op. (No.) U/Impl. (No.) Investment (US in M) Export (US in M) Employment (No.)
Chittagong 128 34 499.20 6,653.99 96,583
Dhaka 83 26 397.14 4,587.73 62,980
Comilla 12 21 39.39 40.58 4,296
Mongla 11 16 2.87 21.33 522
Uttara 01 06 1.50 0.00 864
Ishwardi 02 14 0.73 2.85 47
Adamjee - 07 4.00 - 400
Karnaphuli - 04 - - -
Total 237 128 944.83 11,306.49 1,65,692
Fig 13 Zone-wise aggregate performance
40
EPZs of Bangladesh continues

• Performance Factor

• The success stories of EPZs in different
  countries found to be closely associated with the
  physical facilities provided by them to the
  potential investors.
• Therefore, the provision of creating
  infrastructure, buildings and ensuring public
  utilities to the investors were planned in the
  early stage of Bangladesh EPZ.

41
EPZs of Bangladesh Performance Factor

• Infrastructure Facilities

Infrastructure Facilities Infrastructure Facilities
1. Basic infrastructure Electricity, gas, water, road, telecom, e-mail etc.
2. Fully serviced plots (Avg. size 2000 sqm)
3. Factory building available on rental basis.
4. Enclave for workers dormitory.
5. Godown available
6. Business support service courier (DHL, FedEX), Banks, Police station, fire station, post office, CF agent, shipping agent, MTO etc.
7. Administrative support service shopping center, green area, daycare center, commissariat, health club, investors club, medical center, sports complex, accommodation for expatriates, school and college, public transport etc.
42
EPZs of Bangladesh Performance Factor

• Infrastructure Facilities

Fig 14 Partial Infrastructural view of Dhaka EPZ
43
EPZs of Bangladesh Performance Factor

• Infrastructure Facilities

Fig 15 Partial Infrastructural view of
Chittagong EPZ
44
EPZs of Bangladesh Performance Factor

• Why infrastructure needed?

• Bangladesh is a small country with huge
  population, where per capita land holding is very
  minimal (1000/SqKm).
• Land title, acquisition and registration are
  cumbersome.
• Except costal area and hilly land it is very
  difficult to get huge chunk of industrial land.
• Moreover, investment friendly infrastructure for
  industrial operation is absent in the wider
  economy.
• Considering these limitations the theory of EPZ
  was evolved in Bangladesh.

45
EPZs of Bangladesh Performance Factor

• Financial infrastructure, regulatory
  streamlining and proactive service

• Beyond creation of infrastructural facilities,
  BEPZA provides space to local and foreign
  bankers, insurers, CF agents, Freight Forwarder
  and Courier services to give financial help and
  support services to the investors.
• Although, BEPZA has been exempted from operation
  of number of Acts and ordinances, the authority
  of relevant functionaries is applied by BEPZA in
  rational and adaptable ways.
• BEPZA officials ensure smooth commercial,
  manufacturing and operational activities within
  the zone.
• The Industrial Relation Department of every zone
  remains vigilant all around to clench
  labour-management feud within the zone.
• EPZs in Bangladesh house mostly labour-intensive
  industries with a view to employing unemployed
  manpower.

46
EPZs of Bangladesh Performance Factor

• Public Sector Investment in development of EPZs

• More than thirty eight percent of Government
  investment in EPZ is made in non-income
  generating head of expenditure which gives nil
  rate of return on investment.
• A pertinent question that can be raised here is
  whether the existing tariff rates of land or
  factory building could be raised in order to
  bring about quick cost recovery.
• This can be seen in the light of tariff rates
  prevailing in other EPZs of neighboring countries
  where such rates are reportedly similar or little
  bit lower than our tariff rates.
• In these circumstances, if we try to recover our
  cost by enhancing tariff rates, we may loose
  investment.

47
EPZs of Bangladesh Performance Factor
Sl no. Sl no. Item CEPZ (in million US) DEPZ (in million US)
Direct income generating Direct income generating Direct income generating Direct income generating Direct income generating
1. Land acquisition Development Land acquisition Development 9.53 4.09
2. Factory building Factory building 3.93 4.66
3. Bay-shopping centre Bay-shopping centre 0.53 0.07
4. Gas distribution network Gas distribution network 0.26 0.52
5. Electricity distribution network Electricity distribution network 1.06 0.61
6. Water supply system Water supply system 0.50
Total Total 15.81 9.95
Percentage of total investment Percentage of total investment Percentage of total investment 62 62
Non-income generating Non-income generating Non-income generating Non-income generating Non-income generating
1. 1. Roads drains 3.30 2.72
2. 2. Office enterprise service Bldg. 0.55 0.67
3. 3. Residential Building 0.45 0.74
4. 4. Investors Club 0.67 -
5. 5. Custom, Police, Fire brigade equipment store, Health centre, Security etc. 0.43 0.67
6. 6. Others 4.37 1.34
Total 9.77 6.14
Percentage of total investment Percentage of total investment Percentage of total investment 38 38
Grand Total 25.58 16.09
Fig 16 Investment in EPZs up to June, 1998
48
EPZs of Bangladesh Impact Prospect

• The direct impacts of EPZ are

• Increasing foreign currency reserve.
• Industrialization in new bases.
• Increase value addition in export.
• Transfer of technology
• New era for employment generation.

• The indirect impacts of EPZ are

• The creation of Satellite Township near the
  zones
• Establishment of backward linkage industries.
• The development of various trade.
• Increase of activities in the ports.
• Development of communication.
• Enhance the efficiency of workers.

49
EPZs of Bangladesh Performance Factor

• Prospect and Constraint

• BEPZA is taking up initiative to develop EPZ,
  where private sector stimulate industrial
  investment and that will ultimately give
  thousands of economic transaction in the society.
  
• For example, now, what happened in Dhaka and
  Chittagong EPZ is that BEPZA has invested around
  US 41 million to establish EPZs where private
  sector industrial investment accrues US 770
  million followed by US 1500 million
  infrastructure investment around these zones.
• Moreover, there is a clear spillover effect of
  EPZ infrastructure in the wider economy through
  establishment of linkage support industries.
• During 2004-05 EPZ enterprises made transactions
  with domestic industries to the tune of 26 of
  their export earnings.

50
EPZs of Bangladesh Performance Factor

• Public-private partnership

• Public sector BEPZA can only establish EPZs
  with basic infrastructure.
• Private sector may come up to provide
  infrastructure related works to enterprises,
  transportation, hotel and resort centers,
  shopping mall, universities and vocational
  institutes and other social infrastructures,
  operation and management of water, effluent
  disposal, power, telecommunication, linkage
  industry and supportive financial infrastructure.

• Success Engine

• If we sum up investment (FDI and Local)
  necessity in Bangladesh proper infrastructure is
  considered as the main factor for rapid
  industrialization in the country.

51
Reasons For Investment

• One Window Same Day Service
• Compliance issues addressed
• Secure Environment
• Infrastructure Facilities
• Reduction of Lead Time
• Cost of doing business
• Friendly policy of Government
• Incentives
• WIN-WIN Ventures
• Success Story
• Signatory of MIGA (Multilateral Investment
  Guarantee Agency) and ICSID (International Centre
  for Settlement of Investment Dispute)
• Member of WIPO (World Intellectual Property
  Organization) and OPIC (Overseas Private
  Investment Corporation)

52
Reduction of Lead Time

• INTRA INTER ZONE EXPORT IMPORT ALLOWED
• DA BASIS IMPORT
• SIMPLIFIED IMPORT EXPORT PROCEDURE
• IP EP ISSUED WITHIN THE SAME DAY
• IMPORT OF RAW MATERIAL FROM DOMESTIC TARIFF AREA
  (DTA)
• SUB-CONTRACTING ALLOWED BOTH INSIDE OUTSIDE EPZ

53
EPZs of Bangladesh Policy Concessions

• Incentives

Incentives - Fiscal Incentives - Fiscal
1. Tax holiday for 10 years followed by 50 rebate on export sales.
2. Duty free import of const. materials, machinery/spare parts/equipments.
3. Duty free export and import.
4. Relief from double taxation.
5. Exemption from dividend tax.
6. GSP facility available.
7. Duty free import of 3 vehicles.
8. Expatriates exempted from income tax for 3 years.
9. Accelerated depreciation on machinery or plant allowed.
10. Remittance of royalty, technical and consultancy fees allowed.
11. Duty and quota free access to EU (EBA), Canada, Norway, Australia etc and USA under process.
Fig 17 Fiscal incentives provided by BEPZA
54
EPZs of Bangladesh Policy Concessions

• Incentives continues

Incentives Non-Fiscal Incentives Non-Fiscal
1. Investment protected under the Foreign Private Investment (Promotion and protection) Act 1980
2. 100 foreign ownership permissible
3. Enjoy MFN status.
4. No ceiling on foreign investment.
5. Full repatriation of Capital and dividend.
55
EPZs of Bangladesh Policy Concessions

• Non-Fiscal Incentives continues

Incentives Non-Fiscal Incentives Non-Fiscal
6. Relocation Of Foreign Industries Allowed
7. Foreign Currency Loan From Abroad Under Direct Automatic Route
8. Non-resident Foreign Currency Deposit (NFCD) Allowed For A Type Industries
9. Operation of FC account by B and C type industries allowed
10. Resident-ship / Citizenship
Fig 18 Non-Fiscal incentives provided by BEPZA
56
BEPZA SUPPORT SERVICE FACILITIES
1. NO UD, IRC, ERC RENEWAL OF BOND LICENSE 2.
WORK PERMITS ISSUED BY BEPZA 3. SECURED
PROTECTED BONDED AREA 4. OFF SHORE BANKING
AVAILABLE 5. FREEDOM FROM IMPORT EXPORT POLICY
RESTRICTIONS 6. BACK TO BACK L/C 7. 10 SALE TO
DTA (LOCAL MARKET) 8. CUSTOMS CLEARANCE AT
FACTORY SITE 9. SIMPLIFIED SANCTION
PROCEDURE 10. EASILY AVAILABLE TRAINABLE
WORKFORCE 11. RECREATIONAL FACILITIES
57
MONTHLY WAGES IN EPZs OF BANGLADESH
Country
US
58
SERVICE CHARGE - RENT
ZONE LAND SFB (US / SQM / YR) (US
/ SQM / MONTH) EPZ-CHITTAGONG,
EPZ-DHAKA 2.00 2.50 EPZ-COMILLA,
EPZ-ADAMJEE, EPZ-KARNAPHULI EPZ-MONGLA,
EPZ-ISHWARDI, 1.00 1.25 EPZ-UTTARA
59
SERVICE CHARGE - UTILITIES
ZONE ELECTRICITY GAS WATER
(Cents / KWH) (Cents / CUM)
(Cents / CUM) EPZ-CHITTAGONG, 2.59 3.68
11.52 EPZ-ISHWARDI, EPZ-ADAMJEE, EPZ-KARNAPHULI
EPZ-DHAKA, 2.72 3.68 11.52 EPZ-COMILLA, E
PZ-MONGLA, EPZ-UTTARA
RATE INCLUDES SERVICE CHARGE
60
EPZs of Bangladesh Policy Concessions

• Pro-active Support

• Despite limitations BEPZA has been following an
  affirmative policy to nurture investment
  activities in EPZs. The office of BEPZA processes
  the application for setting up of industries,
  allot plot of land or building space and sometime
  the investors are allowed to mortgage the
  building and machinery for raising loan from
  financial institutions.
• The process of sanctioning takes minimum span of
  time.
• Sometimes the EPZ officials pursues the
  prospective investors up to their home countries.
  
• Almost every time they receive the investors in
  Airport and the whole process from landing to
  sanction of industries is done by BEPZA officials
  believing the doctrine of one window service.

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EPZs of Bangladesh Technology Transfer

• Technology transfer or spillover constitutes
  one of the most important dynamic effects
  expected of foreign investment.
• 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.

EPZs of Bangladesh 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.

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EPZs of Bangladesh Economic Contribution

• Annual Economic Benefit

• BEPZA contributes as a multiplier of economic
  activities in Bangladesh.
• Having identified the elements relevant for
  estimation of benefits from EPZs, we have a rough
  estimate of economic contribution of US 622.300
  million to Bangladesh in 2004-2005 which is
  around 43.71 of the total export. Thus the
  foreign currency retention is 43.71

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EPZs of Bangladesh Economic Contribution
PERFORMANCE 2002-03 2002-03 2003-2004 2003-2004 2004-2005 2004-2005
EXPORT 1200 1200 1304 1304 1541 1541
PARTICULARS OF EXP. AMOUNT EXP. AMOUNT EXP. AMOUNT EXP.
WAGES 77 6.41 75 5.75 91 5.91
RENTAL 12 1 12 0.92 13 0.84
UTILITY 22 1.83 23 1.76 24 1.56
SV. CHARGE 52 4.33 54 4.14 65 4.22
DTA GOODS 315 26.25 360 27.60 392 25.44
ADMN. EXP. 33 2.75 33 2.53 42 2.73
TELE COM. 9 0.75 10 0.76 12 0.78
SURPLUS RETAINED BY LOCAL INVESTORS 17 1.42 18 1.38 35 2.23
TOTAL 537 44.75 585 44.86 674 43.71
Fig 19 Annual Economic benefit for the years
2003-2004 and 2004-2005
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COUNTRYWISE ENTERPRISES (UPTO MAR 06)
SL COUNTRY UNIT (NOs.) INVT. (M US) EMP (NOs.)
1 S. KOREA 57 272.228 65,137
2 BANGLADESH 57 190.696 28,613
3 JAPAN 21 126.422 5,470
4 CHINA 28 121.424 25,707
5 USA 12 40.405 8,730
6 UK 10 25.688 5,903
7 GERMANY 4 13.124 4,359
8 PAKISTAN 4 3.379 376
9 MALAYSIA 6 64.141 6,265
10 TAIWAN 10 36.867 4,065
11 INDIA 12 4.204 560
12 PANAMA 1 2.638 2,337
CONTINUED
CHINA INCLUDING HONGKONG
65
COUNTRYWISE ENTERPRISES (UPTO MAR 06)
SL COUNTRY UNIT (NOs.) INVEST. (M US) EMPLOY (NOs.)
13 DENMARK 1 1.019 167
14 THAILAND 1 0.513 -
15 SWEDEN 1 6.828 4,564
16 ITALY 1 10.985 157
17 BELGIUM 1 1.100 163
18 SWITZERLAND 1 1.187 10
19 NETHERLAND 3 6.078 554
20 FRANCE 1 0.530 23
21 NEPAL 1 0.050 55
22 SINGAPORE 2 4.268 58
23 BR. VERGIN IS. 1 2.370 1169
24 IRELAND 1 1.000 16
OTHERS - 1.001 50
TOTAL 237 944.83 1,65,692

• OTHER COUNTRIES
• 24. AUSTRALIA
• 25. CANADA
• 26. SRILANKA
• MOURITIUS
• INDONESIA
• IRELAND
• 30. U A E

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PRODUCTWISE ENTERPRISES (UPTO MAR 06)
SL PRODUCT UNIT INVEST M US EMPLOY (NOS.)
1 GARMENTS 45 243.467 87,714
2 TEXTILE 27 230.832 19,787
3 TERRY TOWEL 16 29.179 4,518
4 KNIT OTHER TEXTILE 21 81.400 15,757
5 GARMENTS ACCS. 30 71.005 4827
6 CAPS 7 41.224 10,974
7 TENT 4 21.820 5,522
8 ELEC ELECTRONICS 14 50.954 2,921
9 FOOTWARE LEATHER 12 50.698 5,202
CONTINUED
67
PRODUCTWISE ENTERPRISES (UPTO MAR 06)
SL PRODUCT UNIT INVEST (M US) EMPLOY (NOS.)
10 METAL PRODUCT 12 19.497 789
11 PLASTIC GOODS 12 20.432 1,020
12 PAPER PRODUCT 2 0.797 99
13 FISHING REAL GOLF 1 31.137 599
14 ROPE 2 6.050 422
15 SERVICE ORIENTED INDUSTRIES 4 4.859 435
16 AGRO PRODUCT 10 2.786 515
17 MISCELLANEOUS 18 32.031 3,406
Gr. Total 237 944.83 1,65,692
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Indicative List of Industries

Garments and Garments Accessories Textile Chemicals Backward and forward linkage industries Electrical equipment and components Electronic products Software Optical goods Woven and Knitted fabrics Engineering products Leather products and Foot-were Toys Medical and Biological instruments Pharmaceutical products Plastic moulded produces Industries based on new uses of jute Cutting/polishing of precious and semi precious stones Household fittings and equipment Hardware

69
Indicative List of Industries

Jewellery Horological instruments Scientific measuring instruments Aircraft instruments Laboratory ware Printing and publishing Printing and copying equipment accessories Do-it-yourself tools and equipment Musical instruments Agro-based industries with 20 cash incentives

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Future Plan

• Dhaka Chittagong EPZ are the mile stone for
  socio-economic upliftment of the country.
• To fulfill growing demand of the investors BEPZA
  has taken project to establish two more EPZs one
  near Dhaka at Adamjee jute Mills area and other
  at Chittagong steel mills area which will
  rehabilitate the industrial process and valuable
  workforce of the country.

• Adamjee EPZ

• About 70 new industrial units are likely to be
  set up in the 295 acres of the now defunct
  Adamjee Jute Mills area.
• It is expected that Adamjee EPZ will create
  employment opportunity for about 100,000
  workforce.
• Some 42,737 square meter of factory building
  will be developed for investors with all
  infrastructure facilities.

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Future Plan Adamjee EPZ
Photo Honble Prime Minister Begum Khaleda Zia
unveiled the inaugural plaque of Adamjee EPZ on
06 March, 2006
Photo Honble Prime Minister Begum Khaleda Zia
Inaugurated a Hong Kong-British Virgin Island
based Hi Fashion Garments Industry M/S. Kwun Tong
Apparels in Adamjee EPZ on 06 March, 2006
No. of Enterprises 07 Investment 4
MUS Employment 400 No. Pending 22 cases with
151 plots
Photo Honble Prime Minister commissioned a
Canadian Sweater Factory Hy-Lan Sweater
International in Adamjee EPZ on 06 March, 2006
72
Future Plan Adamjee EPZ
Fig 20 Master plan of Adamjee EPZ
73
Future Plan Karnaphuli EPZ

• Will be established on the land of closed
  Chittagong steel mills area.
• This EPZ spreading over 222.42 acres of land
  will have 200 plots.
• It is projected that the new EPZ will create
  employment for nearly 50,000 Bangladeshi workers
  in 60 industries.
• Some 25,800 square meter of factory building
  will be developed for investors with all
  infrastructure facilities.

No. of Enterprises 4 Investment 0
MUS Employment 0 Pending 4 cases with 62 plots
74
Future Plan Karnaphuli EPZ
Fig 21 Master plan of Karnaphuli EPZ
75
Conclusion

• Asias Low Cost Production Base.
• A Safe Haven for Investment.

76
THANK YOU