The Financial Express
Swasti Lankabangla Swasti Lankabangla

Focus on SEZs-IX

BEZA learning from Asian zoning experience

| Updated: May 15, 2018 17:12:02

Representational image Representational image

The concept of economic zone is now considered one of the best investment and employment generation models across the world in this age of globalisation, analysts said.

Economic zone (EZ) is a cluster of industries that enjoys liberal fiscal and investment laws and regulations.

Though the first modern zone applied in the Irish county of Clare in the late 1950s, it started rolling from Europe to America before accelerating the economic wheels of Asia and Africa.

More than two decades later, the wave of rapid economic growth riding on the special economic zones hit the Asian economies with the introduction of four such zones in the Chinese south-eastern coast.

The success encouraged other developing countries to incorporate special economic zones (SEZs) into their growth plans to attract foreign capital, boost exports, create jobs, stimulate industry, and improve the existing infrastructure.

Bangladesh also joined the league and adopted long-term industrialisation plan to reap the maximum benefits of its geographical and strategic location connecting South and Southeast Asia by developing 100 economic zones across the country by 2030.

Though economic zones have started changing the industrial landscape of many Asian economies, the analysts said most are poorly-run or do never take off. The success rate largely depends on the number of services available, they added.

From an estimated 500 SEZs in 1995, there are now some 4,300 in over 130 countries (by the most recent count), employing more than 68 million workers.

In the Asian context, China has the largest number with around 1,500 zones followed by 312 in the Philippines, 221 in India and 12 in Sri Lanka while Bangladesh has only eight special economic zones, known as export processing zones (EPZs), facilitating overseas sales.

When contacted on a social media platform, Professor Liu Baocheng, Center for International Business Ethics of the University of International Business and Economics, Beijing, said China established the first four special economic zones (SEZs) in Shenzhen, Zhuhai, Shantou and Xiamen two years after the country's opening up.

He said the initial opening up of these locations was driven by more political reasons than economic because these areas were closer to Hong Kong and Taiwan and were considered entry points to attract business communities from across the Taiwan Strait and Hong Kong with various incentives such as tax exemptions and land concessions.

"In less than a decade, these cities flourished on top of Chinese economic growth. With this experience, one after another coming in and it covers in aggregate 550,000 km2 of land area and nearly one-third of the population," he said.

Mr. Liu said that the establishment of these development zones has not only pushed forward Chinese industrialisation process but also helped build the largest pool of foreign exchange.

He also said many multinational manufacturers had brought industrial technologies, western management, access to international market, and foreign exchange into China.

"These are the primary objectives of China to open up for FDI. I think the best part of Chinese SEZs is investors do not need to go out of the zone for anything," he said.

Reciprocally, the Chinese government offers a whole package of benefits to foreign invested enterprises (FIEs) including income tax holidays and tax exemption from importing capital equipment, priority for land use and access to local human resources, according to him.

The SEZs accounted for 22 per cent of China's gross domestic product (GDP), 45 per cent of total foreign direct investment (FDI), and 60 per cent of exports. They also estimated to have created over 30 million jobs, increased the income of participating farmers by 30 per cent, according to knowledgeable circles.

But the zoning experience is mixed in India, which has not been able to operationalise a large number of sites due to multi-pronged factors like complexities over land acquisition, poor location and limited transport connectivity with major trading destinations.

Professor of Indian Council for Research on International Economic Relations (ICRIER) Dr. Arpita Mukherjee said it is difficult for nations like India to provide the state-of-the-art infrastructure throughout the country. She was contacted through email.

In that context, SEZs are important because it can provide such infrastructure and help attract international investors.

She said India managed to operate 221 SEZs until today but the number of formal approvals has reduced in the past three years as some projects were cancelled at the planning stage due to various reasons such as developers being unable to get contiguous land. A number of notified SEZs have not become operational as they have not been able to attract a single unit.

"There are several reasons behind it. These include difficulties in land acquisition, frequent policy change, approvals without proper investigation of the viability of the project and lack of outside zone connectivity and infrastructure," she said.

About China's success story, she said that China has focused on a few large zones and the focus was on quality rather than number while single-window clearances and other benefits were given to companies coupled with well developed infrastructure.

A bunch of 30 facilities like customs, bonded warehouse are available from a Chinese zone while 15 and nine in India and Bangladesh respectively.

Foreign Investors' Chamber of Commerce and Industry (FICCI) President Shehzad Munim hailed the government plan to build 100 EZs across the country by 2030. The Managing Director of British American Tobacco Bangladesh Co. Ltd was of the view that the zone authorities should focus on the completion of existing projects first and then take up new ones subsequently. Infrastructure and utility facilities such as roads, power etc. should be developed in the SEZs simultaneously to ensure synchronisation and efficiency.

Former president of FICCI Rupali Chowdhury said investors were offered certain places for investment in countries like India, China and Vietnam. They were also being offered subsidies in various forms for a certain period.

She said in some places of India, investors don't need to pay anything to the government for five years while China is providing different kinds of services to the investors in a faster way.

"BEZA should learn the best practices applied in other successful zones outside the country and replicate those here," she said.

Ms Chowdhury, also Managing Director of Berger Paints Bangladesh Ltd, said BEZA should also conduct a comprehensive study to compare the land value with that in other competitive markets. "It will help attract attention of the investors."

She also said a more liberal external borrowing policy needs to be ensured to allow investors to get finance from international sources.

Speaking about the matter, BEZA executive chairman Paban Chowdhury said that the authorities have been learning at each stage. "Yes, more facilities will attract more investors and we're planning to introduce 70 types of services from the Mirsarai special zone. It will take time but we'll do it," the BEZA boss said.



Share if you like