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An economic zone, by definition, is a special designated area within a country's national borders. It is created with its own set of applicable laws to encourage and enhance business and trade investment, and job creation. The primary reason behind setting up such a zone is the desire to attract foreign direct investment. Free zones have been popular and used for centuries to guarantee free storage and exchange along trade routes.
Modern economic zones, however, developed only in the late 1950s, initially in industrialised nations. Notable early examples include the SEZ at Shannon Airport in Clare, Ireland, and, in the 1970s, zones in Latin America and East Asia focused on labour-intensive manufacturing. China's first SEZ, the Shenzhen Special Economic Zone, was established in 1979 under Deng Xiaoping, attracting multinational investment and accelerating industrialisation in the region. These zones attracted investment from multinational corporations.
Inspired by the economic promise of SEZs, the former Awami League government launched an ambitious plan to establish 100 economic zones on 75,000 acres of land across the country by 2030. The government envisioned these zones would create 10 million jobs and generate USD 40 billion in goods and services. The vision was overly optimistic. To make matters worse, the plan was driven by political interests and corruption rather than economic viability and benefit to the people.
Consequently, despite much talk about establishing 100 economic zones, the deposed government, over a span of 15 years, made visible progress in only a few projects-such as Bangabandhu Shilpanagar in Chittagong, the Japanese Economic Zone in Narayanganj, and the Srihatta Economic Zone in Moulvibazar-while work on the vast majority remains stalled or never began.
One notable example of a misguided and whimsical approval of economic zone can be found in the Netrakona SEZ. Sajjadul Hasan, who served as the private secretary (PS) to Prime Minister Sheikh Hasina from 2015 to 2018, allegedly used his influence to secure government approval for an economic zone in his home district, Netrakona. In 2018, during a visit to Mymensingh, Prime Minister Hasina laid the foundation stone for the Netrakona SEZ, a 1.5 billion taka project. Nine years on, there has been little progress, with officials from the Bangladesh Economic Zones Authority (BEZA) now expressing doubts about its financial viability, citing political pressure as the reason for its initial approval. This is just one example among many. Reports indicate that former ministers, secretaries, and politicians have pushed through around 30 economically unviable economic zones, which has now become an albatross around the government's neck.
Speaking to the media, Ashik Chowdhury, Executive Chairman of the Bangladesh Economic Zones Authority (BEZA), recently stated that the authority will concentrate on a smaller number of government zones to better meet investors' demands. This recalibrated strategy, supported by the new leadership of two investment-promotion agencies-BEZA and the Bangladesh Investment Development Authority (BIDA)-will focus on developing a set of prioritised zones on a fast track with clearly defined timelines. Concentrating on fewer, high-potential zones offers a more sustainable approach to developing SEZs.
Apart from planned development of SEZs, Bangladesh has still a long way to go in increasing ease of doing business to attract a healthy flow of foreign investment. Vietnam's success in attracting foreign direct investment (FDI) stands in stark contrast to Bangladesh's performance. In the first eight months of this year, Vietnam secured $14 billion in FDI, while Bangladesh could not attract even a billion dollars. In Bangladesh, investors face a series of obstacles; chief among them is bureaucratic red tape. For example, in Vietnam, a new company can be up and running in just seven days; but in Bangladesh, the same process could drag on for seven months. The bureaucratic hurdles that plague businesses in Bangladesh must be addressed to create a more investor-friendly environment.
The launch of the One Stop Service (OSS) by BEZA and BIDA to support both local and foreign investors had raised high expectations about Bangladesh's investment climate. However, progress towards achieving these goals has fallen far short of expectations. While some advancements in enhancing its systems and processes has been made, OSS remains far from functioning as a true "one-stop service" for investors. Currently, investors require access to as many as 155 services across 44 institutions for tasks such as company registration, land acquisition, and utility services. Yet BIDA and BEZA can only expedite around 60 services from 23 institutions. For the remaining services, investors must still navigate cumbersome bureaucratic processes in various government offices, as the two regulatory bodies have yet to establish agreements with all service-providing agencies.
Regrettably, in many government offices, bribery remains the only way to move files from one desk to the next. For foreign investors, bribery and corruption presents an even more complex challenge, as they risk accountability in their home countries if found to have engaged in corrupt practices to establish a business abroad. Not only do they face dismissal but aso jail time. Addressing these issues with meaningful reform is critical if Bangladesh is to cultivate a truly welcoming and efficient investment environment.
Another major challenge for foreign investors is the frequency of policy changes in Bangladesh, which disrupt business operations. While policy adjustments can be necessary, in Bangladesh investors often allege that government resorts to policy flip-flop without even holding dialogue with private sector partners, leading to uncertainty and reducing profitability for investors.
According to a survey by the World Bank and Business Initiative Leading Development (BUILD), 83 per cent of businesses felt that new regulations released without prior consultation are a major barrier, while 67 per cent expressed frustration at rarely receiving feedback on whether their input has been considered in policy-making. Intergovernmental agencies also struggle to coordinate effectively, creating inconsistencies and uncertainty that harm investment competitiveness.
It is worth mentioning that foreign investors have long been demanding a consistent tax policy in Bangladesh. However, tax policy in Bangladesh changes almost every fiscal year, further complicating investors' decision-making and affecting business confidence.
So, while the interim government is planning to streamline SEZ projects, it must also address the underlying issues hindering foreign investment in Bangladesh. By implementing regulatory reforms, improving infrastructure, and ensuring political stability, the government can create a more attractive investment climate. Simply inviting foreign investors without addressing these fundamental issues is unlikely to yield any positive results.