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Immediately after gaining independence, Bangladesh's foreign currency reserves were nearly depleted. Most factories had either been destroyed or shut down due to the war in 1971. Despite these challenges, the economy, heavily dependent on foreign loans, aid, and agriculture, showed remarkable resilience.
Industrialisation was, however, essential for economic growth. Although Bangladesh had a large working population, it lacked the infrastructure needed to attract investment. To stimulate industrialisation, it was crucial to create a planned environment that would appeal to both foreign and domestic entrepreneurs.
Against the backdrop, in the late 1970s, the World Bank proposed the idea of establishing Export Processing Zones (EPZs). As work progressed, the Bangladesh Export Processing Zones Authority (BEPZA) Act was enacted in 1980, leading to the formation of BEPZA in 1981 and the first EPZ-Chattogram EPZ (CEPZ)-was launched in 1983. Foreign investment began flowing in within the next two years, leading to the emergence of the ready-made garments sector, which is now the largest export revenue earner for the economy.
Building on CEPZ's success, a second EPZ-Dhaka EPZ (DEPZ)-was established in Ashulia, Savar, in 1993. At the time, Ashulia was underdeveloped. DEPZ spurred rapid urbanisation, infrastructure development, and employment in the area and surrounding communities.
Between 1998 and 2006, EPZs were established in Mongla, Cumilla, Ishwardi, Uttara, Karnaphuli, and Adamjee. In 2018, the BEPZA Economic Zone was initiated in Mirsarai, Chattogram, and is now nearing completion. Currently, BEPZA operates eight EPZs and one economic zone, covering only 13.95 square kilometres-just 0.001% of the country's total area.
Since 1971, Bangladesh has received over $30 billion in Foreign Direct Investment (FDI), of which $7.08 billion has been into EPZs. This accounts for one-sixth of the country's total FDI-a significant achievement, especially considering Bangladesh's limited natural resources and reliance on imported inputs. In 2024, the net inflow of FDI in the EZA areas stood at $451.65 million, which was around 36 per cent of the total inflows in the last year. This flow of FDI has had a substantial impact on employment. Currently, over 533,000 workers are employed across the eight EPZs and the economic zone, directly benefiting more than 2.1 million people.
Additionally, a vast network of Small and Medium-sized Enterprises (SMEs) has developed around EPZs, boosting economic activity and significantly contributing to poverty reduction. For example, a BBS survey found that poverty in Nilphamari's Uttara EPZ area dropped by 50 per cent over eight years, a testament to the positive impact of these zones on local communities.
Although some argue that foreign investors repatriate their profits from EPZs, the benefits are undeniable. A significant portion of investor profits is spent on worker wages and local purchases of raw materials and machinery. According to government statistics, EPZs contribute approximately Tk 32,500 crore annually to the Gross National Product (GNP).
Despite the mountains it has climbed, there are still thorns in BEPZA's side that experts from various fields have pointed out time and again.
Critics have highlighted the lack of trade unions within the EPZs. Although BEPZA has implemented Workers' Welfare Associations as an alternative, the International Labour Organisation (ILO) and others argue that these do not fully meet international standards for freedom of association and collective bargaining. There have also been allegations of poor labour practices, including low wages, long working hours, and lack of job security-issues that have often led to labour unrest.
With support and guidance from the ILO and other labour organisations, BEPZA management could work toward resolving these problems one step at a time. Addressing these issues would not only boost productivity but also help Bangladesh restore its reputation, which often suffers following labour unrest. It would also build greater trust among international brands and buyers in the 'Made in Bangladesh' label.
A common concern among industrialists is BEPZA's bureaucratic structure. In many cases, obtaining permits and licenses takes months, whereas similar documents can be secured in countries like neighbouring India within days. Where there is red tape, corruption often follows. Allegations of bribery and unethical practices have also surfaced. Such issues can send the wrong signals to potential foreign investors who are otherwise eager to set up operations in Bangladesh.
As hubs for FDI, EPZs require uninterrupted utilities such as electricity and water, along with proximity to suppliers and vendors. Unfortunately, this is not always the case. For example, in April this year, five factories at Dhaka EPZ were forced to shut down, leaving at least 5,000 workers without work. The reason? Power shortages!
At DEPZ, electricity is typically supplied by United Power, which uses gas provided by Titas Gas. Due to unpaid bills, Titas halted gas supply to United Power's plant at the end of April. This forced the authorities to rely on the Bangladesh Rural Electrification Board (BREB), or Palli Biddyut, for electricity. There is also a shortage of advanced technological equipment and a lack of capacity among the local workforce to operate such systems.
Like the overall economy, EPZs have also been affected by external shocks. The EPZs have faced instability due to post-pandemic disruptions, geopolitical tensions such as the Russia-Ukraine war, and economic downturns in key export markets.
Recently, in an interview with a vernacular daily, Major General Abul Kalam Mohammad Ziaur Rahman, Executive Chairman of BEPZA, pointed out that their biggest constraint is a lack of raw materials and scarcity of land. Relying mainly on one port, Chittagong, and the limited capacity of Payra and Mongla is another challenge. He, however, hoped that once the Matarbari port is operational, both time and cost will decrease. Though gas is currently the most reliable source for electricity and boiler operations, solar energy can be an option to provide around one-third of EPZs' total electricity demand, addressing concerns about energy reliability and environmental sustainability.
A debate has now emerged around the government's plan to merge BEPZA with other investment promotion agencies. Investors are opposing the idea, arguing that BEPZA's moderate success stems from its operational independence. They fear that combining it with other government bodies would increase bureaucracy and significantly reduce its efficiency.
As the BEPZA celebrates its 45th anniversary this month, it is also a time to review the progress and outline a sustainable growth path. While the authority ushered in foreign investment and served as a pillar for the emergence and growth of several industrial and export sectors for Bangladesh for four and a half decades, it has also been facing numerous challenges. The proper identification and resolution of these issues could enable BEPZA to reach greater heights over the next decade. It is also crucial that BEPZA retains its independence. This autonomy will allow it to conduct research, make timely decisions and make changes swiftly in a dynamic global environment.
Syed Tashfin Chowdhury is a communications professional.