Export processing zones: ideal place for investment opportunities
The following is a message by Major General A.T.M. Shahidul Islam, executive chairman of the Bangladesh Export Processing Zones Authority (BEPZA), on the occasion of his country’s National and Independence Day. — ED.
The Government of Bangladesh attaches great importance to the role of foreign investment in accelerating the pace of industrial development in Bangladesh. With this objective in view, the government promulgated Bangladesh Export Processing Zones Authority Act with the mandate to attract investment in the Export Processing Zones(EPZs) of Bangladesh. This EPZ Act provides for the legal, institutional and incentive framework for the EPZ program and the Bangladesh Export Processing Zones Authority (BEPZA) has been charged with the responsibility of administering the program to achieve economic objectives on behalf of the government.
EPZs are designed to further integrate Bangladesh into the global supply chain and attract export-oriented investments in the zones, thus achieving its economic objectives of job creation, diversification and expansion of exports, increasing productive investments, technology transfer and creation of backward linkages between the zones and the domestic economy. Chittagong EPZ is the first Zone established by BEPZA.
The Chittagong EPZ is the pioneer for investors which gradually turned Bangladesh as a “New Horizon for investment”. Observing its astounding success, Dhaka EPZ came into operation in the year 1993. Afterwards 6(six) more EPZs namely Mongla, Comilla, Ishwardi, Uttara (Nilphamari), Adamjee & Karnaphuli have been set up and these EPZs have already started operation. Recently The Financial Times, a London based FDI magazine, has ranked Chittagong Export Processing Zone (CEPZ) as the 3rd Best Cost Competitive Zone in the world and the 4th in the Best Economic Potential for 2010-11. (FDI Magazine of The Financial Times, London, June-July, 2010 issue).
The main attraction of investment in Bangladesh is the most inexpensive, productive, abundant and easily trainable workforce. Today Bangladesh has a growing number of managers, engineers, technicians and skilled labour force. The minimum wage of the workers in the EPZs is one of the lowest in Asia. Changing economic and political conditions in the Asian region are prompting many international investors to reassess their investment strategies and plan for relocating their investments in Bangladesh. Those changes are producing higher opportunities for Bangladesh to attract higher levels of FDI. Most Asian countries including China, Thailand, Sri Lanka, Cambodia, Philippines, Vietnam, Indonesia and Malaysia are experiencing wages increase and rising production costs that are making them more expensive resulting the EPZs of Bangladesh an attractive destination for foreign investment.
One window service
BEPZA has been providing “ONE WINDOW SERVICE” to its investors. Operational and documentation procedures have been framed to make them easy and simple with minimum formalities. Investors need only to deal with BEPZA for all of their investment and operational requirements. BEPZA assists the investors with everything like import, export, and subcontract permits etc. Apart from that, by providing on-site services such as customs clearance, logistics, international couriers, and offshore banking facilities, BEPZA provides its investors with the chance to further simplify business processes, resulting in a reduction in lead time. BEPZA also provides same-day services to the investors.
Protection of foreign investment
Foreign investors are enjoying multiple protections in BEPZA. The Foreign Private Investment (Promotion and Protection) Act secures all foreign investment in Bangladesh.
As a member of OPIC’s (Overseas Private Investment Corporation, USA) insurance and finance programmes operable in Bangladesh as well as in the EPZs. Bangladesh is a member of Multilateral Investment Guarantee Agency (MIGA) which provides safeguards and security under international law.
The International Centre for the Settlement of Investment Dispute (ICSID) also provides an additional means of remedy, whilst copyright interests are protected through World Intellectual Property Organization (WIPO).
The World Bank has ranked Bangladesh 20th out of 187 nations for investors’ protection, making it as the safest country to invest the in South Asian Region. (Doing Business, 2010).
BEPZA offers investment opportunities in convertible foreign currencies, providing investors with the flexibility of repatriating of both profit and capital. The investors also enjoy GSP facility in EU countries, USA, Australia, Japan, Norway and duty and quota free access to Canada and the Republic of Korea.
BEPZA provides infrastructure facilities for the investors. BEPZA provides fully serviced plots and standard factory buildings for setting up manufacturing industry. Investor can use these plots under a 30- year lease which is renewable. Apart from these plots, an investor may also take lease of Standard Factory Building (SFB) owned by BEPZA. All the utility connections such as electricity, water, internet & telecommunication are readily connected in the enterprises of the EPZs. BEPZA has also allowed setting up of hi-tech infrastructure facilities like Central Effluent Treatment Plant, Water Treatment Plant, Inland Container Deport (ICD), Internet service, Power Generation Plant as service oriented industries in the EPZs.
BEPZA has allowed setting up of support service business facilities for the investors such as local and foreign banks, Off Shore Banking Units (OBU), insurance companies, C & F agents, freight forwarder and courier service in the EPZs. Other administrative facilities, such as Customs Office, Police Station, BEPZA’s Security, Fire Station, Public Transport, Medical centers etc are available in the EPZs.
10 years tax holiday for the Industries established before 1st January, 2012 and Industries to be set up after Dec. 31, 2011.
Income tax exemption of salaries of foreign technicians for three years (For the projects approved before March 22, 2009).
Duty free import of machinery, equipment, construction materials.
Duty free import of raw materials.
Duty free export of finished goods.
Relief from double taxation.
Exemption from dividend tax for tax holiday period.
Duty free import of two/three duty free vehicles for A & B type industries subject to certain conditions (For the projects approved before March 22, 2009).
Full repatriation of profit, capital & establishment.
Investment protected under the Foreign Private Investment (Promotion and Protection) Act.
BEPZA is a signatory of MIGA (Multilateral Investment Guarantee Agency) and ICSID (International Centre for Settlement of Investment Dispute).
BEPZA is a Member of WIPO (World Intellectual Property Organization) and OPIC (Overseas Private Investment Corporation).
100 percent foreign ownership permissible.
Enjoy GSP benefits in EU countries, Japan, Australia, USA, Canada, Norway, etc.
No ceiling on foreign investment.
Foreign currency loan from abroad under direct automatic route (OBU facilities).
Non-resident Foreign Currency Deposit (NFCD) allowed for 'A' type industries.
Operation of FC account by 'B' and 'C' type industries allowed.
Resident permit / Citizenship granted for foreign investors.
100% backward linkage raw materials, accessories are allowed to sell to export oriented industries inside and outside EPZs.
Taking and offering subcontracting are allowed both inside and outside EPZ.
10 percent sale of finished products except garments.
10 percent sale of defective finished goods.
10 percent sale of surplus raw materials.
Support service facilities
Work permits are issued by BEPZA.
IP & EP issued within the same day.
No UD (Utilization Declaration), IRC (Import Registration Certificate), ERC (Export Registration Certificate) & renewal of bond license required.
Customs clearance at factory site.
Intra / inter zone sub-contracting & transfer of goods allowed.
Easily available and trainable workforce.
Presently 403 industries are in operation in the EPZs under BEPZA. Among them 167 industrial units in Chittagong EPZ, 103 industrial units in Dhaka EPZ, 33 industrial units in Adamjee EPZ, 32 industrial units in Comilla EPZ, 36 industrial units in Karnaphuli EPZ, 10 industrial units in Uttara EPZ, 11 industrial units in Ishwardi EPZ and 11 industrial units in Mongla EPZ. Apart from that 119 industrial units are at different stages of implementation.
As on January, 2012 the cumulative investment in EPZs is $2,340.334 million.
Among them $921.624 million in Chittagong EPZ, $840.00 million in Dhaka EPZ, $5.22 million in Mongla EPZ, $150.593 million in Comilla EPZ, $72.081 million in Ishwardi EPZ, $147.297 million in Adamjee EPZ, $183.227 million in Karnaphuli EPZ and $20.291 million in Uttara EPZ.
In the first six months of the financial year 2011-2012, 33 enterprises have executed the agreement for an investment of $468.128 million with BEPZA.
As of January, 2012 job opportunity for 323,489 Bangladeshi nationals have been created in the EPZs. Among them 172,305 people in Chittagong EPZ, 85,329 persons in Dhaka EPZ, 824 persons in Mongla EPZ, 11,371 persons in Comilla EPZ, 5,626 persons in Ishwardi EPZ, 20,019 persons in Adamjee EPZ , 21,583 persons in Karnaphuli EPZ and 6,432 persons in Uttara EPZ. BEPZA is also playing a vital role in generating employment opportunity for female workers, who constitute 64 percent of the total employment in EPZs.
During the first 6 months of financial year 2011-2012 goods worth of $2,022.68 million was exported from EPZs. Among them goods worth of $934.81 million from Chittagong EPZ, $759.49 million from Dhaka EPZ, $28.40 million from Mongla EPZ, $69.09 million from Comilla EPZ, $6.36 million from Uttara EPZ, $100.05 million from Adamjee EPZ, $22.14 million from Ishwardi EPZ and $102.35 million from Karnaphuli EPZ. The export target of BEPZA for the 2011-2012 financial year is $4 billion.
EPZs of Bangladesh have also been making special contribution to the development of backward linkage and supportive industries of the country. The enterprises within EPZs may require to supply raw materials from the local market vis-a-vis 100% export oriented enterprises in local market also supply their products to EPZ-e nterprises. Therefore, the development of backward forward linkage and accessories industries have enhanced by the EPZ enterprises.
Up to January 2012, 37 countries including South Korea, Japan, China, Malaysia, Taiwan, U.S.A, U.K, Italy, Canada, Netherlands, Germany, British Virgin Island, India, Sweden, Singapore, Pakistan, Panama, Switzerland, Belgium, Denmark, France, Thailand, Sri Lanka, Indonesia, Australia, Nepal, Mauritius, Ireland, U.A.E., Turkey, Ukraine, Marshal Island, Kuwait, Spain, Malta and Rumania have invested in the EPZs of Bangladesh.
Apart from industrialization, foreign currency earning and employment generation, EPZs have also been playing a special role in ensuring the welfare of its workers which include education, medical, security, welfare. In view of the above, schools, colleges, and medical centers have been established by BEPZA.
Nowadays buyers are placing utmost importance on social compliance issues, and BEPZA encourages its investors to comply with the code of conducts and conditions. The present working environment and wages of the workers have been improved significantly. Considering the increase of living cost of the workers of industries of EPZs the minimum wages structure for EPZs workers has been revised and made effective from November 2010. The Government has enacted “The EPZ Workers Welfare Association and Industrial Relations Act, 2010” (Act No. 43 of 2010) to ensure the rights and welfare of the workers of EPZs industries.
BEPZA attaches much importance on environment issues. The BEPZA has already taken steps to introduce five Central Effluent Treatment Plants (CETP) in five EPZs in order to ensure maximum protection for the environment. The CETP project in Dhaka EPZ has already started its operation.