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Economic zones and right investment prerequisites

Moslem Uddin Ahmed

Economic zoning as a development paradigm works wonders in advancing the economy of a country in the era of free market. Conceptually, capital is on free float across the globe and it flows in if such designated zones are built up with right infrastructures, utilities and legal and fiscal facilities in place. However, security of investors and investment is also a foremost consideration in making investment decision by businesses from home and abroad both.   

And a stable political environ with overall peace in a particular country can only ascertain such an ambience of unimpeachable economic activity.

Such proposition is tried and tested best in China, in Vietnam, lately in Myanmar and Sri Lanka close by Bangladesh. All these countries reap peace dividends after having passed through blood feuds in civil strife or revolution.

Though Bangladesh had established export-processing zones (EPZs) earlier, with fairly a degree of success, special economic zones are being undertaken only lately. The takeoff took place a few days back with Prime Minister Sheikh Hasina laying the foundation stones of 10 such economic zones from a long-range videoconferencing from her office in the capital.

The start-up ten are among a hundred EZs planned. Creating 10 million jobs is aimed at by setting up the 100 economic zones within 15 years, Finance Minister AMA Muhith said while presenting the budget 2015-16 in parliament. Raising export earnings by $40 billion is also in target.

And the ultimate goal in vision is to upgrade Bangladesh to the status of a middle-income country by 2021 and developed one by 2041.

Of the 10 zones at the first go, Mirsarai Economic Zone in Chittagong, Srihattya Economic Zone in Moulvibazar, Mongla Economic Zone in Bagerhat and Subrang Tourist Park in Cox`s Bazar are being developed under public-private partnership. The remaining six are under private initiatives. Those are located at Palash in Narsingdi, Boddarbazar at Sonargaon in Narayanganj, Konabari in Gazipur, Meghnaghat in Narayanganj, Choto Shilmandi at Sonargaon in Narayanganj and Gazaria in Munshiganj.

A moot point being raised here is almost all the EZs are surrounding greater Dhaka and Chittagong, where mills and factories, EPZs and special parks for specific industries are mushrooming. Vast other regions of the country are left behind, with people’s socioeconomic status remaining far below par with the central belt. Unwarranted result: influx of people into these already overcrowded, cramped and almost uninhabitable areas.               

Such planning and execution are creating, willy-nilly, regional disparity as well as income inequalities among citizens of the central and backwoods regions apart from that among people within the same central belt, economists pointed out.

Balance in development and in society at large should form bedrock for the national development paradigm.    

“Economic zoning in Bangladesh should be area-specific, based on potential in terms of basic supplies, including raw material, labour availability, communication advantages and also needs for balanced development of the country,” says an analyst.          

China did it. Actually the socialist country stands at the summit of success in economic zoning—a boon reaped from the opening up of the planned economy. In a moderation of its socialist state policy based on controlled economy, Beijing has established special economic zones (SEZs) by opening specific regions and even provinces to foreign capital and technology.       

That worked wonders. China vies to be number one outpacing the United Sates now after outbidding Japan to become second-biggest economy of the world, as per international economic watchdogs.           

Economic zoning has a history, dating back to emergence of economic activities slowly from primitive, nomadic human heritage. Fiefdoms built up on the availability of primary natural resources and labour of land slaves. Same had passed through industrial economic system up to the modern times culminating in the China model.                    

Modern SEZs appeared from the late 1950s in industrial countries. The first was in Shannon Airport in Clare, Ireland. From the 1970s onward, zones providing labor-intensive manufacturing have been established, starting in Latin America and East Asia. These zones attracted investment from multinational corporations.

A recent trend has been for African countries to set up SEZs in partnership with China.

Special economic zone (SEZ) is commonly used as a generic term to refer to a modern economic zone. In these zones business and trade laws differ from the rest of the country. The aims of the zones include increased trade and investment, job creation and effective administration.

To encourage businesses to set up in a zone, financially libertarian policies are introduced. These policies typically regard investing, taxation, trading, quotas, customs and labour regulations. Additionally, companies may be offered tax holidays.

A paramount motive behind economic zones may be attracting foreign direct investment (FDI).The benefits a company gains by being in a special economic zone may mean it can produce and trade goods at a globally competitive price.

The operating definition of an economic zone is determined individually by each country. In some countries the zones have been criticized for being little more than ‘Chinese labour camps’, where labor rights are denied for workers.

In Bangladesh’s case, it’s a challenging but promising undertaking that could help--if really realized through well-thought-out modus operandi--in reaping the demographic dividend from its vast pool of working-age people.            

As prescribed by economists, ensuring adequate infrastructures, utilities and services like power and gas, proper policy supports and removing procedural and institutional shortcomings are urgent for making the venture a success.          

While giving the go to the ten EZs, the PM promised to create an excellent environment for investment in the zones and also sought cooperation of locals. "I would like to urge local people to extend cooperation so that the investors could build the zones at a faster pace and `beautiful atmosphere`, and that would help establish a hunger-and poverty-free prosperous Bangladesh," she said.

However, a pivotal point raised by local and foreign chamber bodies, diplomats of donor countries and agencies, and some prospective investors is the need for socio-political peace and stability.

Some of them dropped a broad hint that resolving the prevailing political standoff and resultant periodical unrest and uncertainties might open wide avenues for investment and surge in economic activities.

The nation was at one in rejoicing at Bangladesh’s enviable triumph over Pakistan at the battle of willows now in the Asia Cup T20 cricket tourney in this month of March, when the Bengalis went to war in 1971 and finally liberated themselves from Pakistani rule. Why not make it a defining moment in politics, too? None will lose in this March win, as well, for the nation.

(This article, written on March 03, 2016, was originally published in The News Today) 





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