Special Economic Zones of Bangladesh-Your Safe Destination for Investment

Mohammed AyubAdditional SecretaryBangladesh Economic Zones AuthorityMonem Business District, 111, Bir UttamC.R. Dutta Road, Level 12 Karwanbazar, Dhaka-1205Bangladesh.E-mail: em.admin@beza.gov.bd, ayub6006@yahoo.comWebsite: www.beza.gov.bd

Bangladesh has embarked into an ambitious journey of industrialdevelopment and economic progress

“Vision 2021 incorporates participatory democracy and efficient and honest

governance, which, drawing upon a vibrant private sector, will transform Bangladesh into a major commercial hub through creating a competitive economic environment sustained

by a well-trained, skilled workforce”

1971Inception

2016Industrialization

2021Transformation

Need to transform Bangladesh by 2021 into a middle income country, free from economic disparity, built upon strong democratic foundations and well-governed

institutions

Bangladesh therefore possesses the key ingredients for Investment

Bangladesh

Access to Market

Macro Economic

Parameters

Strategic Location

Policy Support

Young Workforce

Low Cost of Dong

Business

Significant access to developed countries

Access to markets of neighbouring countries

Liberal FDI policy

Treaties with countries to avoid double taxation

Industry oriented policy

Demographic Dividend-Youth

Vibrant pool of talented and qualified young population

Consistent GDP growth

Increase in per capita income

Rising FDI and foreign trade

Located between India and China

Well connected to South East Asian Region

Access to Waterways

May evolve as Trade Hub

Cost of doing business is low among the developing countries and its South Asian counterparts

Economic Zones are placed to harness the potential of Industrial Development

Why Bangladesh?Macroeconomic Perspective: Growth Trend and

Outlook

❖ The Bangladesh economy continues to achieve robust real GDP growth despite the global

economic slowdown (average GDP growth for the last 5 years is 6.32 percent).

❖ Real GDP growth is expected to remain resilient in the medium term

Why Bangladesh?

Resilient Growth…..

Source: Towards New Sources of Competitiveness, Volume 1, World Bank , March 2014

Macroeconomic Perspective: Inflation Scenario

5

5.5

6

6.5

7

7.5

8

8.5

9

General Food Non-Food

❖ General inflation has fallen down steadily; On February 2016, average and point-to-point

inflation were 6.15 and 5.62 percent respectively;

❖ The government’s prudent fiscal and monetary management is the determining factors for this

moderate inflation.

❖ Given the lower oil and commodity prices and domestic crop outlook overall inflation will

likely to continue its decline.

Percentage distribution of working age populationby sex and age group

Why Bangladesh: Demographic perspective

Working age population: 15+: 106.3

million

of which 85.83 million

is over 65 years old

Why Bangladesh:Bangladesh has the lowest wage rate

Grade Monthly wage (USD)

Helper 70

Junior Operator 80.50

Operator 85.75

Senior Operator 91

High Skilled 140

Why Bangladesh: Bangladesh is the lowest utility tariff rates provider

Utilities Rate (USD)

Electricity 0.107/Kwh

Water 0.325/CM

Gas 0.095/CM

Why Bangladesh: Social perspective

✓ Main provisions are:

✓ EZ Workers Welfare Fund will be created for the workers.

✓ The fund will be created from the grant or subscription of the investors, development partners, government grants etc.

✓ Contribution by the investors will be based on the number of workers.

✓ There shall be counselors for grievance handling, compliance monitoring and building of awareness among the EZ workers.

✓ There shall be conciliator for dispute settlement.

✓ Disputes shall be resolved through arbitration.

✓ Skill development initiative will be taken under the fund.

✓ There shall be a separate bank account for the fund.

BEZA: Committed to Industrial Development

BEZA Created through BEZA Act 2010

Responsible for and devoted to organized industrial development in Bangladesh

Facilitates private sector participation

Fosters industrialization to promote growth in

domestic industrialization, foreign trade, employment generation and improving socio-

economic status

Objectives of BEZA

BEZA was established by the Bangladesh Economic Zones Act 2010 withbroad the objective of structural transformation of the economy ofBangladesh through:

Attracting FDI

Developing and diversifying export

Promoting skill, Sharing knowledge and

Generating employment

Ensuring dynamic economic benefits for the domestic industry

Social and Environmental sustainability

Our Mission

Develop 100 EZs inthe next 15 years

Create 10 million employment

Foster industrialization by increasing additional

export of USD 40 billion per year

Reasons for regime transition

Export Processing Zone Economic Zone

Static

(attracting investment and generating

employment)

Dynamic

(structural transformation of the

economy, diversification, upgradation,

knowledge sharing, skill

development, R & D)

Labor-intensive Investment-intensive

Incentive-driven Service-driven

Management-driven

Exploitative Enclave Integrated Development Tool

Limited spillover effect Wider spillover effect

Potential benefits of economic zones (WB)

Direct benefits Indirect benefits

Foreign exchange earnings

FDI

Employment generation

Government revenue

Export growth

Skill upgrading

Technology transfer

Demonstration effect

Export diversification

Enhancing trade efficiency of

domestic firms

BEZA activities at a glance

Total approved EZs 79

Total planned land for 79 zones ( acres) 79019

Land owned by BEZA (Acres) 31199

Number of approved Private EZs 23

Pre-qualification License awarded to Private EZs 11

PPP License awarded (Mongla and Mirsarai-1st Phase) 02

Private EZ license 06

Number of EZs under Development 15

Total direct investment by Developer (US$ Million) 904

Total number of Jobs created 7781

The Regulatory Framework

Act (Establishment scheme of economic zone)

• The Bangladesh Economic Zones Act, 2010

• One Stop Services Act 2018.

Policy (regarding development, operation, management and control

of private economic zones)

• Bangladesh Private Economic Zones Policy, 2014.

Rules (Qualification of developers, developer’s right and obligation

cancellation of EZ license, etc.)

• Bangladesh Economic Zones (Appointment of

Developer, etc.) Rules, 2014

• Bangladesh Economic Zones (the Procedure of Appointment of

Developer) Rules 2016

• EZ construction and building guidelines

Guidelines• Bangladesh Economic Zones Development Guidelines (draft)

Statutory Regulatory Orders for incentives

Different implementation models of BEZA to deliver on its targetand integration of private sector and FDI

Economic Zones

Private Economic

Zones

Government

Economic Zones

Special Economic

Zones

Established through public and private partnership (PPP)

by local or foreign individuals, body or organizations

Established individually or jointly by local, non-resident

Bangladesh or foreign investors, body, business

organizations or groups

Established and owned by the Government

Established privately or by public-private partnership

(PPP) or by the Government initiative, for establishment

of any kind of specialized industry or commercial

organization

1

2

3

4

Private sector can participate as developer

&/or unit investor

Private sector owned economic zones

Private sector can participate as unit investor

Private sector can participate as developer

&/or unit investor

G to G Economic

Zones

5To be undertaken at Government to Government Level

Private sector can participate as developer

&/or unit investor

6 Government

Enterprises Economic

Zones

On model of BEPZA, where a government entity may act

as developer

Private sector can participate as unit investor

European investors can participate via PPP route or Private economic zone development or G2G initiatives of zone development

Fiscal Incentives For Developers

Income Tax exemption 12 years: First 10 years 100%, 11th year 70%, 12th year 30%

Exemption from custom duty on all imports for development of economic zone

Exemption from stamp duty and registration fees for land registration for the first time

Exemption of stamp duty and registration fees of loan/credit document

Exemption from tax on dividend income for 10 years

BEZs are Regionally Competitive…

Ince

nti

ves

for

Un

it

Inve

sto

rsTax Holiday for 10 years

Duty free import of raw materials

Exemption form dividend tax

Full Repatriation of capital and dividend

No ceiling of FDI

100% Backward linkage raw-materials and accessories to sell for EOI in DTA

20% sale of finished product to DTA by EPA

Ince

nti

ves

for

Un

it

Inve

sto

rsSub-contracting with DTA allowed

Exemption of stamp duty and registration fees

Exemption of VAT on all utility services

Duty exemption on export

Exemption of Custom Duty for import of vehicles

Exemption of double taxation subject to Double taxation agreement

Exemption of Salary income from IT for expatriates

Ince

nti

ves

for

Un

it

Inve

sto

rsConsider Economic Zone as custom bonded area

Foreign loan is allowed in compliance with existing laws

FC Account for non-residents

FC Account for both local and joint venture industry

Foreign investors to be free to inter into JV

Tax exemption on capital gains from transfer of shares

Provision of transfer of shares by foreign shareholders to local shareholders and investors

Incentives for Unit Investors

Issuance of work permits to foreigners is allowed up to 5% of total officers/employees of an industrial Unit.

Re-investment of remittable dividend to be treated as new foreign investment.

Resident visa for investment of US$ 75,000 or more.

Citizenship for investment of US$ 500,000 or more.

Non-Fiscal Incentives

100% foreign ownership permissible

• No ceiling on foreign investment

• Full repatriation of capital and dividend

Foreign currency loan allowed in compliance with

existing laws

• Hold nonresident foreign currency deposit account

• EZs will enjoy MFN status

Sub-contracting with Domestic Tariff Area

allowed

• Transfer of shares of foreign shareholders allowed

• 50 years land lease period with scope of extension

One Stop Service

Potential Sectors For Investment In Economic Zones

Shipbuilding & Ship Repairing, Steel Rerolling Plants

Leather Goods

Light Engineering & Auto Parts

Power

PharmaceuticalsTelecommunication

IT-enabled services

Large-scale Export Oriented RMG

LNG Terminal & Petro-Chemical Plants

Jute and

Jute-based product

Agro-Processing including Fish

Processing & Cold Chain

Thank You