BEPZA: EPZs of Bangladesh the ideal place for the investors

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BEPZA: EPZs of Bangladesh the ideal place for the investors
March 26, 2012
MAJOR GENERAL A T M SHAHIDUL ISLAM

Socio-economic development is essential in order to reduce poverty in developing countries and to improve people’s living standards.

Investment plays an important role in the socio-economic development of a country.

The contribution of Foreign Direct Investment (FDI) is very significant especially in the underdeveloped and developing countries.

Private sector provides bulk of employment and contributes to poverty alleviation.

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 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 as the agency 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) new 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).

MODE OF INVESTMENT

BEPZA pursues an open door policy in regards to foreign or local investment in its EPZs.

It attracts investment in three categories, ie

Type – A – Investment with 100% foreign ownership,

Type-B- Joint venture between Bangladeshi and foreign investors

Type-C -100% Bangladeshi ownership.

INVESTMENT CLIMATE IN THE EPZS

(1) Geo-regional location

The comparative advantages of the EPZ in Bangladesh are it’s homogenously, large number of potential human resources, competitive wage level, and its ‘geo-regional location’.

Bangladesh is situated in close proximity to the Bay of Bengal, which has given the country with an easy access to the world through sea-way and also by air in terms of import and export.

As a result, the foreign investors are always keen to take those strategic advantages.

(2) Human Resources

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.

China, Thailand, Sri Lanka, Cambodia, Philippines and even Vietnam, Indonesia & Malaysia are experiencing wages increase and rising production costs that are making them more expensive resulting the EPZs of Bangladesh have become a new field and place for foreign investment.

(3) 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.

(4) Protection of Foreign investment:

Foreign investors 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 best in South Asian Region.

(Doing Business, 2010).

(5)Flexibility:

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.

(6) Infrastructure Facilities:

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 years 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.

(7) Support Facilities:

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.

(8) Fiscal and Non fiscal Incentives:

The fiscal incentives include:

— 10 years tax holiday for the Industries established before 1st January, 2012 and Industries to set up after 31st December, 2011 tax holiday period will be:

Tax exemption period Rate of tax exemption

First 02 years (1st and 2nd Year) 100% Next 02 years (3rd and 4th Year) 50% Next 01 years (5th Year) 25%

— Income tax exemption of salaries of foreign technician 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.

The non-fiscal incentives include:

— 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% 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 ship / 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% sale of finished products except garments.

— 10% sale of defective finished goods.

— 10% sale of surplus raw materials

Support Service Facilities include:

— Work permits 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.

Copyright Business Recorder, 2012

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