In the era of free market economic zoning as a development paradigm works wonders in advancing the economy of a country. Conceptually, capital is on free float across the globe. Capital flows in if such designated zones are built up with right utilities, infrastructures and legal and fiscal facilities in place.Stability is sine qua non for SEZs to work wonder
Economic zoning has a history,
dating back to emergence of
economic activities slowly from
primitive, nomadic human heritage
Prof. Sarwar Md. Saifullah Khaled
In the era of free market economic zoning as a development paradigm works wonders in advancing the economy of a country. Conceptually, capital is on free float across the globe. Capital flows in if such designated zones are built up with right utilities, infrastructures and legal and fiscal facilities in place.
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 special economic zones (SEZs) appeared from the late 1950s in industrial countries. The first was in Shannon Airport in Clare, Ireland. From the 1970s onward, zones providing labour-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 zones are 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, trading, customs, taxation, quotas 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 labour rights are denied for workers. In Bangladeshs case, it is 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 out of about 170 million populations.
Though Bangladesh had established export-processing zones (EPZs) earlier, with fairly a degree of success, SEZs are being undertaken only lately. The takeoff took place a few days back with the countrys Prime Minister (PM) laying the foundation stones of 10 such SEZs from a long-range videoconferencing from her office in the capital Dhaka. The start-up ten are among a hundred planned SEZs. The Finance Minister said while presenting the budget 2015-2016 in parliament that creation of 10 million jobs is aimed at by setting up the 100 SEZs within 15 years time. Raising export earnings by US$40 billion is also in target. 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 SEZs at the first step, Mirsarai Economic Zone in Chittagong, Srihattya Economic Zone in Moulvibazar, Mongla Economic Zone in Bagerhat and Subrang Tourist Park in Coxs Bazar are being developed under public-private partnership (PPP). 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 SEZs 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 peoples socio-economic status remaining far below par with the central belt. Unwarranted result will be influx of people into these already overcrowded, cramped and almost uninhabitable areas. Economists pointed out that 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.
Balance in development and in society at large should form bedrock for the national development paradigm. Analysts say that 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. And China did it.
Actually the socialist country China 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 SEZs by opening specific regions and even provinces to foreign capital and technology. That worked wonders. As per international economic watchdogs China vies to be number one outpacing the United Sates of America now after outbidding Japan to become second-biggest economy in the world.
As prescribed by economists, ensuring adequate infrastructures, utilities and services like power and gas, proper policy supports and removing procedural, administerial and institutional shortcomings are urgent for making the venture a success. While giving the go to the ten SEZs, the PM promised to create an excellent environment for investment in the zones and also sought cooperation of locals. It is necessary that the local people extend cooperation so that the investors could build the zones at a faster pace and beautiful and congenial atmosphere, so that it may help establish a hunger- and poverty-free prosperous Bangladesh.
But to make the venture a success uninterrupted power supply there in the SEZs is essential. The PMs energy adviser has urged businesspeople to prefer the SEZs while setting up their new industries as the government is planning for uninterrupted power supply there. He was speaking at a seminar titled Prospects and Challenges for Industries in Energy and Power Sector of 7th Five Year Plan arranged by the Dhaka Chamber of Commerce and Industries (DCCI) on March 5, 2016.
The PMs energy adviser said the government would first thought about economic zones to solve land problem and strengthen economic development. Now it wants investors to give preference to these zones while setting up industries. He further said the government is taking various plans and steps to improve the generation of power and energy and the supply of that for the development of the countrys industries, agriculture and the overall economy.
The energy adviser said Were finding out a new paradigm of economic development and well follow the path with courage. Korea had no any source of primary energy, they made a good progress; but, we are not in so bad position as Allah has given us some sources of it. He said Bangladesh is in discussions with Myanmar and Indias Tripura state to import gas. Tripura has gas but it cannot use it. He continued they are also now focusing on extensive research on power and energy by universities, Bangladeshi scientists at home and abroad, different institutions and private sector for strengthening the sector.
However, in reality, the Bangladesh Energy Regulatory Commission (BERC) emphasised finding out alternative sources of energy due to the limited reserve of natural gas within the country. The DCCI, also, said many investors have set up various factories and industries at different parts of the country, but could not operate those for lack of power and energy connections. It urged to take initiatives for giving power and gas connections to those industries on priority basis.
Energy experts said despite 706 mmcfd increase in gas production during 2010-2015, about 500 mmcfd supply shortage remains while there is a negligible increase in new reserve. They say If nothing changes (1 tcf yearly usage and 14 tcf remaining reserve) gas can be supplied for 14 years. If the demand increases at 7 percent the gas will be exhausted in 2013. According to a study of 2003, experts said, there is a 95 percent probability of finding 8.4 tcf of new gas within the country. They say that there should be long-term strategic view to meet the primary energy demand for the next 15-20 years.
Moreover, security of investors and investment is also a foremost consideration in making investment decision in the SEZs by businesses from both home and abroad. And a stable political environment 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.
So, 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 in the country. 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 writer is a retired Professor of Economics
