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The introduction of the special economic zone concept has brought little success in attracting the private sector investment in the country especially the foreign direct investment fallen to a decade low in the past financial year.

Economists observe that the concept aimed at replicating the Chinese success in industrialisation since 2015 is still far away from the targets of the immediate past Awami League regime other than just announcing the establishment of 97 economic zones.

Of them, 68 zones have been planned for setting up by the government and the rest 29 by the private sector investors from home and abroad throughout the country, with the initial deadline of 2030, already extended to 2041, by the Awami League regime ousted on August 5 in the face of a student-led mass uprising.    

Operation in some 10 economic zones has begun partly, but others are behind deadlines because of delay in infrastructural development while many zones, taken without any feasibility studies, still remain at the approval stage.

Facilitating easy access of land to the foreign investors in the land-scarce Bangladesh with necessary infrastructure has been the main idea of the new concept, former World Bank Dhaka office chief economist Zahid Hossain points out.

But translating the idea into reality has become challenging for a number of reasons, he adds.

As the major reasons economists identify the implementing agencies’ inefficiency, politicisation of the investor selection process, flawed planning, and a complicated land acquisition process.  

Besides, they have also said that some of the special economic zones have been approved on political consideration without any feasibility studies.

These factors have made progress of many of the economic zones complicated, all the more so after a new set-up took over responsibility for the Bangladesh Economic Zones Authority after the interim government assumed power on August 8 following the ouster of the Sheikh Hasina-led regime.    

For example, Anowara Economic Zone-2 in Chattogram across River Karnaphuli has been awarded to Chinese investors exclusively in 2015.

To facilitate easy access to the economic zone, a tunnel underneath the river has already been constructed at a cost of Tk 5,913 crore with loans from China.

But the economic zone itself has made little progress so far, said BEZA officials.

They have also mentioned that establishment of proposed zones by India in National Special Economic Zones at Mirsarai, Mongla and Kushtia has also slowed down due to the global financial crisis stemmed from the war in Ukraine since 2022.

With the interim government led by Muhammad Yunus assuming power three days after Sheikh Hasina resigned as prime minister and fled to India on August 5, the prospect of Indian economic zones in the country becomes complicated, the officials observe.

Besides, reportedly many politicians and bureaucrats persuaded then prime minister Sheikh Hasina to approve around two dozens of economic zones without any feasibility studies, overburdening the BEZA.

New Bangladesh Economic Zones Authority executive chairman Chowdhury Ashik Mahmud Bin Harun, however, recently said that they would concentrate on minimum five and maximum 10 economic zones.

Emphasis would only be given on specific timelines to address the needs of the investors in a realistic way, he said.

Investors prefer stable policies to only tax waivers, added Ashik Mahmud, also the executive chairman of the Bangladesh Investment Development Authority.

BEZA insiders said that 10 economic zones, three under the government initiative and 7 under the private initiative had made progress over the past one decade.

Available data shows that the BEZA received $28.75 billion worth of investment proposals from companies at home and abroad, but the actual investment stood at around $6.00 billion between 2020 and June 30, 2023.

National Special Economic Zone at Mirsarai, the Sreehatta Economic Zone in Sylhet and Jamalpur Economic Zone in Jamalpur are built by the government.          

City Economic Zone, Meghna Industrial Economic Zone, Meghna Economic Zone, Abdul Monem Economic Zone, Bay Economic Zone, and Aman Economic Zone are built and operated by private groups with the government giving land to them.

The National Special Economic Zone at Mirsarai made the highest progress as many companies have started factories there in 2022.  

Of them, Asian Paints Bangladesh Nippon-McDonald—a joint venture company of Japan’s Nippon Steel Corporation and Bangladesh’s McDonald Steel Building Products Ltd—is the forerunner in establishing factories on at least two-thirds area of the Mirsarai economic zone covering a total area of 33,805 acres, or 136.38 square kilometres, bigger than the Dhaka South City Corporation covering 109km2.

The Bangladesh Economic Zones Authority in this zone had readied the industrial plots by implementing the first phase of a project costing an estimated Tk 2,685 crore for building on-site infrastructure and Tk 2,862 crore on off-site infrastructure with at least three years delay from the deadline of 2019.

The feasibility study of this zone shows another investment of around Tk 3,000 crore would be required to complete the second and the third phase to ready the remaining areas by 2028.

But right now, the BEZA is facing problems in realising Tk 85 crore in arrears as lease fees of 500 acres of land allocated to a consortium of Sikder Group, Bashundhara Group and GasMin Ltd in the National SEZ in Mirsarai.

In 2018, the BEZA leased out the land to the consortium for development by 2020 for industrial establishment. Since the consortium has failed to complete the task the BEZA may scrap the deal.

The case remains as an example of wrong selection of investors, while allegations remain that investors are deprived of scopes of investment.

The inequality in opportunity for the investors widened in the past 15 years, said Institute for Inclusive Finance and Development executive director MK Mujeri.

Loyalty to the ruling party had prevailed over merit and capacity for accessing bank credits, said Mujeri, adding that lack of good governance had long been identified as the major problem for both local and foreign investors.

Echoing Mujeri, M Masrur Reaz, chief executive officer of the Policy Exchange Bangladesh, said that ensuring level playing field was imperative for maintaining investors’ confidence.

The foreign direct investment flow to the country in FY23–24 dropped to a decade low amid negative credit rating, dollar shortage, political uncertainty, inefficient bureaucracy and corruption.

The FDI in FY23–24 fell by 8.80 per cent to $1.47 billion from $1.6 billion in FY22–23, and $3.44 billion in FY21–22, according to Bangladesh Bank.

The FDI flow in FY23–24 has been the lowest in the past decade with the country received $1.48 billion in FY13–14, according to the central bank.

Chowdhury Ashik Mahmud Bin Harun, executive chairman of both the Bangladesh Investment Development Authority and Special Economic Zones Authority, acknowledged that Bangladesh’s tiny share of Asia’s $620 billion in FDI was disappointing.

He blamed corruption and negative score in the ease of doing business indicator for the situation.

Policy Exchange Bangladesh chief Masrur Reaz hoped that the interim government would act to curb the already identified investment barriers paving the way for more private investment.

Without local and foreign private investments inside the economic zones or outside, the county’s graduation from the least developed countries’ bloc in 2026 would be bumpy, they said.