Bangladesh has finally started reaping benefits from the US-China trade war as Asian companies now look to invest around $1 billion in the country's export processing zones.
When local private investment has remained stagnant during this Covid crisis, the Bangladesh Export Processing Zones Authority (Bepza) has a slew of investment proposals, mostly from Asian countries, including China, Japan, India, and South Korea, according to the authorities.
Most investment proposals are made for manufacturing non-apparel products as Bepza's aim is to come out of the country's dependence on a single sector.
Currently, Bepza contributes to around 20% of the country's total annual exports, of which 64% account for non-RMG items.
The investment in export processing zones grew by 15% in the last fiscal year and Bepza will see a 20% to 25% jump in growth by the fiscal 2022-23 with the inclusion of the $1 billion investment that has remained in the pipeline.
Explaining the reason why Asian investors are coming to Bangladesh, Major General Md Nazrul Islam, executive chairman at Bepza, said investors are shifting from China owing to rising labour costs in the country.
"We are now benefiting from the US-China trade war. Some foreign investors are shifting their businesses to Bangladesh from Myanmar too," he added.
At present, China tops the list in terms of investments in Bangladesh. Besides, investors from India, Japan, and South Korea are also coming here, he said.
"We have signed an investment deal with Germany," he said, adding that most investments are flowing in for the manufacturing of non-RMG products such as high-quality leather goods, zipper, button, backward linkage products and outdoor tents.
Some 90% of the investment proposals that they have received since January this year are from Asian countries, the Bepza executive chairman said.
Japanese investors have sought 50 plots in Bangabandhu Sheikh Mujib Shilpa Nagar located in Mirsarai, Chattogram for setting up 50 industries. They will invest in manufacturing field items, golf shafts and various other products.
"We have formed a committee to review their proposal. But we cannot allocate them 50 plots as we have a huge load of investment proposals," Major General Md Nazrul Islam said.
Among current foreign investors, China has the highest number, 109 enterprises in export processing zones, followed by South Korea 71, Japan 31 and India 20, according to Bepza.
There are 459 enterprises now in operation in export processing zones, of which 70% are foreign ones. The total investments in the country's eight export processing zones stood at $5.67 billion as of August this year, according to Bepza.
With foreign investment continuing to swell up, Bepza started to construct three new export processing zones in Patuakhali, Jashore and Gaibandha.
Rising labour cost in China and high tariffs imposed because of US-China trade war have prompted Asian investors to choose Bangladesh. – Maj Gen Md Nazrul Islam, Executive Chairman, Bepza
Amid the flood of foreign investment, creating skilled manpower is now the main challenge for Bepza as Bangladeshi workers lag behind in technical knowhow.
When unemployment emerged as a big concern amid job cuts during the pandemic, Bepza generated 32,000 new employment opportunities, thanks to a big flow of foreign investments in eight export processing zones.
Bepza has set a unique example in the case of female employment as 67% of total 4.67 lakh employees in export processing zones are women.
Nazrul Islam said there is a shortage of skilled manpower to operate modern equipment.
Bepza, National Skill Development Authority and Bangladesh High-tech Park Authority are now working collaboratively to create skilled manpower, he added.
How Bepza's work on EPZ development
Under Bepza, there are now eight EPZs such as Chattogram EPZ, Dhaka EPZ, Mongla EPZ, Ishwardi EPZ, Comilla EPZ, Uttara EPZ, Adamjee EPZ, Karnaphuli EPZ and Adamjee EPZ.
Talking about Bepza's under-construction economic zone at Bangabandhu Sheikh Mujib Shilpa Nagar, Nazrul Islam said, "We have 1,150 acres of land at the industrial city where 350 export-oriented factories will be built."
All work will be completed by 2023 with 140 plots having so far been ready, he also said.
"We have already allotted 66 plots out of 550 to different companies who will start infrastructure development work towards the end of this year," he pointed out.
They have made arrangements for uninterrupted water supply for four-five years to companies at Bangabandhu industrial city, he also said, adding that the government has also taken projects to mitigate water crisis at the industrial city.
Bepza is also developing an export processing zone on 1,831 acres of land in Gaibandha, particularly to produce agro-based products, Nazrul Islam said.
On the other hand, groundwork on Patuakhali's EPZ, only a 30-minute journey by road from Payra deep seaport, has been completed.
Besides, there will be easy communication between Jashore's EPZ and Mongla port, he said.
There are now 50 factories in operation in Adamjee EPZ. Ten more are waiting to go into operation. The EPZ, which has capacity to accommodate 83 factories, has already witnessed investments amounting to $600 million. The EPZ generates a revenue of Tk500 crore annually.
The country's RMG factories inside eight EPZs mainly manufacture clothing items of big brands. They also produce 138 more items, such as optical fibre cables, Golf items, furniture, jute products, etc. in 22 categories.
"We are emphasising product diversification in non-RMG sectors. For example, Sony Ericsson is producing mobile parts, while Nissan, Mitsubishi, Hino and Toyota are making automobile parts. ABU Garcia is manufacturing golf shafts," the Bepza executive chairman said.
Bepza has three agendas: product diversification, employment generation and employment for women, he said, mentioning that product diversification is Prime Minister Sheikh Hasina's special agenda.
Some 174 out of 459 enterprises operating in the export processing zones manufacture non-RMG products, according to Bepza.
Why foreign investors are interested in investing in EPZs
Bepza offers investors various incentives to invest in EPZs.
Investors can avail tax holiday, duty-free imports of raw materials and machinery, exemption from dividend tax, GSP facility, duty- and quota-free access to European Union and other countries.
In an EPZ, 100% foreign ownership is permissible - there is no ceiling on foreign investment and full repatriation of capital and dividend.
Bepza charges $2.50 yearly in a plot rent in Chattogram, Dhaka, Comilla, Adamjee and Karnaphuli EPZ and $1.40 for Mongla, Ishwardi and Uttara EPZ.
Bepza, which has around 2,000 employees, works on ensuring services, such as gas, water and electricity supplies to investors.