Banks wary of financing special economic zones

The government's plan to boost economic growth through Special Economic Zones (SEZs) is experiencing a setback because leading banks are wary of financing them. The banks justify their concern by saying that there is a lack of specific regulations on this.      

BIBM Training Director Professor Shah Md Ahsan Habib said that "Banks need to boost funding so that the construction of 100 SEZs in Bangladesh can be completed soon. Moreover, better cooperation among the Bangladesh Economic Zone Authority, the National Board of Revenue and Bangladesh Bank is essential,"

Infrastructure development at the SEZs is underway, and the role of banks is crucial for completion of the construction.

A seminar titled 'Business Facility in Special Economic Zones in Bangladesh' was held at the BBIM on Monday.

At the seminar, BIBM Training Director Professor Shah Md Ahsan Habib said: "Secured financing by banks will certainly speed up things at the SEZs."   

The speakers at the seminar said that SEZs are being set up to yield benefits such as employment generation, export growth and a rise in government revenues. These will also help in increasing economic diversification, innovation and foreign direct investment (FDI). 

They added that in order to attract the attention of foreign investors, not only is the environment inside the SEZs important, but so is the overall development and political stability of the country.

The speakers at the seminar agreed that four factors are vital for a successful SEZ. These are — synchronising the SEZ's strategy with overall economic policy, setting up the necessary infrastructure, availability of sufficient labour and having the required logistic support.        

SEZs were supposed to receive major funding from licensed offshore banks. However, those banks financed only 35 percent while the remaining 65 percent came from authorised dealer banks.   

Bangladesh Bank (BB) recently issued a circular regarding offshore banking.

In the circular, the central bank has asked all scheduled banks to maintain a certain cash reserve ratio (CRR) and a statutory liquidity reserve (SLR) for liabilities arising from respective offshore banking operations.

Bankers at the seminar said that these requirements are limiting the financing capacity of banks.