Introduction:

Economic supremacy is the foremost feature of the current world. In order to survive, Bangladesh
has no other options but to attain economic development. Foreign Direct Investment (FDI) is
recognized as a key component for economic growth for Bangladesh. Being one of the Least
Developed Countries (LDC) with insufficient domestic savings rate for investment after fulfilling
its

basic

needs,

the

importance

of

foreign

investment

is

unquestionable. Foreign Direct Investment (FDI) will create employment, increaseefficiency

of

labor, encourage technology transfer and develop new exportable sector. To attract more and more
FDI

the

government

of

Bangladesh

has

been

friendly environment. A number of opportunities

trying

to

establish private investment

have been given by

the

Government

of

Bangladesh (GOB) to attract foreign investors to invest in the country in some prospective sectors.
Sponsoring

agencies

responsible

for

private

sector

industrialdevelopment are Board of Investment (BOI), Bangladesh Export Processing ZonesAuthor

ity

(BEPZA),

Bangladesh

Small

and

Cottage

Industries

Corporation

(BSCIC),

Financial Institutions (FI) and Commercial Banks (CB) including DevelopmentFinancing

Institutions (DFI) and Nationalized Commercial Banks (NCB) etc. In late 70s when individual
ownership economy revived in our country, EPZ was created to attract capital investment,
employment generation and rapid industrialization. As a matter of fact, the main objective of
setting up EPZ is to create individual industrial entrepreneurs and thereby to achieve the other
objectives.

The

economy

of

Bangladesh

is basically agro-based. The habitants of agro-

based economy are generally remainshabituated in a risk less life. In other way, business
investment particularly industrial investment brings solvency and dynamism in
human life but it is risky and hazardous. Therefore, to create industrial entrepreneurs some
institutional support must be extended to the individual businessmen. EPZ ensures this
institutional support to the potential business entrepreneurs in Bangladesh.
A brief Economic review of Bangladesh:
Bangladesh separated itself from Pakistan and embarked on a Liberation War 43 years ago. A valid
question may arise: Does our present economic performance justify the decision of our great leaders
to be separated from Pakistan in 1971? While independence is always a basic right and has no
alternative, this question may be answered from a purely economic point of view. Today, Bangladesh

has a rising economy. It is no more a basket case .Because, economic growth of Bangladesh has been
estimated to be impressive at 6.12 per cent in the current financial year (FY) 2013-14 despite having
some internal and external shocks. The per capita income (Gross National Income) of the country
has also risen remarkably to US$ 1190 which was $1044 in the last FY 2012-13, in the current fiscal
year.

In the past decade, the economy has grown at nearly 6 percent per year, and human

development went hand-in-hand with economic growth. Poverty dropped by nearly a third, coupled
with increased life expectancy, literacy, and per capita food intake. More than 15 million
Bangladeshis have moved out of poverty since 1992.While poverty reduction in both urban and rural
areas has been remarkable. The expectation is that the country will be graduated to a middle-income
country by 2021. Behind these all achievements EPZs of Bangladesh have greate contribution.
In addition, over the past 5 years, revenue collection has increased from 10.7 percent to 13.3 percent
of GDP. At the same time, the size of public spending has increased from 15.7 percent to 18.3
percent of GDP. The target over the next 5-years would be to augment resource mobilization to 17
percent and increase the size of the budget to 22 percent of GDP. Governments core objective to
transform Bangladesh into a middle-income country by 2021 through structural and other reforms,
especially in the areas of strengthening local government, land management, institutional
development and good governance.
BEPZA at a glance:
In order to stimulate rapid economic growth of the country, particularly through
industrialization, the government has adopted an 'Open Door Policy' to attract foreign
investment to Bangladesh. The Bangladesh Export Processing Zones Authority (BEPZA)
is the official organ of the government to promote, attract and facilitate foreign
investment in the Export Processing Zones. The primary objective of an EPZ is to
provide special areas where potential investors would find a congenial investment
climate, free from cumbersome procedures.

Vision
To build a stronger and economically prosperous Bangladesh

 Mission

Promotion of Investment

Diversification of Export

Generation of Employment
Bangladesh EPZ's:

An export processing zone (EPZ) is defined as a territorial or economic enclave in which goods may
be imported and manufactured and reshipped with a reduction in duties / and/or minimal intervention
by custom officials (World Bank 1999).there are eight EPZs in Bangladesh. They are 1. Chittagong EPZ
2. Dhaka EPZ
3. Mongla EPZ
4. Ishwardi EPZ
5. Comilla EPZ
6. Uttara EPZ
7. Adamjee EPZ
8. Karnaphuli EPZ
EPZs Provide Plots/factory buildings in custom bonded area
Infrastructural facilities
Administrative facilities
Fiscal & non-fiscal incentives

 EPZ attracts : foreign & local investment

Objectives of EPZs:
(i)

To foster and generate economic development of Bangladesh by encouraging and

promoting foreign investments in a zones.

(ii)

To diversity the sources of foreign exchange earnings by increasing export of Bangladesh

through a zone

(iii)

To encourage and foster the establishment and development of industries and commercial
enterprises in a zone in order to widen and strengthen the economic base of Bangladesh

(iv)

To generate productive employment opportunity and to upgrade labor and management

skills through acquisition of advanced technology
The reasons the foreign investors are attracted to our country to invest Infrastructure facilities
Reduction of lead time
Cost of doing business
Friendly policy of government
Incentives
Signatory of MGA, ICSID, WIPO, OPIC
Asias low cost production base
Lower labor cost
Nationwide transportation facilities as well as access to the sea ports etc.

 Reason for setting EPZs in Bangladesh

EPZ set up in Bangladesh due to various reasons Major reason among them is expedites export
activities and stimulates rapid economic growth.
These reasons are:

Stimulate rapid economic growth

Enhance industrialization

Adopted with Open door policy i.e. Globalization

Attract foreign investment

Provide special areas where potential investor would get congenial investment climate.

Smooth export procedure, free from cumbersome procedures

Development export promotion strategy

More employment generation

Development of export oriented industries

Proper use of domestic available raw materials

Mode of Investment
BEPZA pursues an open door policy in matters of foreign investment in its EPZs. Bangladesh Export
Processing Zones Authority is a statutory body but very different from other autonomous
organization. It enjoys complete freedom of action in its decision making process independently of
any Administrative Ministry.

Investment with 100% foreign ownership (Type - A ' )

Joint ventures (Type-B) with no limit to the extent of equity sharing by the foreign
partner

100% Bangladeshi ownership (Type-C) is allowed in the EPZs.

Types of Investment (Up to July, 2012)

Type

No.

Operation
in (%)

100% Foreign Ownership

230

57%

Joint Venture

62

15%

100% Local Venture

115

28%

In Operation

407

100%

Under Implementation (La)

Sanctioned Industry
Total

62
77

Source:
BEPZA

546

Contribution of EPZs to the national Economy of Bangladesh:

After independence, the stagnant economy of the war-ravaged country was desperately seeking
private capital and technical know-how to facilitate the industrialization process to achieve
economic growth. Unfortunately, this could not be achieved in the initial years. In late 70s
Bangladesh EPZ has emerged to attract capital investment in EPZ and made a remarkable
progress in multiple sector of social, political, cultural and economic development of the country.
Number of steps has also been taken to attract Foreign Direct Investment (FDI) and facilitate
further industrialization in order to boost up economic development.
EPZs have been making significant contribution to the gradual empowerment of women which
supports the objective of Millennium Development Goal (MDG).This financial and social
empowerment of women has far reaching effect on the countrys poverty reduction initiatives as
the increasing number of young girls and woman are joining the productive workforce of EPZs
migrating from poverty prone remote rural areas of Bangladesh linking the rural economy with
industrialization process. BEPZA has also accelerated the privatization effort of the government

successfully by converting two loss making State Own Enterprises (SOEs) of the country namely
Chittagong Steel Mills and Adamjee Jute Mills Ltd in to EPZs. Once abandoned projects are now
vibrating with activities. Mention may also be made that investors from thirty three countries
have already invested in the EPZs of Bangladesh. The leading nations among them include South
Korea, Japan, China and the host Bangladesh.
EPZs growing contribution to Investment, Export and Employment:
Investment, Export and Employment are the driving forces of a countrys economy and EPZs of
Bangladesh have great contribution to these forces. The contribution of these three forces are
given below Investment:
The total amount of actual investment in BEPZA in 2011-2012 financial year stands at US$339.26
million, which is 8.31% higher than the actual investment made (US$ 313.23 million) in the
previous financial year. The actual investment made this financial year is the highest ever in the
history of BEPZA.
Moreover, during the last 03 financial years (2009-2012) US$ 874.48 million actual investment has
been made in BEPZA. There has been a 45.12% growth compared to the actual investment of the
previous 03 financial years (2006-2009) which was US$602.58 million.
Despite worldwide recession FDI has increased in the EPZs during the last 48 months. In June, 2001
the cumulative investment in EPZs was US$ 475.20 million but up to July, 2012 the investment
stands at US$ 2,478.90 million. The Detailed picture of cumulative investment has been mentioned
below:
YEAR

INV ($m)

2005-2006

112.89

2006-2007

152.37

2007-2008

302.19

2008-2009

148.03

2009-2010

221.99

2010-2011

313.23

2011-2012

339.26

2012-2013
(July,12)

21.95

Figure: Investment up to July2005 to 2012 in EPZs in Bangladesh

Source: BEPZA

Export:
Bangladesh has achieved phenomenal export success through the EPZs. In the total foreign exchange
earnings of the country through exports, the share of EPZs increased from a microscopic low of 0.02% in
1983-84 to a spectacular high of 17.24% in 2012-13(July,2012). The enterprises of EPZs have exported
goods worth of US$ 30,000.78 million up to July, 12. The share of EPZs in the foreign exchange earnings
through the exports of manufactured goods also shows the same trend over the corresponding period
reflecting fast decline in the relative share of the DTA in both total exports and the exports of manufactured
goods and the resulting foreign exchange earnings of the country. Annual trend rate of growth of export
earnings of the EPZs has been more than six times higher than that of total national export earnings and more
than four times higher than that of total national export earnings from manufactured goods. It means that
export performance of the EPZs is much more impressive than that of the country as a whole.

Subject: Total export figure of EPZ

YEAR

EXP ($m)

2005-2006

1836.18

2006-2007

2063.67

2007-2008

2429.58

2008-2009

2581.70

2009-2010

2822.54

2010-2011

3697.62

2011-2012

4210.80

2012-2013
(July, 12)

433.05

Figure: Export up to July from 2005 to 2012 in EPZs in Bangladesh

Source: BEPZA

Table: BEPZAs contribution towards total national Export

YEAR

TOTAL EXPORT OF
BANGLADESH (US$m)

TOTAL EXPORT
OF EPZs
(US$m)

BEPZAs
CONTRIBUTION (%)

2005-2006

10526

1836

17.44

2006-2007

12178

2064

17.00

2007-2008

14111

2429

17.22

2008-2009

15560

2582

16.60

2009-2010

16250

2822

17.36

2010-2011

22924

3698

16.13

2011-2012

24,41 0

4210

17.24

Employment:
Presently 407 enterprises are carrying out their operational activities in the EPZs. The export from
EPZs has also grown steadily which is now 17.24% of the countrys total national export and the
same has exceeded four billion marks during the last financial year. The direct employment
opportunities for more than three hundred thousand Bangladeshi nationals have also been created in
the EPZ units constituting 64% of the total work force from female category. Total employment for
these enterprises are 3,41,344 nos up to July, 12.
Subject: Total Employment figure of EPZ
YEAR

No of EMPL

2005-2006

23,021

2006-2007

23,360

2007-2008

17,130

2008-2009

16,394

2009-2010

28,064

2010-2011

43,666

2011-2012

33,598

2012-2013

1,323

(July, 12)
Figure: Employment up to July 2005 to 2012 in EPZs in Bangladesh
Source: BEPZA

Conclusion:
EPZs in Bangladesh play a significant role in attracting foreign direct investment as well as in
involving local investment, which jointly contribute to an overall increase in the countries volume
of exports and in its earnings of foreign exchange. Foreign exchange earned through exports by
EPZ enterprises reduces deficits in the country balance of payments. A part of it is converted into
local currency to be spent on procurement of goods and services from the local economy.
BEPZAs contribution to national export was 2.69% in 1990-91 and 17.44% 2005-2006.
The two EPZs provide employment to about 201,169 Bangladeshi workers. As the average family
size in the country is 6 members, with only one earning member in a family, these 201,169
workers earn livelihood for more than 1.2 million people. In most cases, foreign investment in
EPZs accompanied by utilization of advanced technology and provides an opportunity for the
local workforce to acquire new skills. The trained workers also help expedite transfer of
technology.

Most important factors affecting the success of the EPZs in Bangladesh are: (i) the existing
macroeconomic policies affecting the EPZs (ii) a more or less realistic exchange rate and stable
macroeconomic environment, and (iii) low-cost labor.

Areas where EPZs have been established have become special growth centers in the economy of
Bangladesh as a result of organized and fast development of infrastructure including roads,
electricity gas, water supply, telecommunication, fire brigade, post office etc. Lastly it can say
that, EPZs in Bangladesh have been instrumental in creating salutary impacts in terms of flow of
foreign investment, employment generation, export and foreign exchange earnings, and value
added & overall in our national economy.