The first full license for an economic zone to be developed by a local private company has just been awarded. The Meghna Group of Industries, a leading conglomerate of Bangladesh, has received the final license from the Bangladesh Economic Zones Authority to establish the Meghna Economic Zone (MEZ). This pioneering zone will be built on 245 acres of land in Sonargaon, on the banks of the Meghna river.
Sonargaon, a symbol of the past, now becomes the harbinger of the future.
The vision of that future was first articulated exactly 10 years ago when the World Bank Group published a path-breaking report called “Bangladesh: Piloting Reform through the Development and Management of Economic Zones.”
That report, published in June 2006, had two key messages. First, in a land-scarce country, like Bangladesh, industrialisation had to be carried out in a manner that made optimum use of land.
Bangladesh has had a fairly respectable rate of industrialisation and this rate is likely to accelerate. This is good news for Bangladesh. Industrialisation, especially if labour-intensive, is likely to be the most effective way of creating jobs and income opportunities for poor people while also generating other positive outcomes, such as export revenues and growth synergies in the economy.
But industry requires land and industrial production can tax the environment.
The rapid industrialisation of recent times has adversely impacted the environment. In the absence of a good zoning policy, entrepreneurs have set up factories wherever they could find a plot of land.
Often the sites are far off a major road or an electricity transmission line. Not only are extra costs incurred in building the connecting road and the last-mile power distribution line to the factory, often more land is used up than would have been under better-planned industrial growth.
The report thus argued for an economic zones agenda ie a substantial push to build economic zones in large numbers so that industrialisation proceeded in an organised manner.
But who would build the zones?
Till then, all industrial zones in Bangladesh were built and operated by the public sector. The country had six export processing zones at that time, all developed and managed by the Bangladesh Export Processing Zone Authority (BEPZA).
These were reasonably well-run, but were all export-oriented; investors catering largely to the domestic market had started to complain. They could, of course, go to the industrial parks, of which there were about 60 scattered all over the country. But these were in bad shape. Run by an inefficient and resource-starved Bangladesh Small and Cottage Industries Corporation (BSCIC), most lacked good infrastructure and utilities, and some were in locations that made little economic sense.
The public sector was stretched -- in terms of resources and management skills. It lacked market knowledge needed to understand and respond to the needs of investors in a modern, fast-moving, globalised environment. The substantial economic zones agenda that the report argued for could not be implemented through the old public-sector model of zone development.
Thus, the second message of the report: Create the enabling environment for the private sector to step in and develop the economic zones, as well as manage them.
Private companies were already into housing estates, modern commercial buildings, and other types of large-scale construction activity. Being involved in industrial activity themselves, the private sector also had first-hand knowledge of industry.
Building upon this knowledge and, when needed, leveraging foreign companies experienced in zone development, Bangladeshi companies could make an entry into the development and management of economic zones. Drawing upon global experience, the report laid out several options for private zones, including different models of partnership between the public and private sectors.
A bold idea at that time for a country long-used to a public sector economic zones regime.
Like many good reports produced by donor agencies, this could have been relegated to the government bookshelves. But it was different this time.
The report triggered interest in the government and, thanks to a conscious effort to engage stakeholders and the media, the idea of economic zones started resonating in the minds of Bangladeshis.
The evolution of the economic zones agenda, in particular the progress made with getting the private sector involved, is heartening for many reasons. It shows that there is a place for bold ideas in Bangladesh
The first step was to establish the legal framework for private sector development and management of economic zones. An Economic Zones Act was first enacted by the care-taker government in 2008 and promptly ratified by the new parliament in 2010. In November that year, the Bangladesh Economic Zones Authority (BEZA) was established and attached to the prime minister’s office.
Enacting a law and setting up an institution to oversee zone development is a necessary step. But it is not sufficient. The next task was to prepare and approve a set of implementing regulations that would make the law operational and allow the BEZA to function effectively.
While this took some time, reflecting the challenges of moving regulatory proposals through the many hoops in government, a critical mass of regulations, operational processes and guidance manuals are now in place.
To its credit, the government has all along recognised the importance of environmental and social due-diligence. Proposed sites have to be vetted through a rigorous site selection process and, once a site has been selected, a proper environmental and social assessment has to be carried out.
Prospective private zone developers do not get the go-ahead the moment they first walk through the BEZA doors. They have to satisfy a number of conditions in order to get a pre-qualification license and do more work before they get the final license, which Meghna has just received.
Seven other pre-qualification licenses have been awarded and the companies are working towards the final license. The investors include well-known companies, such as the AK Khan and Company and Abdul Monem Ltd. Encouraged by the pioneers, another 12 companies have apparently approached BEZA with an intent to join the private zone bandwagon.
The evolution of the economic zones agenda, in particular the progress made with getting the private sector involved, is heartening for many reasons. It shows that there is a place for bold ideas in Bangladesh.
When appropriately supported and nudged, political leaders and government officials are indeed willing to implement such ideas. But the experience also shows the need to stick with an agenda with patience and resilience, including on the part of development partners who, in this case, have been engaged for the long haul, through ups and down, with strategic vision as well as micro-level operational support.
Above all, it is a story of how it is possible in Bangladesh to move away from the chaos of haphazard development to a more organised and disciplined path, energised by entrepreneurship but cognisant that land and the environment is something we have to bequest to future generations.
Akhtar Mahmood works for an international development agency.