SEZ: An effective tool

The Chittagong Export Processing Zone is pictured. The Special Economic Zones Act brings all these zones under a common legal framework. PHOTO: Anurup Kanti Das

Without any brouhaha, the parliament passed into law the Special Economic Zones (SEZ) Act on August 1 that nobody really took notice of.
But soon, the SEZ would be 'the buzz word' of policy and strategy dialogues in everything from the business environment, customs regulations, government rules for business, investment promotion and land zoning to the primacy of private entrepreneurship over public enterprise. The sooner we get started the better for us.
The SEZ Act is an omnibus legislation that gives legal cover and guidance to all types of industrial zones that require special dispensations from the government.
The idea of such a legal mandate, though new to our country, has been around for decades in other countries. However, we are not total aliens when it comes to industrial zones with special privileges -- the export processing zones (EPZ), BSCIC industrial estates, Korean EPZ and the ICT Incubator are some existing examples, which are incidentally all state-owned aside from KEPZ.
For ICT and other high tech industries, the government is setting up the Hi-Tech Park in Kaliakoir, armed with the new-fangled Hi-Tech Park Authority Act passed in 2009, a law that will eventually govern the business of all technology parks. When it comes to the other special industrial zones, we have separate laws to govern them, such as the Bangladesh EPZ Authority Act (passed in 1980), BSCIC Act (passed in 1957) and Private EPZ Act (passed in 1996).
One can easily see how this multitude of laws and regulations concerning broadly the same theme can lead to legal and administrative wrangling, not to mention heightened confusion, among all stakeholders. The SEZ Act brings all these zones under a common legal framework which, when enforced, will make the job of setting up and operating special industrial zones under both public and private initiative a snip -- well, that's the idea.
To make that happen, rules and regulations under the SEZ Act will have to be formulated and then applied to a designated zone as a model SEZ. Gradually, all other SEZs have to be brought under the jurisdiction of the SEZ Act. That's a mammoth undertaking to say the least but an undertaking that can reap rich dividends for the nation.
The Philippines passed a similar law in 1995 when they had only 12 such special industrial parks with only 91,000 jobs between them -- all state-owned and -operated. Today, they have more than 200, out of which 190 are privately owned and operated. This accelerated growth in the number of SEZs created more than 3 million direct jobs and 4 times as many indirect jobs, and brought in investment of more than $30 billion. What is significant is that more than 90 percent of the SEZs are owned and operated by private enterprise. Cameroon, China, India, Kazakhstan, Malaysia, Pakistan, Poland, South Korea and Ukraine are among other nations that have adopted the SEZ law and achieved similar spectacular results.
With 3-4 million fresh entrants in the job market a year, creating sustainable jobs is certainly the most daunting task facing the nation today. And those jobs will not be forthcoming unless large investments in industrial undertakings happen quickly.
SEZ could be the most effective vehicle in our hands today to materialise the vision of accelerated economic growth. With India enveloping us like a giant glove, growing near double-digits, accelerating our growth rate is no longer nice-to-have but a must-have.
However attractive, making SEZs work will require a sympathetic consideration from all government agencies currently handling zones that will come under the SEZ Act. It will also require energetic intervention of business chambers and industry associations as well as the moral support of the civil society and economic think tanks. Most contentious will be the private enterprise provisions in the SEZ Act as can be vouched by KEPZ, the lone private EPZ in the country. Even after 14 years of frantic appeals, KEPZ does not enjoy the same privileges as enjoyed by the state-owned EPZs. However, as can be seen from the experience of other developing nations, massive private sector participation is the real key to the magic of SEZs.
In that spirit, the stakeholders will hopefully work expeditiously to frame the SEZ rules and regulations and pave the way for 300 SEZs, 3 million jobs and investment worth $30 billion in the next ten years.

The writer is the founder and chief executive of Technohaven Co Ltd. He can be reached at [email protected].