Any break in KEPZ clouds soon?
The Korean Export Processing Zone on the bank of the river Karnaphuli in Chittagong still remains unoccupied due to lack of gas and electricity supply and delayed clearance from the authorities on environment. Photo: YOUNGONE
The atmosphere is shrouded in stillness. The land remains bare with small hills sporadically covering an area of 2,500 acres. It was supposed to be an industrial enclave years ago. But nothing happened in the last 8 years.
Not a single hole of the golf course enjoys shots, despite regular nursing of the 18-hole field by around 100 workers, with hopes that one day occasional golfers will crowd it.
Sometimes a skulk of foxes appears from the hilly forest, and trot around lazily. But initiators of Bangladesh's first private sector export processing zone (EPZ) were not far from preparations to let their dreams come true.
The Korean Export Processing Zone (KEPZ), situated on the bank of the river Karnaphuli in Chittagong, was readied for investors in 1999. But due to a lack of gas, electricity, delayed clearance from the authorities on environment and other bureaucratic hassles, the area remains unoccupied.
But things are about to change as Youngone Corporation, an initiator of Bangladesh's largest export processing area, now moves to break the ice on investment sterility. The company will shortly make an investment footprint in the lone KEPZ by setting up a $110 million footwear factory.
"We want to take the risk first before welcoming other investors," Md Shahjahan, general manager of KEPZ, told a group of reporters when they visited the site on July 16.
The 72-production line shoe factory will create jobs for more than 30,000 in the area, while KEPZ projects will directly and indirectly create jobs for more than 3,50,000, when the zone becomes fully functional.
The KEPZ officials are a bit optimistic about obtaining electricity and environmental clearance, but worried about gas, a major source of energy needed to set up a factory.
The Korean-sponsored private EPZ was initially discussed between Korea and Bangladesh in 1995, on the sidelines of a summit held at Seoul. Later, Kihak Sung, chairman and chief executive officer of Youngone Corporation, came to kick-start establishment.
Youngone is one of the leading foreign investors in Bangladesh, employing over 30,000 people in more than a dozen factories in Dhaka and Chittagong EPZ, with an annual turnover of around Tk 25 billion.
Capitalising on its business background in Bangladesh, Youngone acquired land to establish the private EPZ in 1999 after fulfilling all requirements. To develop the hilly and mostly sandy land, Youngone sketched a plan to invest $200million.
However until May 2007, the company did not get an operational licence, a certification from the government to start production in any EPZ.
The KEPZ officials were also not ready to explain the delay.
However, people familiar with the matter mainly blamed the delay on political unwillingness.
It is a common phenomenon that when a political government initiated the project, its successor is hesitant to take it forward. And so, KEPZ did not get government support for a long time.
From 1999 to 1996, foreign investors from US, China and India knocked KEPZ authorities for investment opportunities. But none was entertained.
Youngone even had to shift their investment plans to Vietnam, which resulted in employment for 20,000 people in that country, a big blow to Bangladeshi job seekers.
Good news for the expected $1billion foreign direct investment (FDI) hub came in May 2007, when it obtained the operational licence.
However, problems still remain, as electricity and gas crises persist in Chittagong. And the KEPZ has been a victim from the beginning.
"We want only 2.75 million cubic feet per day (mmcfd) gas to run the shoe factory initially," Shahjahan said. "We just want to start."
Considering the acute shortage of gas, the KEPZ already submitted a conservative gas requirement to the government. It wants 2.75 mmcfd gas by 2010, 6.90 mmcfd by 2011, 10.05 mmcfd by 2012 and 13.20 mmcfd by 2013.
"We hope to get an electric connection soon, " the official said.
In addition, the KEPZ requires support from the Chittagong Port authorities, National Board of Revenue and the Department of Environment.
KEPZ could give momentum to the process of attracting FDI, which has been declining since 2006 mainly because of political uncertainty.
Bangladesh fetched FDI worth $793 million in fiscal 2006-07, which declined to $650 million in 2007-08, according to Bangladesh Bank statistics.
The United Nations Conference on Trade and Development (Unctad) says worldwide FDI inflows shrank 21 percent in 2008 to $1.4 trillion. The World Association of Investment Promotion Agencies predicted a 12-15 percent contraction in FDI in 2009.
The government in its budget for fiscal year 2008-09 announced that establishment of EPZ will not be allowed anymore. In such circumstances, the ready KEPZ could be considered as an investment hub by prospective investors. Nothing but a supportive whistle from the government is enough to make investors crowd into the KEPZ.
The buzz of factories in the expected change in the KEPZ scenario may replace the silence of the occasional golfers in their leisure time.
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