ADB Praises Efforts To Build Economic Zones

ADB Praises Efforts To Build Economic Zones

A new report from the Asian Development Bank has given a thumbs-up to Bangladesh’s efforts in setting up 100 special economic zones as dedicated industrial districts help attract foreign investment and boost exports.

SEZs are associated with more foreign affiliates in the economy that exports, said the Asian Economic Integration Report 2016, which was released earlier this month.

The ADB report, which covers 48 countries in Asia and the Pacific, examines current trends in trade, finance, migration, remittance, and other regional cooperation and integration issues, with a special chapter on the factors behind the growth of FDI in the region.

In 2014, Bangladesh had only eight special economic zones (known as export processing zones) that facilitate exports compared to 14 in Cambodia, 199 in India, 10 in Kazakhstan, 1,475 in China, 312 in the Philippines and 12 in Sri Lanka.

Bangladesh plans to develop 100 special economic zones in the next 15 years, with a target to earn an additional $40 billion by exporting goods from the economic zones by 2030. Exports by the factories located in the country’s export processing zones rose 9.16 percent year-on-year to $6.67 billion last fiscal year.

The ADB report called for strengthening trade linkages and attracting foreign direct investment, which will contribute to Asia and the Pacific’s growth and help improve resilience to emerging protectionism.

The report cautions that the benefits of FDI are not automatic. Different types of FDI will bring different benefits and what works in one country may not necessarily work for another. “For example, FDI in extractive industries can be less beneficial than FDI that promotes trade, which strengthens the host country’s links to international production networks.”

The report said good governance and quality of institutions in the host economy could signal its government’s commitment to honouring the interests of foreign investors and their investments. “Without these conditions, significant increases in FDI are not likely.” The report however said developing economies with relatively poor governance can still foster FDI inflows by improving the business environment.

Bangladesh was the fifth top recipient of remittance. Last year, it earned more in remittance than Vietnam, Indonesia, Sri Lanka and Nepal, but lagged behind India, China, the Philippines and Pakistan.

The report also compared non-performing loans among the countries.

It showed that Bangladesh had an NPL of 9.3 percent in 2015. Only five countries in the region — Pakistan, Bhutan, Afghanistan, the Maldives and Tajikistan — had a higher NPL than Bangladesh.

The report said ADB-supported railway enhancement projects in Bangladesh are improving the international connectivity of the rail system.  Improvements in border-crossing facilities, such as land customs stations and dry ports in Bhutan, and land customs stations and integrated checkpoints in India are speeding border processing and increasing efficiency.

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