High rents and utility bills are hampering investments in Export Processing Zones (EPZs) in Bangladesh. We have to shut down our factories if the government doesn’t reduce the charges, they claimed.
Investors in the country’s export processing zones (EPZs) are struggling to stay afloat during the Covid-19 pandemic. Many have already closed down their businesses and a number of foreign investors are thinking of shifting their investments. Industries in all eight EPZs are on a double-edged sword, with their production and export at a low ebb, and the huge pressure of payment of rent for their plots, electricity and gas bills plus salary and allowances of employees every month.
Investors say they will have to shut down their businesses unless the government takes initiatives to arrange affordable rent and utility bills for them. Besides, many foreign investors may withdraw their investments.
Kotobuki Bangladesh Ltd, a Japanese company with 100 percent foreign investment in Mongla EPZ, manufactures engine parts for Toyota cars. The company’s production officer Elias said, “Investors in their company are thinking of shifting investment from Bangladesh.”
He said if this situation continues, it will not be possible to run the business here. Besides, they are not getting the amount of assistance that the government is supposed to provide in such a situation.
Quoting representative director and president of Kotobuki Bangladesh Ltd Ryota Kitamura, Elias said Kotobuki’s Japan-based head office had decided that if this continues and they do not receive any benefits from the government, they will relocate their business from Bangladesh.
Md Elias said now they have to pay electricity and gas bills from April. The government had stopped the service providers from collecting the utility bills for three months. The government’s announcement was a great relief during the pandemic.
“But suddenly various service providers are pressuring us to pay all the outstanding bills in full by June 30. Otherwise, they are threatening to cut off the electricity, water and gas connections of the customers. This will increase the suffering of businesses,” he added.
“Additionally, the rent for the allotted plot has to be paid regularly every month even though the activities at the factory are completely closed.”
He said the most unreasonable thing was to pay the rent of the allotted plots on a monthly basis. Because, according to the Export Processing Zones Act, if you cannot pay the rent of the plot on time every month, you have to pay 24 percent interest on that rent the next month. And if the rent is not given for three months, the allotment of the plot will be cancelled.”
Elias also mentioned that foreign investors are not getting any benefits under the government-announced stimulus packages.
In August last year, Deshbandhu Group, a well-known business organisation, started the fully export-oriented ‘Deshbandhu Textile Mill’ at Uttara EPZ in Nilphamari.
Production stopped in April because of the coronavirus.
Kishore Kumar, director of production at the Deshbandhu Group, told that the company was able to pay the workers in April-May with a small loan from the government’s announced stimulus package. He complained that the banks with which they deal are also delaying in giving them the loans from the package.
He said no new business agreement had been reached since last March. Many contracts have been cancelled by foreign buyers. Again, according to the agreement, a large quantity of garments was produced but they could not be shipped in full.
As a result, it can be said that there is no income from business. Kishore Kumar said that now with a small number of workers, some limited production activities are being carried out in compliance with health rules.
However, he mentioned that a lot of money is being spent on salaries and allowances of the workers.
An official of a foreign investment firm at the Dhaka EPZ said on condition of anonymity that the way business has been going for the past few months, they are thinking of winding down the business from Bangladesh.
The official said their company produces leather goods which are exported to different countries of the world.
A lockdown was announced at the factory at the beginning of May after eight workers had tested positive at a time. Although it opened in late May, many workers are still absent, and as a result production is very limited.
SG Oil Refineries Ltd started operations in Mongla EPZ in mid-2018 with the joint venture of a few Indian and Bangladeshi investors.
Till last December, it has exported about 50,000 tonnes of oil to different countries. They still store 6,000 tonnes of oil. Again, 2,200 tonnes of crude oil is stuck in Mongla port.
Due to the coronavirus, all the EPZ industries in the country stopped activities for the whole of April as announced by the government.
Brigadier General (retd) Sarwar Jahan Talukder, chairman of SG Oil Refinery Ltd, told that the impact of the coronavirus pandemic has now fallen on all investors in the EPZ, not just because of the April shutdown.
As production and exports have almost stopped, about 30 industrial establishments in Mongla are now in a state of disarray, said Talukder.
There are a total of eight EPZs in the country under the control of the Bangladesh Export Processing Zones Authority (Bepza). EPZs are located in Chattogram, Dhaka, Mongla, Ishwardi, Uttara (Nilphamari), Adamjee and Karnaphuli.
In the EPZs, there are over 5.14 lakh manpower in 470 industrial establishments.
The total investment in EPZs at present is over $4.88 billion. The investment in the garments industry has been more than $1.8 billion dollars, according to the Bangladesh Bureau of Statistics (BBS).
Of this, the total manpower in 118 garments is 3.5 lakh. After that, there are nearly 28,000 manpower in the textile industry. About 60 percent of the total workforce is in the apparel factories and the remaining 40 percent is in other industries. The EPZ has 25 percent garments, 20 percent garment accessories, 8 percent textiles, 7 percent knitwear, 6 percent footwear and leather and 19 percent other products.
The others industries include hat manufacturing units, agro-based enterprises, services, fertiliser production, furniture, paper, rope, sports, fishing reels and toy manufacturing industries.
At present 470 establishments are in production and 101 industrial establishments are under implementation. There are 161 industrial establishments in Chattogram, 102 in Dhaka, 30 in Mongla, 18 in Ishwardi, 47 in Cumilla, 18 in Nilphamari, 52 in Adamjee and 42 in Karnaphuli EPZs.
According to Bepza, in the eight EPZs, 58 percent industries have 100 percent foreign ownership, 14 percent have domestic and foreign joint ventures, and 28 percent industrial establishments have 100 percent local ventures.
Chairman of Mongla SG Oil Refinery Ltd Brigadier General (retd) Sarwar Jahan Talukder told, investors in various EPZs have repeatedly approached Bepza to allow them to pay their electricity and gas bills late, but to no avail. In addition, they have requested Bepza to waive the provision of 24 percent interest for non-payment of monthly rent of the allotted plots. They are yet to receive any response from Bepza in this regard, too.
Some investors in EPZs said they will file writ petitions in the High Court seeking stay of the provision of 24 percent interest if the rent for the allotted plots is not paid every month. Some businessmen have already hired lawyers.
Professor Mustafizur Rahman, Distinguished Fellow of the Centre for Policy Dialogue (CPD), said, “The health risk we see, it seems we will not get rid of it so fast. There is not much initiative on the part of the government to keep the country’s economy running. There is also no initiative to address business and economic risks.”
The economist said the EPZ areas have a lot of foreign investment plus millions of workers earn their livelihood there.
“EPZs have one of the major contributions to strengthening the wheels of the economy. Therefore, the government should take special initiatives for EPZ investors in the current situation.”
Nazma Binte Alamgir, general manager (public relations) of Bepza, said investors had applied to Bepza on various issues. Bepza is thinking whether something can be done by discussing these issues.