Institutions for Facilitating FDI: Issues for BEPZA, Bangladesh.

Abstract

The Bangladesh Export Processing Zones Authority (BEPZA), which is responsible for the Export Processing Zones (EPZs) in Bangladesh, is a key institution in attracting and managing Foreign Direct Investment (FDI) in Bangladesh. Though termed as efficient, BEPZA activities became the center of criticism after a shattering labour outburst of 2006. This briefing paper aims to provide an explanation for this massive failure, and also to discuss some of BEPZA's successful cases, through in-depth investigation of its institutional practices, trends and arrangements. BEPZA was developed as a distinct authority directly under the Prime Minister's Office (PMO). It was granted considerable power over related ministries, divisions and corporations, and also immunity from sixteen laws relating to industry, labour and customs questions. BEPZA also included, at a later stage, the PMO's Principal Secretary in its governing body in order to further streamline the co-operation of the central bureaucratic structure, but with the practice of providing speedy solutions rather than following the conventional argument and counter-argument decision-making process having become the norm. Why failure? With overwhelming emphasis on the interest of foreign investors and, on the contrary, apathy to labourers, considering them just a factor of production, BEPZA seemingly assumed that direct investors would appropriately maintain labour-related guidelines; though low labour productivity, in comparison to neighboring countries, may have also contributed to BEPZA's failure to enforce labour related regulations. Another reason for this apparent negligence may also lie in the paradoxical nature of BEPZA's mandate, the tension between investment performance and adhering to labour regulations; and though BEPZA is in the process of addressing its failures to enforce the labour-related regulations, there is a concern that it may now fail in its goals concerning business and FDI, especially if institution based changes are not enforced in order to aid this rebalancing of its mandate - a fact which is further supported by the prospect of the emergence of a competitive private EPZ operation.

Citation

IPPG Briefing Paper No. Ten, In Conjunction with CUTS International, DFID, London, UK, 10 pp.

Institutions for Facilitating FDI: Issues for BEPZA, Bangladesh.

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