EPZ or Export Processing Zone is a special type of area where the government offers duty-free service to manufacturers. The prime objectives of EPZ include attracting foreign investment, strengthening the economy, creating job opportunities, and many more. EPZ’s are governed by an ‘open-door policy. The policy features zero or fewer duty fees to attract investment. Foreign investors can run their businesses easily in these EPZ areas.
What is an EPZ?
To understand EPZ better we need to know how it works. Why is it profitable for investors? Why is it important for us? To start a business manufacturers need to set up plants. To set up plants in an EPZ the machinery, and raw products can be imported without a duty fee. They also get to export goods without tax. Long-term tax holidays are also offered. EPZ facilities may include- free trade conditions, one-stop documentation, and registration facilities. Generally, EPZs have good connectivity with ports to ensure smooth transportation. EPZ areas are considered foreign lands as they are not subjected to tax.
Significance of EPZ
EPZs can play a significant role in terms of the progress of a country. It has the potential to strengthen the economy. Foreign direct investment (FDI) is an important feature of it. EPZs need a huge workforce which is a great source of employment. The idea of EPZ came from countries like Hong Kong, Singapore, and Gibraltar in the 19th century. It is a tool mainly used by developing countries to promote economic growth and increase export-oriented production. A skilled workforce and cheap labor are required to increase its efficiency. Countries like China, South Korea, and Indonesia have benefited significantly from the concept of EPZs. But not all countries have benefited from it. The Philippines couldn’t gain any profit as the cost of infrastructure was higher than the profit.
Like a coin, EPZs also come with their pros and cons. Some economists say that laborers get low wages and the working conditions are not safe.
EPZs in Bangladesh
In Bangladesh, EPZs are playing a significant role in terms of rapid economic growth. Currently, there are 8 EPZs in Bangladesh. Investments in these areas are classified into three categories-A, B, and C. These types are based on a percentage of foreign and domestic investment. Type-A investments mean 100 percent foreign investments. Type-B investments are made jointly by a Bangladeshi firm and a foreign company. Type C investments are made solely by a Bangladeshi company. Currently, almost 230406 people are employed in BEPZs. Bangladesh has announced that 100 EPZs and SEZs will be established within 15 years. The largest EPZ is in Chattogram. BEPZA is not only focusing on attracting foreign investments but also trying to produce high-end products. Auto parts, electronics, camera lenses, and medical equipment are also made in EPZs. They also get exported abroad. Currently, BEPZA said it was giving importance to encouraging the establishment of medical equipment manufacturing plants.
EPZs provide a free-trade and liberal regulatory environment for the firms involved. Lastly, we can say that EPZ areas are playing an important role in strengthening the economies of developing countries like Bangladesh.
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Writer
HRIDAM ROSHAN PAUL
Intern, Content Writing Department
YSSE