Report on the Potential for Monitoring and Evaluation of Special Economic Zones in Bangladesh
Background information of the research project：
In order to advance our understanding of special economic zones (SEZs) as an instrument of economic transformation, the Institute of New Structural Economics (INSE) at Peking University initiated a monitoring and evaluation (M&E) program for SEZs. The goal is to overcome current data gaps by creating a normalized, multi-country data set that is collected on an ongoing basis and incorporates both quantitative and qualitative data on SEZs. This approach is expected to deliver actionable insights to help policymakers and other stakeholders to make decisions and investments regarding SEZs that maximize their benefits, including structural transformation and the pursuit of Sustainable Development Goals. To determine suitable indicators and data collection methods, the M&E framework is being developed through country pilots in collaboration with local institutions in partner countries.
In 2018, the INSE cooperated with the Bangladesh Institute of Development Studies (BIDS) to investigate Bangladesh’s new SEZ program and its potential for inclusion into the M&E pilot program. A field study was conducted in Bangladesh by a joint research team in August 2018. This project was sponsored by the United Nations Development Program (UNDP) and the United Nations Office for South-South Cooperation (UNOSSC) under the “South-South Global Thinkers – the Global Coalition of Think Tank Networks for South-South Cooperation” initiative. The resulting Report on the Potential for Monitoring and Evaluation of Special Economic Zones in Bangladesh was launched during a side-event of the Second High-Level United Nations Conference on South-South Cooperation (BAPA+40) on March 19, 2019.
In 2010, the Bangladesh Economic Zones Authority (BEZA) was initiated with the ambition to establish 100 Economic Zones (EZs) throughout the country. In comparison with already existing types of zones in Bangladesh, EZs are broader in scope and more inclusive of the private sector and other partners. This report presents the findings of the field study conducted by the BIDS and the INSE to determine whether this new program could be incorporated into the pilot phase of the INSE’s Monitoring and Evaluation program for SEZs. In the spirit of South-South cooperation (SSC) upheld through the BIDS-INSE collaboration, the report also provides comparative analyses to support SEZ-related lesson-sharing and highlight current cooperation trends in this field. BEZA’s program is presented contextualized with an analysis of the evolution of SEZ programs in Bangladesh, India and Pakistan. Further insight is provided with consideration of the Chinese experience with SEZs, a recurrent point of reference in the literature. In light of these findings, the report argues that there is a mutually reinforcing relationship between SSC and SEZ development and recommends to further leverage this dynamic for economic transformation.
The study of Bangladesh’s new program finds that the domestic private sector is coming on board with enthusiasm. A handful of private EZs are already operating. However, progress is hampered by administrative, financing, and infrastructural bottlenecks. Certain policies to streamline EZs’ administrative processes have been adopted but not yet implemented. System-wide shortcomings affecting industrial development in general remain a main concern for Bangladeshi entrepreneurs, in particular restricted access to finance for long-term investment and severely congested connective infrastructure. As for public EZs, field research revealed that they are slower to develop and none is currently operational. Overall, the EZ program is still at a very early stage of development. Rules are still being drafted, many projects have been approved but few have actually started. As a result, the report concludes that although it is highly desirable to include Bangladesh into a shared mechanism to capture the results of more and less successful zones, BEZA’s program is not yet ready for inclusion into the M&E program.
The comparative analysis of historical SEZ development in India, Pakistan and Bangladesh reveals that programs have been successful when: (a) articulated within a broader economic strategy enjoying political commitment; (b) supported with a dedicated policy and governance framework; and (c) implemented transparently and adaptively. In this regard, Bangladesh distinguished itself as an early regional leader in the setting up of effective zone programs for industrial development in the past. Still, there is also scope for BEZA to learn from cautionary tales from its neighbors. Issues of governance and land acquisition for industrial development in particular should continue to be approached with nuance and sensitivity. Likewise, the Chinese experience with SEZs can serve as an inspiration for Bangladesh and other developing countries. After their inceptions in 1978 as testing grounds for economic reforms, Chinese SEZs developed into various models to prepare the country for new challenges as its economic structure evolved. This is inspiring for Bangladesh’s new EZs, as the country now faces the challenge to upgrade and diversify its economy beyond early industrialization successes in low-value added ready-made garments exports.
Overall, this report stresses the importance for Southern countries channeling scarce resources into SEZs of learning from each other’s positive and negative experiences to maximize chances for success. SEZs also offer unique platforms for direct forms of SSC. As channels for investment, SEZs can help make the junction between Southern economies as they undergo structural transformation, as seen in Asia. Various modes of SSC via SEZs can be envisioned, such as the private Chinese overseas SEZs in Africa or the Government-to-Government EZs planned in Bangladesh. If adopted by enough countries, the M&E program has the potential to accelerate learning by capturing, aggregating and sharing all those experiences at the multilateral level.
K.A.S. Murshid, Director General of the Bangladesh Institute of Development Studies.
Marianne Männlein, Project Research Specialist at the Institute of New Structural Economics, Peking University.
Sarah Hager, (formerly) Project Research Specialist at the Institute of New Structural Economics, Peking University.
Link to the report: