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Drivers of and Obstacles to Urban Competitiveness from the Perspective of the Garment Sector
Box 5.3 Policy Objectives and Achievements of Bangladesh’s Export Processing Zones Bangladesh’s EPZ program was established in the early 1980s, before the extraordinary growth of garment exports, as a policy tool to catalyze industrial development, attract foreign private investment, and generate employment. The program was also conceived as a spatially targeted policy to direct investments to lagging regions and reduce regional inequalities—an attempt to “move jobs to people.” Although the EPZ program has been relatively successful in attracting investment, the strategy of using EPZs to deconcentrate economic production outside the Dhaka and Chittagong metropolitan areas has not worked. The first EPZ, in Chittagong, was completed in 1983–84 (Farole 2010). The second, in Dhaka, was established in 1993 and expanded in 1997. Eight EPZs currently operate under the Bangladesh Export Processing Zones Authority (BEPZA), with two new zones in the planning stage. The first privately managed zone, operated by the Youngone Corporation of Korea, is under construction in Chittagong. After more than 10 years of negotiations, however, the privately owned EPZ has yet to take off. Youngone Corporation, the private investor, which acquired the land in 1999, received its operating license only in 2007; as of 2012, the EPZ remained in limbo, because of poor access to gas and electricity. The success of EPZs in Dhaka and Chittagong was driven almost entirely by the growth of the garment sector, with almost two thirds of companies in EPZs operating in it. (Farole 2010; Farole and Akinci 2011). Bangladesh’s EPZ program has not succeeded in “moving jobs to people.” Although the zones are spread across the country, economic activity is highly concentrated, with the Chittagong and Dhaka EPZs accounting for 90 percent of all exports and 67 percent of all jobs in EPZs in 2012. The Adamjee EPZ—located in Narayanganj, within the Dhaka metropolitan area, and opened in 2005—and the Karnaphuli EPZ—located near Chittagong and opened in 2006—have been attracting investments at a fairly rapid pace since they opened. Both were created from the conversion of two closed loss-making state-owned enterprises (Adamjee Jute Mills and Chittagong Steel Mills). The Comilla zone—located on the Dhaka-Chittagong corridor—has grown gradually but steadily mostly due to its strategic location and its relatively good connectivity. In contrast, the Ishwardi, Mongla, and Uttara EPZs, located in the western region, have performed poorly. These zones, located far from the Chittagong port and Dhaka, have generated only 1 percent of total exports in EPZs. Sources: Farole 2010; Farole and Akinci 2011.
Small and Medium-Size Cities Small and medium-size cities are uncompetitive “distant places” from the perspective of the private sector. The overwhelming majority of firms report inadequate access to skilled labor as the main constraint, followed by distance to other garment firms and inadequate access to transport infrastructure, including the port (table 5.1). These results confirm that proximity to Dhaka is an important locational advantage for garment firms because it provides access to markets and labor. Small and medium-size cities need to develop a competitive advantage by relying on local entrepreneurship rather than attempting to attract firms from elsewhere through relocation incentives. Garment firms’ location choices are characterized by path dependency. Only 10 percent of the sampled firms relocated, and another 10 percent report that they would like to relocate. Of firms Bangladesh • http://dx.doi.org/10.1596/978-0-8213-9859-3