History of Bangladesh EPZ

Since independence, Bangladesh has made remarkable progress in diversified areas of social,
political, cultural and economic life of its citizens. In order to boost up economic
development of the country, a number of steps have also been taken to attract Foreign Direct
Investment (FDI) and facilitate industrialization process of the country. One of such efforts
was the promulgation of BEPZA Act 1980 which eventually instituted the formation of
Bangladesh Export Processing Zones Authority (BEPZA), the government organ responsible
for creation, operation and development of Export Processing Zones (EPZ) in the country.
After the independence the stagnant economy of the war ravaged country was desperately
seeking private capital and technical knowhow to facilitate the industrialization process to
achieve economic growth. During the initial years it could not happen. However, a visit by
the then World Bank Vice President, Mr. Robert McNamara in the early eighties to
Bangladesh transmitted the concept of EPZs to us. Since then EPZs, in tune with the liberal
industrial policy of the government along with investment friendly legal & institutional
framework like Foreign Private Investment (Promotion and Protection) Act1980, have made
significant progress. The pioneer zone in Bangladesh was set up in South Halishahar in
Chittagong in 1983. Following the tremendous success of the Chittagong EPZ, the
government has decided to establish the countrys second EPZ at Savar near Dhaka a decade
later in 1993. In view of the growing demand of the investors the government has then
established EPZs such as Mongla EPZ (Bagerhat), Ishwardi EPZ (Pabna), Comilla EPZ
(Comilla), Adamjee EPZ (Siddirganj, Narayanganj), Uttara EPZ (Nilphamari), Karnaphuli
EPZ (Chittagang). Attractive packages of incentives, physical industrial facilities of Zones
along with abundance of skilled manpower at a competitive rate have placed Bangladeshs
EPZs in a comparative advantageous position over other competing EPZs of neighboring
countries. Apart from the manufacturing sectors EPZs are now inviting investment into
infrastructure, power & utility, and environmental management projects which have made the
Zones truly attractive investment destination for the prudent investors who looks to the
future.
Most of the industries of Bangladesh are highly labor intensive. Automation of working
process is still now not very famous here. Employment creation and investment in the export
oriented industries is an important objective of the industrial policy of Bangladesh. An Export
Processing Zone (EPZ) is one of the instruments used for attracting investment, mainly
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foreign direct investment and to provide employment. EPZ has been a part of a larger set of
instruments and policy measures in Bangladesh. Around 110,000 workers are working in the
Bangladesh Export Processing Zone. Bangladesh EPZ authority doesnt allow any union
activity inside the zone. But they dont have any right of association, right for collective
bargaining, right to strike.
In Bangladesh there are around 6,300 registered unions and 1.9 million union members.
Almost 100% of government organizations are unionized. But, unionization in private
organizations is not so popular in Bangladesh. Dhaka Export Processing Zone (EPZ) is one of
them, where unions are not allowed. The authority of Dhaka EPZ is Bangladesh Export
Processing Zone Authority (BEPZA) totally prohibited the union inside the zone.
Management and monitoring of EPZs in the country lie with the Bangladesh Export
Processing Zones Authority (BEPZA).
Currently, some 428 operational units in the EPZs invested $402.58 million last fiscal year,
while their investments amounted to $328.53 million in fiscal 2012-13, according to BEPZA.
When EPZs were established at different places in Bangladesh, the government entered into
contracts with foreign investors that trade unions will not be allowed in EPZ areas. A trade
union (or labor union) is an organization of workers who have banded together to achieve
common goals in key areas and working conditions. The trade union, through its leadership,
bargains with the employer on behalf of union members and negotiates labor contracts
(collective bargaining) with employers. This may include the negotiation of wages, work
rules, complaint procedures, rules governing hiring, firing and promotion of workers,
benefits, workplace safety and policies. The most common, but by no means only, purpose of
these organizations ismaintaining or improving the conditions of their employment. About
five years ago, workers and employees working in EPZ areas are demanding that they should
be allowed to form trade unions there to protect their interest and rights. Considering foreign
investors position and considering workers demand; the objective of this report is to find a
credible solution for this problem mentioning reasons for and against allowing trade unions in
Bangladeshs EPZ areas.

Why Foreign Investors Come to EPZ

(1) Geo-regional location
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The comparative advantages of the EPZ in Bangladesh are its homogenously, large number
of potential human resources, competitive wage level, and its geo-regional location.
Bangladesh is situated in close proximity to the Bay of Bengal, which has given the country
with an easy access to the world through sea-way and also by air in terms of import and
export. As a result, the foreign investors are always keen to take those strategic advantages.
(2) Human Resources
The main attraction of investment in Bangladesh is the most inexpensive, productive,
abundant and easily trainable workforce. Today Bangladesh has a growing number of
managers, engineers, technicians and skilled labor force. The minimum wage of the workers
in the EPZs is one of the lowest in Asia. Changing economic and political conditions in the
Asian region are prompting many international investors to reassess their investment
strategies and plan for relocating their investments in Bangladesh. Those changes are
producing higher opportunities for Bangladesh to attract higher levels of FDI. China,
Thailand, Sri Lanka, Cambodia, Philippines and even Vietnam, Indonesia & Malaysia are
experiencing wages increase and rising production costs that are making them more
expensive resulting the EPZs of Bangladesh have become a new field and place for foreign
investment.
(3) One Window Service
BEPZA has been providing ONE WINDOW SERVICE to its investors. Operational and
documentation procedures have been framed to make them easy and simple with minimum
formalities. Investors need only to deal with BEPZA for all of their investment and
operational requirements. BEPZA assists the investors with everything like import, export,
and subcontract permits etc.
Apart from that, by providing on-site services such as customs clearance, logistics,
international couriers, and offshore banking facilities, BEPZA provides its investors with the
chance to further simplify business processes, resulting in a reduction in lead time. BEPZA
also provides same-day services to the investors.
(4) Protection of Foreign investment
Foreign investors enjoying multiple protections in BEPZA. The Foreign Private Investment
(Promotion and Protection) Act secures all foreign investment in Bangladesh. As a member of
OPICs (Overseas Private Investment Corporation, USA) insurance and finance programs
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operable in Bangladesh as well as in the EPZs. Bangladesh is a member of Multilateral

Investment Guarantee Agency (MIGA) which provides safeguards and security under
international law. The International Centre for the Settlement of Investment Dispute (ICSID)
also provides an additional means of remedy, whilst copyright interests are protected through
World Intellectual Property Organization (WIPO). The World Bank has ranked Bangladesh
20th out of 187 nations for investors protection, making it as the best in South Asian Region.
(5) Flexibility
BEPZA offers investment opportunities in convertible foreign currencies, providing investors
with the flexibility of repatriating of both profit and capital. The investors also enjoy GSP
facility in EU countries, USA, Australia, Japan, Norway and duty and quota free access to
Canada.
(6) Infrastructure Facilities
BEPZA provides infrastructure facilities for the investors. BEPZA provides fully serviced
plots and standard factory buildings for setting up manufacturing industry. Investor can use
these plots under a 30 years lease which is renewable. Apart from these plots, an investor may
also take lease of Standard Factory Building (SFB) owned by BEPZA. All the utility
connections such as electricity, water, internet & telecommunication are readily connected in
the enterprises of the EPZs. BEPZA has also allowed setting up of hi-tech infrastructure
facilities like Central Effluent Treatment Plant, Water Treatment Plant, Inland Container
Deport (ICD), Internet service, Power Generation Plant as service oriented industries in the
EPZs.
(7) Support Facilities
BEPZA has allowed setting up of support service business facilities for the investors such as
local and foreign banks, Off Shore Banking Units (OBU), insurance companies, C & F
agents, freight forwarder and courier service in the EPZs. Other administrative facilities, such
as Customs Office, Police Station, BEPZAs Security, Fire Station, Public Transport, Medical
centers etc. are available in the EPZs.
(8) Fiscal and Non fiscal Incentives
The fiscal incentives include:

 10 years tax holiday for the Industries established before 1st January, 2012 and Industries
to set up after 31st December, 2011 tax holiday period will be: Tax exemption period Rate of
tax exemption First 02 years (1st and 2nd Year) 100% Next 02 years (3rd and 4th Year) 50%
Next 01 years (5th Year) 25%
Income tax exemption of salaries of foreign technician for three years (For the projects
approved before March 22, 2009).
Duty free import of machinery, equipment, construction materials.
Duty free import of raw materials
Duty free export of finished goods.
Relief from double taxation.
Exemption from dividend tax for tax holiday period.
Duty free import of two/three duty free vehicles for A & B type industries subject to
certain conditions (For the projects approved before March 22, 2009).
Full repatriation of profit, capital & establishment.
The non-fiscal incentives include:
Investment protected under the Foreign Private Investment (Promotion and Protection)
Act.
BEPZA is a signatory of MIGA (Multilateral Investment Guarantee Agency) and ICSID
(International Centre for Settlement of Investment Dispute)
BEPZA is a Member of WIPO (World Intellectual Property Organization) and OPIC
(Overseas Private Investment Corporation)
100% foreign ownership permissible.
Enjoy GSP benefits in EU countries, Japan, Australia, USA, Canada, Norway etc.
No ceiling on foreign investment.
Foreign currency loan from abroad under direct automatic route (OBU facilities).
Non-resident Foreign Currency Deposit (NFCD) allowed for A type industries.
Operation of FC account by B and C type industries allowed.
Resident ship / Citizenship granted for foreign investors.
100% backward linkage raw materials, accessories are allowed to sell to export oriented
industries inside and outside EPZs.
Taking and offering subcontracting are allowed both inside and outside EPZ.
10% sale of finished products except garments.
10% sale of defective finished goods.
10% sale of surplus raw materials
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Support Service Facilities include:

Work permits issued by BEPZA.
IP & EP issued within the same day.
No UD (Utilization Declaration), IRC (Import Registration Certificate), ERC (Export
Registration Certificate) & renewal of bond license required
Customs clearance at factory site.
Intra / inter zone sub-contracting & transfer of goods allowed.
Easily available and trainable workforce.

Current Situation of Trade Unions in EPZs

According to the Bangladesh Labor Act, 2006, workers/employers, without distinction
whatsoever shall have the right to form trade union for the purpose of regulating the relations
between workers and employers or workers and workers or employers and employers and,
subject to the constitution of the union concerned, to join trade union of their own choosing
[Sec: 176, The Bangladesh Labor Act, 2006 / Sec: 3, IRO, 1969]. EPZs are considered
outside the purview of the BLA. The EPZ Workers Association and Industrial Relations Act
(2004) provides for the formation of trade unions in EPZs from 1 November 2006. However,
the law sets out several phases for implementation, with complicated and cumbersome
procedures to be followed at each stage. At stage one, EPZ factory workers were only
allowed to set up Worker Representation and Welfare Committees (WRWC). Stage one ended
on 31 October 2006, but continued in practice into 2007 because of systematic delays of the
government to set out and implement the administrative procedures to transition worker
organizations to stage two of the law. At the second stage of the law, workers were allowed to
go through a process to transform their WRWC into a trade union, referred to as a Workers'
Association (WA) in the law. A WA can be created provided over 30 % of the workforce
requests that the association should be set up. More than 50 % of all the workers in the
factory must vote affirmatively for the WA to be formed. Only one federation of WAs can be
formed per EPZ, if at least 50 % of the registered WA in the zone vote for it. The Bangladesh
Export Processing Zone Authority (BEPZA) Executive Chairman also has almost unlimited
authority to deregister a Workers' Association should he determine that the WA has
committed an "unfair practice", violated any aspect of its own constitution or of the EPZ Law,

or failed to submit a report to him. The ban on strikes or lockouts in the EPZs was due to
expire on 31 October 2008. But the rules allowed BEPZA to extend it until 31 October 2010.
Although the EPZ law provides for the establishment of an EPZ Labor Tribunal and an EPZ
Labor Appellate Tribunal, these two tribunals have yet to be established. As a result, workers
in the EPZs were effectively denied access to the judicial system for their grievances. BEPZA
is vested with responsibility to administer labor matters for all enterprises in EPZs. The
International Labor Organization (ILO) condemned Bangladesh for its continuing failure to
provide full trade union freedoms and for permitting serious violations of ILO Conventions
both in law and in practice.
But recently the government in principle has decided to allow factory workers in EPZs to
conduct trade union activities from January 1, 2014, as part of its measures to fulfill the
conditions set by the United States Trade Representative (USTR). Business leaders and
investors in the EPZs, however, have some misgivings. They say that providing such right
might cause labor unrest in the EPZs which will jeopardize their investment. Foreign
investors in the export processing zones (EPZs) do not want trade unionism as any agitation
or demonstration in such specialized industrial zones will hamper production and overseas
trade. A Japanese investor in Chittagong EPZ said, We are worried about protecting our
investment as the cabinet agreed to amend the EPZ law, which will allow unionism in the
EPZs. We do not want any new unionism as we already have a workers' welfare committee
(WWC) at every factory in EPZs. This committee is enough to protect the interests of
workers. A Korean investor in Savar EPZ said, The inflow of fresh foreign funds in the
EPZs will be affected by unionism.
However, The EPZ authorities took the decisions as part of government measures to fulfill
the USTR conditionality for revival of GSP (Generalized System of Preferences) facilities in
the US market. The US administration scrapped the trade privilege on June 27, 2013 due to
alleged shortcomings relating to labor's rights and working condition after Tazreen Fashions
fire and Rana Plaza building collapse. The USA suspend Bangladeshs GSP trade benefits in
June 2013 citing poor worker rights and worker safety records. It continues to press for
improvement of those issues, which led to some important progress including the current
amendment of the Bangladesh Export Processing Zone (EPZ) Labour Act 2014. After the
Rana Plaza building collapse in April last year, the government amended the labor law in July
the same year, allowing full freedom of association in factories outside the EPZs. With the
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amendment to the labor law, a total of 203 trade unions have been registered since January to
the end of July last year, according to the labor ministry. The government moved to amend
the EPZ law under pressures from the US government as the Obama Administration
suspended the generalized system of preferences status, citing serious shortcomings in labor
rights and working conditions.

Why Trade Union should be allowed in EPZ in

Bangladesh?
According to the researches done to accomplish this assignment given by Dr. Shoaib Ahmed,
I express my view in favor of workers right adding that the workers must be provided with a
platform to raise their voice and allowed to settle their issues with their employers at factory
level.

But there must be some sort of check and balance. There should be elected

representatives of workers to bargain with the management or owners at the factory level.
However, there should not be any political affiliation and trade unions must work
wholeheartedly for the development of the industry. According to sources, trade unions in
Bangladesh are highly politicized. Most of the trade unions are affiliated with industrial
federations and even with the national federations of trade unions, which have got political
affiliation with major political parties. Many of the employers while talking to The
Independent expressed their fear that politics might infiltrate trade unions. "The politicized
trade unions will ultimately disrupt production, putting investment of hundreds of crores of
taka in jeopardy," said an investor adding that politics must be disengaged from trade unions.
So there must not be any politically affiliated trade unions. However, god news is that, the
associations are not entitled to participate in any political activities.
Metropolitan Chamber of Commerce and Industry (MCCI) president Rokeya Afzal Rahman
also expressed a similar view, terming trade union activities as a demand of time. But the
freedom to enjoy labor rights should not be abused or be allowed to destroy the congenial
working atmosphere. Former FBCCI president Annisul Huq, however, strongly advocated for
labor rights both in EPZs and outside them.
"EPZs were protected by law for a certain period of time, but this should not continue
forever," he added. Huq, also a former president of Bangladesh Garment Manufacturer and
Exporters Association (BGMEA), said that the situation may change any time. He mentioned
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that in recent times, foreign investors are investing outside the EPZs while locals are
investing in the EPZs.
The recent labor unrest in Ashulia and Gazipur has raised concerns among global buyers. The
prolonged labor unrest in the area has also shaken the confidence of local entrepreneurs.
"Because of the frequent unrest, many buyers threatened to shift their order to other
countries," said BGMEA president Atiqul Islam.
According to Bangladeshs The Daily Star, under the proposed Bangladesh EPZ Labor Act
2014, factory workers within an EPZ will be able to apply for registration to form workers
welfare associations, which will act like trade unions as per the law. EPZ factory workers will
elect welfare union leaders each year. The law also includes policies and procedures for
worker recruitment, job conditions, and facilities during maternity, workplace environment,
work hours, wages, and labor court formation. State Minister for Labor and Employment
Mujibul Haque Chunnu told The Daily Star, The law will improve the countrys image
worldwide. Besides, it will have a positive impact on trade and investment. This will protect
the workers from another workplace tragedy like Rana Plaza collapse incident.

Sources

http://www.epzbangladesh.org.bd/pages
http://www.bangladeshtrades.com/export-processing-zones.html
https://bangladesheconomy.wordpress.com/2012/03/27/bepza-epzs-of-bangladesh-

the-ideal-place-for-the-investors
https://www.sourcingjournalonline.com/bangladesh-grant-workers-epzs-right-

unionize
http://www.thedailystar.net/epz-workers-get-rights-to-union-32286
http://www.thedailystar.net/epz-investors-worried-over-trade-union-39387