In today’s increasingly competitive world economy, a tool that can stimulate employment, diversify exports, generate investment and deliver growth is prized by all countries. And among rapidly growing markets, such as Bangladesh, India, China and Vietnam, such benefits are being provided by export processing zones (EPZs). EPZs are economic enclaves in which goods can be manufactured, imported and reshipped with reduced duties and minimal intervention by customs officials.
Transformation is not limited to EPZs - it is a template that can be applied in the wider business world and beyond.
Chittagong, in Bangladesh, is home to one of the most successful EPZs in Asia and has been instrumental in attracting foreign investment to the country. The Chittagong EPZ is one of eight zones that are making a critical contribution to Bangladesh’s economic growth. And, along with its counterpart in Dhaka, it is one of the most significant.
At present, power supply to EPZs can only meet 75% of demand. Unless new sources of gas – which is the primary fuel for power generation – are established, the gap between demand and supply could widen in the near future. Limited new gas connections and frequent power outages are forcing enterprises to use diesel- or oil-based power generation, which is three times more expensive than gas. Therefore, their operating costs are rising. Due to increasing oil prices, electricity prices are also on the up. However, to keep power prices down, the Government is providing huge subsidies to this sector. Subsidies, which amount to around 2% of GDP, are crippling public finances and are not sustainable.
So, what is being done to address these challenges? In 2012, the International Finance Corporation (IFC) launched a low-carbon initiative in Chittagong. The IFC conducted a technical assistance program to identify ways to reduce greenhouse gas (GHG) emissions significantly in the Chittagong EPZ (CEPZ) and do so in a cost-effective way.
The CEPZ’s carbon footprint was assessed and the potential for reducing GHG emissions was analyzed. This analysis led to the drawing of a road map that is replicable across other EPZs.
EPZs are set to play a crucial role in Bangladesh’s economic development. But they face an energy crisis that, unless tackled effectively, will limit their ability to develop the exports that will contribute to growth. The study that this article discusses outlines new and innovative ways to reduce energy use in EPZs, and sets out how government, regulatory bodies and the private sector can work together to provide the funding and organization to make change happen. And transformation is not limited to EPZs – it is a template that can be applied in the wider business world and beyond. As such, it sets a path that Bangladesh can follow to reach a low-carbon future.