The Bangladesh Economic Zone Authority (BEZA) – which works on developing the country’s industrial sector – is navigating a severe financial deficit, triggered by a significant increase in expenditure compared to income, and falling investments.
It now seeks an additional five years to repay its loans to the Finance Division, insiders told The Business Post.
A large portion of BEZA’s income comes from leasing land in economic zones. But revenue from this source is facing a shortfall due to a decrease in new investments, paving the way to a financial crisis the organisation is now facing.
Insiders say the country’s economic zones are not getting expected domestic and foreign investments due to economic uncertainty, slowdown caused by the post-Covid global situation, and the Russia-Ukraine war.
Those who have already invested in the economic zones are not able to pay the lease money on time due to the global financial crisis.
Many investors even cancelled investment plans and withdrew earnest money and lease money that they had previously deposited to BEZA, which decreased its income drastically. BEZA is also unable to collect fees against gas, water and electricity services to new industries.
The annual report of BEZA reflects the impact of the global economic crisis caused by Covid-19 and the Russia-Ukraine war on the economic region.
According to the report, 8,000 acres of land had been allotted to 168 investors until 2020 in BEZA's five economic zones. The total investment proposal from these investors was $24.52 billion.
As of 2021, 5,780 acres of land had been leased to 137 investors in those five economic zones.
Their investment proposal amounted to $21.2 billion in that year. As such, the proposed investment in the economic zones fell by $3.32 billion in 2021 when compared year-on-year, as 31 investors left the economic zones cancelling their plans.
On the other hand, investment in the country’s private economic zones reached $3 billion by 2020, and rose to $3.4 billion in 2021.
BEZA has taken loans from the Finance Division at different times for the development of various economic zones. In the current FY, an expenditure of Tk 1,059 crore was allocated to BEZA by the Finance Division.
But BEZA’s own income of Tk 327.49 crore is very limited compared to such a huge expenditure. The money earned by leasing land to investors in different economic zones is being spent on infrastructure development.
According to the Finance Ministry sources, BEZA owes Tk 131 crore to the Finance Division as per the loan and subsidiary loan agreements. The Finance Division has asked for this money from BEZA.
In reply, BEZA informed that due to a number of reasons, it does not have the necessary funds to pay the dues.
If BEZA repays the loan with interest, the ongoing development activities and investment initiatives will be disrupted which might create an adverse impact on the investors, said the finance ministry sources.
In this context, the Prime Minister’s Office has sent a letter to the Finance Ministry, instructing to exempt BEZA for five years from paying the loan and interest to the Finance Division.
Recently, in a letter sent to the finance ministry, BEZA Executive Chairman Shaikh Yusuf Harun said BEZA does not have the necessary funds to pay the outstanding dues to the Finance Division.
He requested to give an additional time of five years from now to repay this loan considering the current financial situation.
The Finance Division has demanded Tk 131 crore from BEZA against seven loan agreements. But BEZA said the grace period for the two loans it took to set up Japanese economic zones is ten years.
As a result, the first instalments against these two loans are supposed to be paid in June 2030. The instalments of those two loans are Tk 22.49 crore and Tk 54.11 crore. Deducting these two loan instalments of Tk 76.61 crore, the outstanding balance is Tk 54.48 crore.
The Bangladesh Economic Zone Act was passed in 2010 and BEZA was established in 2011 to establish, license, operate, manage and control economic zones in different areas of the country.
BEZA has a plan to set up 100 economic zones in the country by 2030, creating employment for one crore people and increasing exports by $40 billion. Currently, out of 97 approved economic zones, 28 are being established.
Among those, nine economic zones have come into production.
BEZA currently owns 61,000 acres of land, and it has a plan to include 75,000 acres of land in its land bank by 2030.
