Bangladesh has the world’s highest population density of a non-city state (1,252 people/km2) and nearly two million youth enter the job market every year. The Government of Bangladesh recognizes that it must remove binding constraints to private sector development to create more jobs and improving access to serviced land for greenfield investments has become a key policy priority. Investors also grapple with a lack of skilled workers, poor connectivity and high transaction costs. For example, Bangladesh ranks 177 (of 190 countries) in the World Bank’s Ease of Doing Business and 100 (of 160 countries) in the World Bank’s Logistics Performance Index.
In 2010, two pieces of landmark legislation supported by the Bank Group led to the establishment of the Bangladesh Economic Zones Authority (BEZA) and the Bangladesh Hi-Tech Park Authority (BHTPA). These novel institutions were established to move the country’s spatial development policy from an export processing zones model, with modest backward economic linkages, to a special economic zones model, that focuses on strengthening backward and forward linkages, increasing involvement of the private sector, and supporting production for both the growing domestic market and the export market. The Private Sector Development Support Project which covers two International Development Association (IDA) credits (approved in 2011 and 2016), supported the regulatory reform process, helped build the two new institutions, and financed land and infrastructure development for economic zones and hi-tech parks. The overall objectives were to promote private investment and stimulate more and better jobs.
In 2018, Honda established a factory to produce two-wheel vehicles in the Abdul Monem Economic Zone. It was not only one of the first major foreign direct investments in Bangladesh but also the first major investment in a privately-owned and operated economic zone. It will hopefully have a catalytic and signaling effect for global international investors. The next goal for the Government of Bangladesh and the project is to bring in the first major foreign developer of economic zones in the country, which could accelerate the establishment of global supply chains linked to foreign multinationals. Besides the financing of infrastructure and technical assistance, the project has trained nearly 14,000 entry-level workers and mid-level managers. It has also financed the employment of 90 social and environmental counsellors who strengthen social and environmental compliance and adherence to international standards in existing export processing zones.