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Land hitch bars KEPZ from taking off

Sharier Khan
The Korean Export Processing Zone (KEPZ) authorities are unable to offer industrial plots to foreign investors as the government is yet to hand over the deed of transfer for the land the KEPZ purchased in Chittagong a decade ago.
On top of that, the Department of Environment on Thursday cancelled its clearance for the private export processing zone alleging unauthorised cutting of hills on the site. The KEPZ, however, claims that it has always been following the government rules. It says the problem lies with the government rules, not with the KEPZ.
KEPZ President Jahangir Saadat told The Daily Star that many foreign investors visited the site in Anwara, Chittagong, on the Karnaphuli but they ultimately left for other countries on learning that the KEPZ authorities were unable to lease out the plots to them. The KEPZ needs the deed to be able to lease out the plots.
The only industrial unit at the KEPZ was set up by Youngone, which owns the KEPZ.
"Time and again the government and other quarters have been orchestrating allegations against the KEPZ that they are occupying a huge tract oflandforthepastl6 years and doing nothing for its development and thus
unable to bring in the much needed investment into the zone. Such allegations are absolutely baseless and untrue,” said Saadat.
He noted that for any EPZ to launch operations, four basic clearances are necessary: operational licence, environment clearance, Custom Statutory Regulatory Order (SRO) by the National Board of Revenue, and the deed of transfer of land.
The KEPZ applied for the operational licence and environment clearance in 1999. The licence was given inApril2007 and the environment clearance in 2009, which was cancelled on Thursday. It applied for the Custom SRO in 2001, which was given in 2010.
The KEPZ requested the government to conclude the deed of transfer in August 2001. This remained stuck until 2009 due to a legal hitch caused by the government's arbitrary price fixing of the khas land sold to the KEPZ, sources have said.
After the legal issue was resolved in favour of the KEPZ, the government assured the KEPZ of handing over the deed by February 2011, but the KEPZ is still waiting for that.
According to the KEPZ president, the KEPZ is also facing some serious hurdles like the government's unilateral annulment of tax holiday, restriction on the types of industries that could be set in the zone and introduction of a provision to obtain government permission for setting up industry there. DEED OF LAND TRANSFER Explaining complications over the Deed of Land TYansfer, he said of the 2,492 acres of KEPZ land, 700 acres belonged to private owners and the rest to the government. In 1999, when the KEPZ started paying private land owners, it paid private land owners 50 percent more than the rate of the government. The enhanced rate was recommended by the government.
But afterwards, the government suggested that the KEPZ also pay 50 percent more for the government khas land. The KEPZ failed to see the legal premise for this extra payment and turned to the court. After a long legal battle the KEPZ won.
However, in late 2010, the government asked the KEPZ to pay the extra through an out-of-court settlement so that it could hand over the deed of transfer by February 2011.
The government later imposed a condition: That
upon the issuance of the deed the KEPZ would have to complete land development within two years or the undeveloped part would be taken back by the government.
On this point, the KEPZ argued that whereas the government owned Chittagong EPZ with an area of453 acres has taken around 14 years to develop, KEPZ with 2,492 acres should be given at least eight years time for development.
Following this argument, the director general of the Private EPZ Cell visited the KEPZ site last year and was convinced of the need for eight years for land development. But the government is yet to officially approve this.
“It took more than two decades for the government EPZs to complete development of their land. We have to be given a reasonable time frame,” said Saadat.
“Is the KEPZ responsible for the delay? All we say is let us follow the law under which we operate. That would solve all the problems,” he noted. TAX HOLIDAY
WITHDRAWN
As per the Private EPZ Act, 1996, the KEPZ applied to the Executive Cell, Prime Minister's Office (PMO), in September 2001, for tax holiday within the zone. Tax holiday for 10 years was accorded by the NBR in April 2008, in line with the facility and exemption allowed to industrial units at the government-owned EPZs.
However, just when Youngone was completing the first phase of its Karnaphuli Shoes Industries Ltd at the KEPZ, the NBR in July 2011, withdrew the tax holiday. In effect, the 10-year tax holiday was withdrawn before the zone could go into full operation.
The NBR justified the withdrawal by saying it was applicable to all EPZs. But the truth is that other EPZs are all old and saturated with investors with no further scope for land for new investors. The KEPZ had not even taken off.
“This will not only discourage prospective foreign investors from investing in the country but will send the wrong signal worldwide,” said Saadat, adding that the KEPZ had appealed to the NBR for restoration of the tax holiday.
RESTRICTION ON INDUSTRYTYPES
Describing the problems with government restrictions on the type of industries for the KEPZ, Saadat said, “At present only 14 kinds of industries are allowed to be set up. Others will require the
approval from the Board of Governors."
The private EPZ Board of Governors meets once a year even though the Private EPZ Act says that there should be at least four meetings a year.
This made investment opportunities inflexible and the KEPZ requested the Private EPZ Cell in 2010 to review the list and allow it to set up all kinds of industries permissible under the Industrial Policy 2010, including garments and textiles.
In the government-owned EPZs, there are no restrictions on setting up of any type of industries permissible under Industrial Policy 2010. The president of the KEPZ said Section 16 of the Private EPZ Act ensures that all concessions applicable to government EPZ's are also applicable for the KEPZ.
But the authorities are foot dragging. He even cited the Foreign Private Investors Promotion & Protection Act, 1980, which clearly stipulates that foreign investors must be accorded similar investment opportunities as are accorded to citizens of Bangladesh.
PERMISSION AUTHORITY On the issue of permission for setting up an industry in the KEPZ, Saadat pointed to the Private EPZ Act Section 14 (2), which clearly says that permission for setting up industries by enterprises in private EPZs shall be granted by the sponsor company based on the guidelines provided by the Executive Cell. This empowers the KEPZ with the authority to receive and evaluate an investor's application and approve it.
But, unfortunately in 2010, the Board of Governors of the Private EPZ passed a decision saying that the KEPZ would grant permission to investors but it would then have to be approved by the Private EPZ Cell. This blatantly disregards the provision of the Private EPZ Act and complicates and delays approval for setting up industries.
The KEPZ has filed an appeal with the Private EPZ Cell for reviewing the decision.
With $200 million, the KEPZ has so far developed a substantial area of land as industrial plots, 22km of internal road network, a facility for foreign investors and expatriate staff. When fully operational, the KEPZ aims at attracting investments over $1 billion and employ around 100,000 people directly and another 200,000 indirectly.