A Bepza suspension order on the construction works at the project sites at Karnaphuli EPZ (KEPZ) Extension in Chittagong and a fear of taking back the land by the food ministry have cast a shadow of uncertainty over the future of $181.2 million foreign investment.
The Bangladesh Export Processing Zones Authority (Bepza) on March 25 sent a letter to the KEPZ asking it to suspend construction works of Bepza and other industries in the allocated industrial zone at the Halishahar CSD in the port city until further notice.
The order came at the time when around 70 percent of the construction works were complete with the investors already depositing around $500,000 to Bepza as security deposit, stamp duties and rents, said investors.
The construction works have remained suspended since March 28.
In a letter to the Bepza chairman on April 18, the investors demanded 'definite answer or offerings' before April 27, and said otherwise they would go for legal action, demanding compensation worth $100 million from the authorities.
The investors also sent letters to the Federation of Bangladesh Chambers of Commerce and Industry, Metropolitan Chamber, American Chamber, foreign and industries ministries and Taiwan Trade Centre.
Investors including nine from Taiwan, two from South Korea, and one each from India, Sri Lanka and China are now thinking of withdrawing investment if Bepza fails to offer them any decision by this time.
“This decision (of suspending construction works) will create a 'negative impact' on foreign direct investment to the country,” said Jeff Chuang, managing director of Cosmos Shoes International Ltd that invested the largest amount in KEPZ.
“Foreign investors maintain good networks and potential investors always seek information from existing investors, embassies or investment promotion bodies of their countries,” he said.
“Furthermore, this decision has ruined my and other investors' reputation with customers as well as the reputation of both the Bepza and investment environment of Bangladesh,” said Chuang, who is acting on behalf of all the investors at KEPZ Extension CSD (Central Storage Depot).
“All the investors at KEPZ Extension suffered great losses during this suspension of construction works.”
He said the plants they were going to build in the abandoned CSD land in Halishahar would have created jobs for at least 24,000 people by 2010.
“We have long-term agreements with top global brands. Now if the deals are cancelled, we will have to face adverse impacts,” he said.
Bepza allocated 59.28 acres of land to the KEPZ Extension in December 2006, which was earlier an abandoned CSD warehouse of the government's food department, for transforming the area into an EPZ.
Fourteen foreign investors were given allotments and they signed 30 years' lease agreements with Bepza from June 2008 to January 2009.
There were 86 CSD buildings, of which Bepza demolished 53 unusable ones and spent Tk 33 million for developing infrastructure.
An engineers' committee has inspected the remaining buildings, and found that 25 are no longer suitable for neither industrial use nor storage use for food grains.
As the Halishahar CSD's 33 remaining buildings were not fit for food grain storage, the food ministry declared the CSD abandoned in 1997 and gave it to Bepza.
The CSD had the capacity to store 85,000 tonnes of food grains but was rarely used before the handover.
A committee headed by industries secretary suggested in 2008 that it was not possible to return the land to the food ministry and advised the government to set up a food depot with 15,000 tonnes of capacity at Dewanghat in Chittagong.
To compensate the food ministry, the finance ministry has taken away Tk 300 crore from Bepza fund and allocated the money for construction of a food depot at Dewanghat.
The present government has decided to take control of the abandoned CSDs and make more CSDs across the country to ensure food security.
The suspension order is a part of this concern and it is speculated that the land would be taken back to the food ministry, said a senior Bepza official.
He said the government recently sought explanation as to why the CSD land was allocated to Bepza. After that Bepza sent a letter to the Prime Minister's Office explaining all the factors.
Now the decision is under consideration of the prime minister.