Govt scraps Indian Economic Zones as project stalls

Highlights:

• Bangladesh scraps Indian Economic Zone projects in Mirsarai and Mongla
• India showed no response despite repeated requests from Bangladesh
• Projects delisted from India's Line of Credit after review
• Only 1% of project funds were spent before cancellation
• Indian contractors showed no interest; tender bids went unsubmitted
• Bangladesh plans to repurpose the allocated land for other uses

The government has scrapped the Indian Economic Zone project in Mirsarai, Chattogram, and Mongla, Bagerhat after years of inactivity and lack of response from India.

Chowdhury Ashik Mahmud Bin Harun, executive chairman of the Bangladesh Investment Development Authority (Bida) and the Bangladesh Economic Zones Authority (Beza), told The Business Standard, "The Indian Economic Zone has been removed from the G2G framework."

He said, "The discussions around the Indian Economic Zone were mostly preliminary or conceptual. Land had been identified for the zone, and there were talks about which contractor might be assigned to carry out the work, but no formal agreement or contract was ever signed with any contractor."

Explaining the current status of the project, Ashik Mahmud said, "A project was taken up to establish the Indian Economic Zone in Mirsarai, but no progress was made. The project's tenure ended in June, and the line of credit (LoC) funding that was supposed to support it has already been cancelled."

Regarding future plans for the land allocated for the Indian zone, he added, "We will use the land for other purposes, but no final decision has been made yet."

Earlier, Bangladesh had sent multiple letters to India seeking its consent to invite international tenders for the land development work, but no response came. The project is now effectively scrapped.

The previous government had planned to establish two Indian Economic Zones — one in Mirsarai, Chattogram, and another in Mongla, Bagerhat — under Beza's authority. These were to be G2G projects implemented under India's concessional line of credit (LoC). A memorandum of understanding (MoU) between the two countries was signed in 2015, and Bangladesh allocated 900 acres in Mirsarai and 110 acres in Mongla for the zones.

In 2019, the Executive Committee of the National Economic Council (Ecnec) approved the Mirsarai Indian Economic Zone project, which included land development, access roads, an administrative building, and utility infrastructure at an estimated cost of Tk965 crore, of which Tk915 crore was expected from India's LoC.

However, during the LoC review meeting held in Dhaka on 5-6 March this year, both countries agreed that projects which had been approved but not implemented would be delisted from the LoC. As a result, both the Mirsarai and Mongla Indian Economic Zone projects have now been delisted. 

According to Beza data, from inception to June 2024, only Tk6.03 crore (around 1% of the total cost) was spent, including Tk3.48 crore from the government and Tk2.55 crore from project assistance.

Beza had issued tender documents in August 2023 to two shortlisted Indian companies — Adani Ports and SEZ Ltd and International Seaport Dredging Pvt Ltd — but neither submitted bids.

Under India's LoC terms, the land development work had to be carried out by an Indian contractor, and 65% of materials had to be sourced from India — conditions that discouraged participation.

In 2022, Beza and Adani Ports and SEZ Ltd signed a term sheet for a development agreement, but the final developer agreement was never concluded. Other activities, including the formation of a company to operate the zone, did not progress either.

During the sixth meeting of the India-Bangladesh Joint Working Group (JWG) on Indian Economic Zones, held in New Delhi on 23 April 2024, Bangladesh requested India's consent to allow Bangladeshi contractors to participate in re-tendering alongside Indian firms, but India did not agree.

Md Mokhlesur Rahman, former project director and now an executive member of Bida, said, "There has been no significant progress. Bangladesh did everything required from its side, but there was no response from India. No Indian contractor showed interest in land development."

He added, "We requested that both Indian and Bangladeshi firms be allowed to participate, but India did not agree. We also proposed that contractors be allowed to source project materials more flexibly, but India declined."

Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), told The Business Standard, "The Indian Economic Zone was to be developed under India's LoC, where Bangladeshi contractors could not participate, and Indian firms were not interested. As there has been no progress, the land cannot just sit idle."

Several Indian companies have already invested in other economic zones in Bangladesh. Among them, Asian Paints Ltd has invested $26 million, Ramky Enviro Pty Ltd $10 million, and Marico Bangladesh Ltd $26.72 million in the National Special Economic Zone (NSEZ), while Sakata Inx Pvt Ltd invested $2.13 million in the Meghna Industrial Economic Zone.