Export processing zones (EPZs) are areas within developing countries that offer incentives and a barrier-free environment to promote economic growth by attracting foreign investment for export-oriented production.
Nepal, Srilanka, Bangladesh is developing country with a huge population. So, there is unemployment problem. Besides, the import is more than the export of the country. Since there is a lack of capital in the country a radical increase in the industrialization and export it is very difficult. Rapid industrialization and the huge increase in export can be done fast only through foreign direct investment (FDI) in Bangladesh. Many developing countries have turned into developed through this way.
Therefore to increase foreign investment in Bangladesh, it is very much necessary to attract the foreign investors. They must be given special incentives and facilities. Some zones or areas are reserved for these investors provided with various types of incentives and facilities in many countries of the world, these are generally known as foreign Trade Zone. The foreign trade zones of Bangladesh are known as “Export processing Zone” or EPZ.
The concept of Export Processing Zone will be clearer by the following important definitions:
Rudy Make: “Export processing Zones denote a phenomenon whereby countries (usually developing ones) set up through legislation industrial sites which permit the duty-free import of raw materials (together with other advantages) for the assembly, and manufacture of goods which are primarily destined for import.”
World Bank: An Export Processing Zone is defined as a territorial or economic enclave in which goods may be imported and manufactured and reshipped with a reduction in duties or minimal intervention by customs officials.
The EPZs are established under the supervision of the Govt. and under the law. The factories in EPZ imports duty-free raw materials and often producing and processing their Products, they export them to foreign countries. For example; in Bangladesh, the required machineries are also imported 100 % duty-free. The products are exported directly and tax-free or at a reduced tax.