(2008.08) pre-feasibility study for sylhet economic zone

8/10/2019 (2008.08) Pre-Feasibility Study for Sylhet Economic Zone

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United House, 10 Gulshan Ave, Gulshan-1 Dhaka-1212 BangladeshPhone: +880 2 88337-52 up to 66 Fax: +880 2 8833495

BICF is managed and executed by the IFC and funded bythe U.K. Department for International Development and the European Commission

Pre-feasibility Study for Sylhet Economic Zone



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About IFC BICF

The IFC Bangladesh Investment Climate Fund was established in January 2007 with the keyobjective of addressing some of the main investment constraints in Bangladesh including an unduly

high administrative burden, poor infrastructure and corruption.

IFC BICF is funded by the UK Government’s Department for International Development (DFID)and the European Commission for a total of US54.8 million over eight years. It will consist of twofour-year phases, with the implementation of Phase II dependent on the success of Phase I.

IFC BICF’s primary objective is to provide advisory services to the Government of Bangladesh inits efforts to improve the country’s investment climate, whilst also working with other stakeholders within the private sector, civil society and the media. IFC BICF’s main counterpart in Governmentis the Board of Investment.

IFC BICF targets three reform areas: improving overall business regulations through a dedicatedbody within the Government; improving the regulatory framework for private participation andenvironmental/social compliance practices in economic zones; and, strengthening institutional andcivil service capacity to promote private sector development reforms, while improving advocacycapacity among all stakeholders.

Disclaimer

IFC, through IFC BICF, endeavors, using its best efforts in the time available, to provide highquality services hereunder and have relied on information provided to them by a wide range of other

sources. However, IFC makes no express or implied representation or warranty as to the accuracy,completeness or sufficiency of this report and its analyses.

Consequently, IFC shall not be liable for any loss, damage or liability that the Client or any otherthird party may suffer or incur as a result of (i) this report prepared by IFC or (ii) any advice orrecommendation given or made by IFC in this report, unless a court of competent jurisdictiondetermines by final judgment that such loss, damage or liability was the result of gross negligence or willful misconduct on the part of IFC.



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Foreword – Acknowledgements

In the past three decades, Bangladesh has made wide use of Export Processing Zones (EPZs) as atool for economic growth and job creation. Industrial estates have also been established in most of

the 64 districts of Bangladesh, and the Government of Bangladesh (GoB) is also contemplatingpaving the way for a variety of other kinds of economic zones in the country. The zones haveproven to be effective tools in setting aside and allocating land for industrial use and in creating jobs.

With a view to reaping the benefits of an economic zone in the northeast division of Sylhet, in 2005the Sylhet Chamber of Commerce & Industry (SCCI) commissioned a pre-feasibility study for aproposed economic zone in Sylhet to a local consulting company, Young Consultants. A major aimof the proposed project was to attract investment from non-resident Bangladeshis, primarily thoseof Sylheti origin, now residing in the U.K. and enjoying a great deal of economic success. The first version of the study completed in August 2007 contained much useful information, however, theBoard of Investment (BOI), which was assigned responsibility for the project by the GoB felt that

the study could be enriched by bringing in international expertise to complete the financial andeconomic models and to benchmark the site against other international zone projects.

The following pre-feasibility study was the result of a joint effort by Young Consultants and severalinternational experts brought in to Bangladesh between November 2007 and May 2008. There werenumerous trips to Sylhet by the consultants and the IFC BICF staff, as well as vast amounts ofinformation gathered both about Sylhet and Bangladesh and information about industries worldwidefor the benchmarking exercise.

Various people assisted us with information and logistics in the course of performing this study. We would like to thank the Sylhet Chamber of Commerce for the original impetus for the project andfor providing extensive information on the project during our visits.

We would also like to thank the Board of Investment for making the request for the study of theIFC BICF and especially Mr. M. Emdad-ul Haque, Deputy Director, Board of Investment in Sylhet,for personally accompanying us on each of the trips to Sylhet. We also appreciate and thank theSylhet and Dhaka branches of the Board of Investment for providing the international and localexperts with data and background material for the study.

We extend thanks both to Mr. Haque and to the Sylhet Chamber of Commerce for assisting withthe organization of a mid-project presentation of the study’s findings in Sylhet on February 25, 2008,reserving the venue, and inviting the approx. one hundred stakeholders who were at the event.

The Bangladesh Export Processing Zones Authority (BEPZA) also provided important informationabout the EPZs of the country that gave a picture of the role of economic zones in Bangladesh andenabled the consultants to benchmark the proposed site in Sylhet against the other zone projects inBangladesh.

And lastly, we would like to extend our appreciation to the private sector in Dhaka, Sylhet,Chittagong and elsewhere across Bangladesh who have worked with us and have providedinvaluable insight to the needs of companies.



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Employment Forecast ............................................................................................................................ 41

Utility Forecast ........................................................................................................................................ 41

Demand Forecast Summary ...................................................................................................................... 42

VI. Financial Analysis ...................................................................................................................................... 44

Methodology ................................................................................................................................................ 44

Assumptions................................................................................................................................................. 45

Capital Costs............................................................................................................................................ 46

Phased Development ............................................................................................................................. 47

Operating Costs ...................................................................................................................................... 48

Product Configuration ........................................................................................................................... 49

Prices......................................................................................................................................................... 49

Capital Structure...................................................................................................................................... 50

Public Private Partnership Structure.................................................................................................... 50

Net Present Value................................................................................................................................... 52

Results........................................................................................................................................................... 53

Sensitivity to Capital Costs and Prices................................................................................................. 54

Financial Conclusions................................................................................................................................. 55

VII. Economic Analysis .................................................................................................................................. 56 Scenario 1: 100% Private Sector Project ............................................................................................. 57

Scenario 2: Government Develops Phase 1 Infrastructure.............................................................. 57

Scenario 3: Government Acquires Land............................................................................................. 57

Scenario 4: Government Acquires Land and Develops Phase 1..................................................... 57

Economic Analysis Summary .................................................................................................................... 57

VIII. Recommendations ................................................................................................................................. 59

Annex 1: Demand Forecast............................................................................................................................ 60

Aggressive Case Demand........................................................................................................................... 60

Base Case Demand...................................................................................................................................... 64

Annex 2: Financial Analysis............................................................................................................................ 68



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Acronyms, Abbreviations, and Initials

BEPZA Bangladesh Export Processing Zone Authority

BICF Bangladesh Investment Climate FundBOI Board of InvestmentBPO Business process outsourcingBSCIC Bangladesh Small and Cottage Industries CorporationEPZ Export processing zoneEZ Economic ZoneHEPZA Ho Chi Minh City Export Processing Zone AuthorityICT Inland container terminalID Industrial districtIFC International Finance CorporationIRR Internal rate of return

IZ Industrial zoneLtd. LimitedKg. KilogramKVA Kilovolt ampereKW/h Kilowatt hourM2 Square metersM3 Cubic metersMo. MonthNA Not availableNRS Non-resident SylhetisPPP Public-private partnership

RMG Ready-made garmentSCCI Sylhet Chamber of Commerce and IndustrySFB Standard factory buildingSq. Square Tk. TakaU.N. United Nations VAT Value-added tax Yr. Year



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I. Executive Summary

Introduction

In 2007, the Board of Investment (BOI) of Bangladesh commissioned a pre-feasibility study todevelop a site for an economic zone in Sylhet. The study was funded by the International FinanceCorporation (IFC)-Bangladesh Investment Climate Fund (BICF) and was undertaken by aninternational specialist and the local firm, Young Consultants, which had carried out the original pre-feasibility study from 2006 to 2007. The following pre-feasibility study includes: i) a brief site reviewand an environmental and social assessment, ii) a market analysis, iii) a demand forecast, iv) anenvironmental and social assessment, v) a financial analysis, and vi) an economic analysis.

The Site

The Economic Zone site is situated 5 kilometers south of Sylhet, bounded by the Sylhet-FenchuganjRoad to the south, the Sylhet-Tamabil Bypass to the north, and the rural community of DakhinSuma to the south and east. The total area of the site is 389 hectares (961 acres) and these lands arecomprised of lowlands, wetlands, and gently rolling hills, as well as a lake and four rivers.

The advantage of the site’s location is:• It is located near an existing urban area, on the outskirts of Sylhet;• It has direct highway access to roads leading to India and Chittagong;• It is in close proximity to a railroad corridor that leads to Chittagong, which could be

connected to the economic zone through a spur;• The land is occupied by approximately 30 families, which means that there are few

resettlement issues;• It is adjacent a new residential/commercial community, which will provide an international

level of living to potential investors and their senior staff.

The disadvantage of the location is:• The government will have to acquire 90 percent of the land, which may mean delays in

beginning the project;• The land contains 4 rivers and a lake, which may present major master planning,

infrastructure and environmental challenges as well as increase the cost of developmentsignificantly;

• The mix of lowlands and wetlands on the site will mean that the land will have to be filled(15-20 feet)—possibly using sand dredged from the adjacent river—and may take up to two

years to settle;• The land is currently used for sustenance farming, so livelihoods will be lost;• The proximity to the urban area of Sylhet may be a liability as the city grows and encroaches

on the site;• Most of the farm workers are women, which may mean an unbalanced impact of the project

on women.



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In addition, there are some critical environmental and social issues related to Sylhet in general, which will significantly impact the financial and economic analysis of the site. Key concerns are:

• Availability of water in the region is uncertain (Sylhet regional issue). Sylhet’s existinggroundwater table is unlikely to be able to support the EZ. A detailed hydrology study is

necessary to determine the medium and long-term water availability for the EZ and theSylhet region as a whole.

• The EZ is in an area of high seismic risk (Sylhet regional issue). Bangladesh is locatedin a seismic zone, and the north-eastern part of Bangladesh is an area of high seismic risk. The main concern for the EZ is that the fill, which is needed to raise the lands above theflood level, will have enough time to properly settle before construction is started. This isnecessary so the lands can support construction.

The above is true for the entire Sylhet Region therefore this applies to any site selected in Sylhet.

The rest of the concerns listed below only apply to the proposed site.

• Flood retention capacity of the site must not be reduced (Issue related to the proposed site). According to the Department of Public Health Engineering (DPHE), it iscritical that development of the site for an EZ not affect or reduce the site’s current floodretention capacity. A study and drainage management plan will need to be developed. This will affect the master planning of the site and reduce the area which can be developed.

• Location of the EZ may be too close to the city of Sylhet (Issue related to the proposed site). If Sylhet continues to grow at a rapid pace, the EZ site will be surroundedby residential communities. Although the land is currently zoned for industrial purposes, if

development is postponed, there will be pressure to rezone the lands to residential use in thefuture. An EZ commitment should be obtained from the Government to ensure thedevelopment of a zone in whichever site is chosen. An EIA should also be done quickly, ifdevelopment of this site is selected, in order to obtain an Environmental ClearanceCertificate.

• Effluent Management is required for the EZ (Issue related to the proposed site). Aneffluent management plan is required for the EZ, which includes: i) the installation of acentral sewage and effluent treatment plant (ETP), ii) pretreatment of effluents by tenantindustries if they do not meet ETP influent requirements, and iii) an emergency response inthe event of an ETP breakdown.

• Land and resettlement may be more costly than previously estimated (Issue relatedto the proposed site) If the Acquisition and Requisition of Immovable Property Ordinanceof 1982 is utilitzed, land expropriation costs will increase to 7,478,484,000 Tk, which is2,492,828,000 Tk more than anticipated. In addition, if resettlement is carried out inconformity with the IFC’s Performance Standards then costs will be increased to pay for there-establishment of lost livelihoods.



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Market Analysis

An analysis of the business climate and economic market in Sylhet was undertaken to help forecastthe market demand in the new EZ. They types of industry sectors proposed for the site are: i) Foodand beverage processing, ii) Garments and textiles, iii) Ceramic and mineral products, iv) Chemicals,

soaps, pharmaceuticals, v) Metalworking, vi) Electronics and electrical appliances, vii) Software andBPO, viii) Rubber and plastic products, ix) Warehousing, and x) Manufacturing.

The following conclusions were determined from the market assessment:

• Sylhet is a competitive location. When benchmarked against Dhaka (Bangladesh),Kathmandu (Nepal), Visakhapatnam and New Delhi (India), Ho Chi Minh City (Vietnam),Colombo (Sri Lanka), Karachi (Pakistan), and Guangzhou (China), Sylhet fares well, as itdelivers a low cost framework for doing business. Worker wages and salaries in Sylhet areamong the lowest in South Asian region. This is positive for companies with labor-intensiveproduction processes. However, the Sylhet labor force also lacks skills necessary for

industrial production or service-oriented exports.

• Sylhet is not in the favored location for investment along the Dhaka-Chittagongcorridor. Bangladesh has experienced an increase in exports in a variety of sectors such asapparel, leather, textiles, metal products, fish, footwear, mineral products (ceramics), andothers. Although Sylhet can attract a small fraction of these investments, business ownersstill favor locations along the Dhaka-Chittagong corridor.

• The location may only attract local investors selling to a local market. Most of thecompanies that will locate in the proposed Sylhet economic zone will be local firmsproducing goods and products for the local market. Some firms may also distribute goods

nationally, or export some items to northeast India.

• NRS capital is high but they lack local industry knowledge. The non-resident Sylheti(NRS) community has shown great interest in locating ventures in the Sylhet economic zone.However, they generally lack industrial expertise, and require local investment partners withsuch knowledge.

Demand Forecast

The Demand Forecast serves the dual purposes of determining the most likely mix of industries inthe zone, and estimating the numbers of new tenants that will locate in the economic zone each

year. Demand for land in the zone was estimated in two scenarios—a Base Case and AggressiveCase. Figure 1 illustrates the potential number of tenants the Sylhet Economic Zone will have undereach scenario over the course of 15 years. In the Base Case, 160 firms will likely locate in the zoneby Year 15. This expands to 290 firms in the Aggressive Scenario (see Annex 1 for demand forecastnumbers).



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Figure 1. Number of Tenants

Number of Tenants

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C u m u l a t i v e N u m b e r o f T e n a n t s

Aggressive

Base Case

Financial Analysis

The IFC BICF developed a Financial Model which was developed using the base-case scenario toassess the viability of the zone project from the perspective of a private sectorowner/developer/operator under four PPP scenarios.

• Scenario 1: Full Private Sector Acquisition, Development, and Operation of the Sylhet EZ

• Scenario 2: Public Sector Develops Phase 1 Infrastructure; and Private Sectors AcquiresLand and Develops Subsequent Phases of the Sylhet EZ

• Scenario 3: Public Sector Acquires Land; and Private Sector Develops and Operates theSylhet EZ

• Scenario 4: Public Sector Acquires Land and Develops Phase 1 Infrastructure; and PrivateSector Develops Subsequent Phases of the Sylhet EZ.

A summary of the financial model results is shown below.



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projects, and decisions on similar projects have not always been based on a thorough cost-benefitanalysis.

Recent trends in Bangladesh are to move away from wholly government funded economic zoneprojects to projects that include some degree of private sector participation. There are a number of

reasons for this including: i) the need for master planning for new zones, ii) the lack of governmentfunding for such projects and iii) the recognition that the private sector does a better job ofmanaging zones while the public sector does a better job of regulating them.

Therefore, the goal of public sector stakeholders in the Sylhet Economic Zone should be to makethe zone profitable to a private sector owner/developer/operator under a PPP situation whileensuring a positive economic impact as well. The IFC BICF team has demonstrated four possiblePPP scenarios in this pre-feasibility study. None of these scenarios is likely to generate the kind ofIRR necessary to attract a private investor if the current site is developed. A suitable IRR could begenerated if the public sector were to provide almost all of the capital required to develop the zone(Scenario 4), but the economic returns to the public sector would fall proportionately. In thisscenario, the financial structure would more closely resemble a no-risk gift to the private sector

developer rather than a true PPP in which both risk and reward are shared.

For the Sylhet EZ, the high capital costs of the project make it unfeasible for any kind of privatedeveloper. Given that the Government of Bangladesh has stated its preference for involving theprivate sector in future EZs, the current site is not suitable and thus does not require a full-scaleeconomic analysis to justify public sector involvement. If a suitable site is found in the future, a full-scale economic model should be used to justify any public contribution to the PPP.

If a new site is identified for development, the government should only participate in the initialcapital development stages of the zone, rather than subsidize zone operations or hold equity in thezone itself. The government can specifically discuss the fine details of its involvement once a new

site has been selected and a private owner/developer/operator has been identified.

Recommendations

1. After a detailed environmental and social review of the site was completed and the newinformation was added to the financial model, it was determined that the development costs forthe Sylhet site would not allow for a profitable PPP structure. This is due to the significantplanning and environmental mitigation costs associated with the site.

2. Demand for an EZ in Sylhet does exist, so a new site should be considered.

3. If an alternative site is investigated in Sylhet, access to water for the industrial facility will needto be examined further, as there is a water supply problem in the area, which needs to beaddressed at a regional level.



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II. Introduction

This study was commissioned by the International Finance Corporation’s Bangladesh InvestmentClimate Fund (IFC BICF) to determine the market demand and financial viability of establishing an

economic zone in Sylhet, Bangladesh. The IFC- BICF is a technical assistance program designed tocreate a better environment for businesses in Bangladesh.

Purpose of the Study

Export processing zones (EPZs) and industrial estates in Bangladesh have historically beendeveloped by the government with little bearing on the actual demand for serviced industrial land. This has yielded “successful” EPZs in population and transportation centers such as Dhaka andChittagong, but less successful ones in places such as Ishwardi. Traditional EPZs—and theirassociated fiscal benefits—have also been off limits to firms that do not have an export-orientedbusiness model.

The government of Bangladesh is no longer willing to expend public funds for new EPZ projects.Current EPZs are heavily subsidized, and do not reflect the market value of serviced industrial land. There thus exists a need for private commercial funding for new economic zones, including ways todetermine market demand and financial viability of such projects.

The IFC BICF is providing guidance to the Bangladesh Export Processing Zone Authority(BEPZA) on evaluating new economic zones projects using internationally accepted methods ofmarket analysis, financial and economic modeling, and private sector participation in economic zoneownership, development, and operation. In parallel, BICF is also training Bangladeshi companiesand non-profit organizations to conduct market demand-based feasibility studies.

This study is in response to government and private sector interest in establishing an economic zonein Sylhet. In a demonstration of international best practices, IFC BICF commissioned this pre-feasibility study to examine the market demand for serviced industrial infrastructure in Sylhet. This will suggest, in part, the recommended mix of public and private sector participation in the projectsufficient to yield a positive internal rate of return (IRR) for private sector stakeholders. This typeof feasibility analysis is what has traditionally been lacking in past BEPZA and BSCIC industrialzone and estate developments.

SCCI-Commissioned Feasibility Study

The analysis contained in this report builds upon the October 2007 Feasibility Report on Special Economic Zone & Industrial Park in and around Sylhet prepared by Young Consultants. That study wascommissioned in 2005 by the Sylhet Chamber of Commerce and Industry (SCCI) with the beliefthat an economic zone was necessary for spurring manufacturing and economic development inSylhet—including investment by non-resident Sylhetis (NRSs), local entrepreneurs, and foreignfirms alike.



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The study undertaken for SCCI did not include a market demand forecast, a land assessment, anenvironmental evaluation, or a financial and economic analysis. It did, however provide an overviewof the socioeconomic climate in Sylhet, including local community and business support for aneconomic zone, availability of productive resources for viable industries, location advantages ofSylhet, location alternatives for an economic zone, and options for ownership and financing of such

a project.

Sylhet is a prosperous district in northeast Bangladesh, owing in significant part to the largeremittances sent by Sylhetis who have emigrated abroad. In 2006/2007, Sylhetis received BDT 5.7billion (approximately US$ 80 million) in remittance earnings. The feasibility study commissionedby SCCI showed, however, that these remittances have not translated into significant investments orloans—particularly for industrial ventures of the type that would locate in an economic zone.Rather, NRS remittances have been plowed primarily into savings, consumption, and real estate. The result is a demand for consumer goods and construction materials that is higher in Sylhet thanmany other districts outside Dhaka.

A survey of remittance receivers did find a willingness among them to invest in an economic zone in

Sylhet, primarily through the purchase of equity bonds for the zone construction. Surveys by YoungConsultants also unveiled some interest by existing business owners—as well as some NRSs— toexpand, relocate, or open new ventures in the proposed zone. These ventures would likely includeproduction of consumer products such as processed foods, plastic and rubber products, handicrafts,mineral-based items, and products to sell in expatriate niche markets.

Investments outside of real estate have been slow to materialize for several reasons, according to theSCCI-commissioned study. Business formation has been limited by the following:• Scarcity of serviced industrial infrastructure• Bureaucratic hassles of obtaining land, permits, registrations, and venture capital• Lack of technically skilled labor

• Little experience among local and NRS entrepreneurs and investors in operating industrial ventures

The SCCI anticipates that an economic zone in Sylhet will ease constraints caused by the scarcity ofland, as well as improve the business climate through reduction of bureaucratic hurdles andcorruption. Provided that is the case, Sylhet does have some positive location attributes, whichinclude the following:• Inexpensive labor• Relatively wealthy local consumer market• Potential to tap consumer markets in northeast India• Good road, rail, and water transportation connectivity to Dhaka and Chittagong Port•

International airport• Abundance of agricultural and mineral-based resources

A site audit was also conducted for the SCCI-sponsored report. It compared potential locations foran economic zone within Sylhet. A location just outside Sylhet Sadar (city) ranked the highest, basedon criteria such as access to utilities, labor, transportation infrastructure, traffic congestion, andnatural resources. The IFC BICF Sylhet Prefeasibility Study will base its analysis and financial andeconomic calculations on that site.



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The IFC BICF Study

The IFC BICF Pre-feasibility Study for Sylhet is comprised of 5 components: i) a site assessmentincluding an environmental and social evaluation, ii) a market analysis, iii) a demand forecast, iv) afinancial model, and vi) an economic benefit review. The critical element of this study is a market

and land demand forecast for local, NRS, and foreign firms in Sylhet. This analysis was fed directlyinto a financial and economic model to determine the IRR of the project.



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III. The Site

This chapter provides an overview of the proposed site, its location, ownership, and theenvironmental and social issues key to the development of the lands. This data will be used in the

financial model to help determine the feasibility of the site.

Site Location

The proposed zone site is situated 5 kilometers south of Sylhet, bounded by the the Sylhet-Fenchuganj road to the south, the Sylhet-Tamabil Bypass to the north, and the rural community ofDakhin Suma to the south and east. The Bypass leads to the Sylhet Airport, as well as the Tamabil-Dowki border of India, which is considered the gateway to Meghalaya and Assam. The Sylhet-Fenchuganj road runs south through the country ending in Chittagong. Adjacent the property is the Akhaura-Chittagong railway line running from Akhaura to Chittagong. Although the railway runsparallel to the site, there is an opportunity to develop a rail spur with direct connection into the siteto improve rail access.

Site Description

The site is 389 hectares or 961 acres in size. The lands are comprised of a mix of lowlands, wetlands,and gently rolling hills. There is a lake and four rivers running through the property. In the centre ofthe site is a small bridge. A few areas within the site contain trees and low lying vegetation, thoughthe majority of the property is flat and unencumbered as it is currently being utilized for crops,fishing, and grazing. During the monsoon season these lands flood, hence to make these lands viablefor development, the lands must be raised approximately 15-18 feet in height.

Land Use Designation

The site and its surrounding area is deemed “agricultural land” by the planning department. In closeproximity to the economic zone are three (3) large-scale housing projects, (recently approved by themunicipality), which will change the existing land use designation in this area from agriculture tomixed use. The Royal, which is the nearest to the economic zone lands, (directly across thehighway), contains 3,000 residential units with schools, community centers, commercial complexes,mosques, and a range of support amenities. East of the site is an amusement park, which has a sitespecific land use designation, and south of the site is a new government office building, which isdesignated as institutional.

Ownership

Only 10 percent of the land is currently owned by the Government of Bangladesh. Hence theremainder of the land will need to be assembled through expropriation, which may take 1 to 2 years. There are a large number of land parcels that need to be acquired. Currently, the land is divided into very small plots, which are used for sustenance farming.



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Access

The site has good road and rail access, which makes its location desirable. It is situated at theintersection of roads leading to Dhaka, Sylhet, India, and Fenchuganj. The existing roads are dualcarriageways and paved but not always lit. They do however currently handle heavy truck transport.

Because the proposed site is adjacent these key transportation corridors, it does reduce potentialtransportation problems. Access points onto the existing roads and byways should be investigatedfurther in the feasibility study. In addition, it is anticipated that the highways will need to be widenedin the future to accommodate traffic flows from both the industrial and residential intensificationproposed for the area. There is however, land on both sides of the road to accommodate thisincrease.

Utilities

The economic zone will need its own water and power supply as there is not enough water or power

in the region to support the industrial facility to the standards needed to attract both local andinternational investors. There is an opportunity here to develop environmentally-friendly options.

Presently there is a high-pressure gas line, which runs through the economic zone site. When the siteis being designed, this must be taken into consideration. It will be important to provide an easementand mandatory setbacks over this high-pressure pipeline to provide access in case of an emergencyor breakage. The connection point to this gas line is located in close proximity but off site. This doesnot create any problem for hook up however.

To conform to best practices, there is a 100-meter setback from the railway line. This setbackencroaches on the perimeter of the site by approximately 25 feet. This land however, is targeted for

highway widening. Within this encroachment is also a low watt power line following the side of thehighway. At this point, there is a 15-20-foot dip from the highway level to the level of the site.

Environmental and Social Assessment

The site has environmental and social concerns, which need to be further investigated in order todetermine if they are fatal flaws for the project. Key issues are as follows:

Availability of water in the region is uncertain. (Sylhet Regional Issue- Potential Fatal Flaw).• The groundwater table in Sylhet is dropping rapidly and available groundwater resources are

unlikely to be able to support the EZ (Water demand for the EZ is estimated at a minimum of

280,235 cubic meters-m3

-in year five of the base case scenario to a maximum of 1,056,580 m3

inyear fifteen of the aggressive scenario).

• Surface water resources from the Surma River are not sufficient in the dry season, and although water could be piped from the Kushiyara River in the dry season, there is no certainty as to theavailability of surface water from this river in the medium to long term, which will be affected bya planned irrigation project upstream of Fenchuganj. If the Tipaimukh Dam on the Barak Riverin India is constructed it could severely constrain downstream water supply in Bangladesh inboth the Surma and Kushiyara Rivers, which are distributaries of the Barak River.



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• A detailed hydrological study is necessary to determine water availability in the medium and longterm water for municipal users, the proposed EZ, other industrial users and for environmentalinstream flow requirements for both the Kushiyara and Surma Rivers.

The EZ is in an area of high seismic risk (Sylhet Regional Issue)

• Bangladesh is located in a seismic zone, and the north-eastern part of Bangladesh is an area ofhigh seismic risk. The main concern here is the liquefaction of soils during a seismic event.Hence, it will be important that the site, once filled, rests for an appropriate amount of time tolet the land settle properly in order for it to be able to support construction.

• International earthquake building standards should be utilized when constructing infrastructureand buildings on this site.

The above is true for the entire Sylhet Region therefore this applies to any site selected in Sylhet. The rest of the concerns listed below only apply to the proposed site.

Flood retention capacity of the site must not be reduced (Issue related to the proposed site)• The Department of Public Health Engineering (DPHE) has indicated that the site’s current

flood retention capacity can not be reduced by the development of the EZ. A study needs to becarried out to see if it is viable to build an EZ in this location if current drainage and floodretention levels must be maintained.

• A Drainage Management Plan with baseline flood levels and drainage requirements is needed todetermine the amount of land, which is left available for development. This will affect the designof the Master Plan and phasing of the project.

Location of the EZ may be too close to the city of Sylhet (Issue related to the proposed site)

• If the rapid expansion of residential areas on the outskirts of Sylhet continues, the EZ site will,in the coming years, be surrounded by urban sprawl.

• While the Department of Environment currently has no objection to an EZ on the proposedsite, delayed development could lead to a rezoning the area to a residential designation, which would prohibit the development of the EZ in this location.

• To show good will, if a feasibility study recommends the development of the EZ in this location,a full environmental impact assessment (EIA) should be undertaken immediately so the siteobtains an Environmental Clearance Certificate. An EIA is a lengthy process and must becompleted before construction is permitted. A commitment from the Department ofEnvironment will also be needed so they do not revoke the certificate at a later date.

Effluent Management is required for the EZ (Issue related to the proposed site)

• An effluent management plan is required for the EZ, which includes: i) the installation of acentral sewage and effluent treatment plant (ETP), ii) pretreatment of effluents by tenantindustries if they do not meet ETP influent requirements, and iii) an emergency response in theevent of an ETP breakdown.



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Land and resettlement may be more costly than previously estimated (Issue related to the

proposed site)

• Land acquisition costs are estimated at 4,985,656,000 Tk. based on an average market value of1,300 Tk/m2. Under the Acquisition and Requisition of Immovable Property Ordinance (1982),the Deputy Commissioner must award a sum of 50 percent of the land’s market value in

addition to the market value itself for any expropriation. This would increase the land acquisitioncosts to 7,478,484,000 Tk.

• If resettlement of the site is carried out in conformity with the IFC's Performance Standards,then resettlement costs may be more expensive than initially anticipated because displacedpersons would also be paid in order to re-establish their livelihoods.

Site Summary

Like most development sites, this location for the Economic Zone has a number of advantages anddisadvantages. In summary, the advantages are:

i) It is located near an existing urban area on the outskirts of Sylhet;ii) It has excellent highway access to roads leading to India and Chittagong, the major port

of Bangladesh;iii) It has close proximity to a railroad link that leads to Chittagong and which could be

connected directly to the economic zone through a spur;iv) The land is occupied by approximately 30 families which, for a site of 961 acres, is

relatively few and will present fewer resettlement issues than might otherwise be thecase;

v) Three residential developments are located directly outside the zone and have been builtaccording to UK-standards with full recreational facilities. This will provide attractive

living accommodations to potential investors and their relocating staff.

The disadvantages are:

i) The government will have to acquire 90 percent of the land which may mean initialdelays in beginning the project;

ii) The land includes 4 rivers and a lake, which may present major challenges forconstruction. This will reduce the amount of land for development and constructionmay be significantly more expensive because development must preserve the rivers andlake;

iii) The land must remain as a floodwater catchment area for the surrounding region;iv) The mix of lowlands and wetlands on the site will mean that the land must be raised, and

the materials used will most likely take a significant amount of time to settle; v) The land is livelihood property, which includes sustenance agriculture and raising of

cattle. Resettlement costs may be more than expected; vi) The proximity to Sylhet may be a liability as the city grows and encroaches on the site; vii) There are water constraints in the region and water may be a fatal flaw to the project; viii) Most of the farm workers observed were women, which may mean a potential impact on

gender issues.



19

IV. Market Analysis

This chapter examines the past and present market conditions in Sylhet and in Bangladesh. Thisincludes an analysis of trade and investment data, industry trends, and comparative cost of doing

business in Sylhet and other locations in the region. This Market Analysis is meant as a supplementto the findings of the Feasibility Report prepared for the SCCI in November 2007.2

Methodology

An analysis of the business climate and economic market provided the keystone to forecasting thedemand for serviced industrial land in Sylhet. The IFC BICF team examined the business trends andthe competitiveness of the Sylhet market from several different angles. This allowed the team tomake realistic assumptions about the types of industries and numbers of companies that wouldlocate in the zone each year, and the land, utility, and employment requirements of such firms. The

market was analyzed in the following manner:

• Competitiveness benchmarking. The cost and quality of doing business in Sylhet wascompared to those of other locations in Bangladesh and Asia where investors might locate afactory. This helped gauge the attractiveness of Sylhet as a place to do business.

• Trade trends. The team examined recent import and export data to gauge the strength of various industries in Bangladesh. This helped narrow the types of companies most likely tolocate in Sylhet in the near term.

• Investment trends. Data on new company registrations and investor inquiries was sourcedfrom BOI, BSCIC, and BEPZA to determine the numbers of new companies in various sectorsthat have invested throughout Bangladesh in the last five to seven years. Additionally, the teamsurveyed existing investors to gauge their perceptions of future business trends. This data was

used to narrow the types of investors likely to locate in Sylhet, as well as predict the futurenumbers of new companies in the Sylhet Economic Zone.

Competitiveness Benchmarking

The team examined the operating costs and quality conditions associated with doing business inSylhet, and compared them to those of seven other locations—Dhaka (Bangladesh), Kathmandu(Nepal), Visakhapatnam and New Delhi (India), Ho Chi Minh City (Vietnam), Colombo (Sri Lanka),Karachi (Pakistan), and Guangzhou (China). These locations were selected for the followingreasons.

• They compete for foreign investment in South Asia• They are home to some foreign investors in Bangladesh• They were cited by existing companies in Bangladesh as being competitive locations to produce

products and/or services

2 See Feasibility Report on Special Economic Zone & Industrial Park in and around Sylhet , Young Consultants, October 2007,namely Chapter 3 “Findings of the Field Surveys on Industrial Park/Economic Zone” and Chapter 4 “Availability ofRaw Materials in and around Sylhet”.



20

Investment Priorities

0 2 4 6 8 10 12 14

Cost of Labor

Tax Benefits

Availability of Labor

Access to Markets

Cost of Operations

Close to Residence

Availability of Specialty Skills

Availability of Raw Materials and Supplies

Availability of Utilities

Availability of Supporting Industries

Cost of Utilities

Few Unions

Access to Seaport

Availability of Transportation

Security

Cost of Land

Availability of Buildings

Cost of Transportation

Political Stability

Duty Rebate

Availability of Land

Policy SupportRecreation and Lodging Opportunities

Software

Number of Responses

Figure 3. Investment Priorities

Figure 4 compares important operating costs such as labor, land, utilities, taxation, and freight

transportation, along with some common quality benchmarks such as the rigidity of the labor regimeand administrative burden in paying taxes. The IFC BICF team surveyed over 30 companies inSylhet, Dhaka, and other locations to learn more about what their actual priorities are when choosingan investment location. In an interview setting, firms were asked to describe their top fiveinvestment priorities when choosing a location for a new facility. The results of this survey, shownabove in Figure 3, provide a sense of the relative importance that companies place on eachbenchmarked factor.



2 1

F i g u r e 4

S y l h e t

D h a k a

N e p a l

I n d i a

V i e t n a m

P a k i s t a n

S r i L a n k a

C h i n a ( G u a n g z h o u )

M o n t h l y S a l a r y —

M i d - L e v e l M a n a g e r

$ 2 0 1 / m o n t h

3

$ 3 0 5 / m o n t h 3

$ 3 3 3 / m o n t h 1

$ 1 , 6 3 9 / m o n t h 2

$ 5 0 0 -

7 0 0 / m o n t h 1 9

$ 5 7 5 –

1 , 7 2 5 / m o n t h 4

$ 1 6 0 – 3 0 0 / m o n t h 5

5 2 0 / m o n t h 6


S k i l l e d / T e c h n i c a l

W o r k e r

$ 7 2 - 1 4 0 / m o n

t h 3

$ 7 7 - 2 2 6 / m o n t h 3

$ 2 2 5 / m o n t h 1

$ 3 5 4 / m o n t h 2

$ 6 8 - 2 8 0 / m o n t h 1 9

$ 1 1 5 – 2 8 7 / m o n t h 4

$ 6 4 – 3 0 0 / m o n

t h 5

2 5 0 / m o n t h 6


U n s k i l l e d W o r k e r

$ 2 7 / m o n t h

3

$ 4 1 / m o n t h 3

$ 7 1 / m o n t h 1

$ 1 0 2 / m o n t h 2

$ 6 3 / m o n t h 1 9

$ 7 7 - 1 0 5 / m o n t h 4

$ 4 5 / m o n t h 5

1 3 5 / m o n t h 6

R i g i d i t y o f

E m p l o y m e n t

( C o m p o s i t e I n d e x )

3 5

3 5

5 2

3 0

2 7

4 3

2 7

2 4

D i f f i c u l t y H i r i n g

I n d e x

4 4

4 4

6 7

0

0

7 8

0

1 1

R i g i d i t y o f W o r k i n g

H o u r s I n d e x

2 0

2 0

2 0

2 0

4 0

2 0

2 0

2 0

D i f f i c u l t y F i r i n g

I n d e x

4 0

4 0

7 0

7 0

4 0

6 0

6 0

4 0

F i r i n g C o s t s ( W e e k s

W a g e s )

1 0 4 . 3

1 0 4 . 3

9 0

5 5 . 9

8 7

1 6 9

1 6 9

9 1

N o n - W a g e L a b o r

C o s t ( % S a l a r y )

0

0

1 0

1 7

1 7

1 5

1 5

4 4

C o s t o f E l e c t r i c i t y

U s a g e ( $ / k w h )

$ 0 . 0 5 9 K w h

$ 0 . 0 5 9 7 ( D h a k a

E P Z ) 1 0

$ 0 . 0 8 9 8 / k w h 8

$ 0 . 0 7 6 / k w h 9

$ 0 . 0 7 5 / k w h 1 8

I n d u s t r i a l O f f - P e a k :

$ 0 . 0 5 8 / k w h

I n d u s t r i a l P e a k :

$ 0 . 0 8 3 / k w h 4

O f f - P e a k :

$ 0 . 0 5 9 / k w h

P e a k : $ 0 . 1 3 3 / k w h 5

O f f - P e a k :

$ 0 . 0 3 9 / k w h

P e a k : $ 0 . 1 1 8 / k w h 1 1

C o s t o f E l e c t r i c i t y

C a p a c i t y D e m a n d

( $ / K V A / m o n t h )

N / A

N / A

$ 2 . 8 9 2 / K V A /

m o 8

$ 4 . 2 4 -

$ 6 . 5 2 K V A / m o .

9

N o n e

N o n e

$ 3 . 4 4 0 / K V A / m o n t h

f o r b u l k c u s t o m

e r s

d e m a n d i n g > 4

2

K V A 5

V o l u m e o f

t r a n s f o r m e r :

$ 2 . 4 3 / K V A / m o n t h

B a s i c F e e :

$ 3 . 6 4 / K V A / m o 1 1

C o s t o f P i p e d W a t e r

( $ / m 3 )

$ 0 . 3 1

$ 0 . 2 5 3 ( D h a k a

E P Z ) 1 0

$ 0 . 2 0 / m

3

( H e t a u d a I D )

$ 0 . 0 7 6 / m 3

( K a t h m a n d u

V a l l e y f o r

c u s t o m e r s u s i n

g

> 1 0 m

3 / m o . ) 8

$ 0 . 5 2 / m

3 9

$ 0 . 2 4 / m

3 1 8

S e w e r a g e :

A p p r o x i m a t e l y

$ 0 . 1 9 / m

3

$ 0 . 2 6 1 / m 3

S e w e r a g e :

$ 0 . 0 6 5 / m 3 4

$ 0 . 4 7 1 / m 3 5

$ 0 . 1 6 8 / m 3 1 1

N a t u r a l G a s

$ 0 . 0 8 2

$ 0 . 0 7 / m

3 1 0

$ 0 . 1 0 2 / m 3 9

$ 0 . 0 7 2 / M M B T U 4

$ 0 . 1 5 4 / m 3

$ 0 . 1 2 6 / m 3 1 1



2 2

C o s t o f S e r v i c e d

L a n d i n s i d e F r e e

Z o n e o r I n d u s t r i a l

E s t a t e ( $ / m 2 / y e a r )

$ 2 . 0 0 / m 2 /

y e a r

$ 1 . 2 5 -

2 . 2 / m

2 / y e a r

1 2

$ 0 . 1 3 / m

2 / y r

( B a l a j u , P a t a n ,

B h a k t a p u r I D s )

8

$ 0 . 9 8 / m

2 / y e a r

9

$ 1 0 8 / m 2 f o r 3 4

y e a r s

( T a n T h u a n E P Z ,

H o C h i M i n h C i t y )

$ 4 2 / m

2 f o r 4 7 y e a r s

( T a n P h u T r u n g I Z )

I n d u s t r i a l P l o t s :

D o w n p a y m e n t o f

$ 5 / m 2 , p l u s a n n u a l

g r o u n d r e n t o f

$ 2 . 5 0 / m

2 1 3

T r a d i n g S e c t o r

P l o t s : D o w n

p a y m e n t o f $ 2 0 / m

2 ,

p l u s $ 2 . 5 0 / m

2

a n n u a l g r o u n d r e n t

1 3

3 0 - y e a r l e a s e :

$ 3 . 7 1 - $ 1 2 . 3 6

/ m 2 ,

d e p e n d i n g o n z

o n e ,

p l u s a n n u a l g r o u n d

r e n t o f $ 0 . 9 1

–

0 . 9 5 / m 2 , d e p e n

d i n g

o n z o n e

5

1 0 - y e a r l e a s e :

$ 2 7 – 5 0 / m 2

3 0 - y e a r l e a s e :

$ 3 1 – 5 5 / m 2

5 0 - y e a r l e a s e : $ 3 4

- 6 1 / m 2 1 1

C o s t o f

P r e f a b r i c a t e d

F a c t o r y S h e l l

( $ / m 2 / y e a r )

$ 2 . 2 5 / m

2 /

y e a r

$ 1 8 –

3 3 m

2 / y e a r

1 2

$ 5 . 7 6 / m

2 / y e a r

( B a l a j u I D ) 8

$ 1 5 . 4 3 -

1 6 . 3 0 / m

2 / y r

9

N A

S F B s n o t a v a i l a b l e .

S h o r t - t e r m

w a r e h o u s e s

a v a i l a b l e f o r

$ 2 . 4 3 / m

2 / m o 1 3

3 0 - y r l e a s e : $ 1

2 3 -

1 3 8 / m

2 . R e n t a l :

$ 1 1 5 – 1 2 9

5

R a n g e s f r o m

$ 6 . 4 6 -

$ 2 4 3 / m 2 / y e a r

1 4

C o s t o f o c e a n

f r e i g h t ( 4 0 ’ t o

L o n g B e a c h )

$ 3 , 4 0 0

$ 3 , 8 0 0 f r o m

D h a k a

$ 5 , 8 0 0 f r o m

K a t h m a n d u

$ 5 , 5 0 0 f r o m

B i r a t n a g e r

$ 5 , 5 0 0 f r o m

N e w D e l h i

$ 3 , 1 0 0 f r o m

K a r a c h i

$ 3 , 5 0 0 f r o m

C o l o m b o

$ 3 , 9 3 9 f r o m

G u a n g z h o u

( M a e r s k )


f r e i g h t ( 4 0 ’ t o

N e w Y o r k )

$ 3 , 3 0 0

$ 3 , 1 0 0 f r o m

D h a k a

$ 6 , 2 0 0 f r o m

K a t h m a n d u

$ 5 , 8 5 0 f r o m

B i r a t n a g e r

$ 4 , 4 0 0 f r o m

N e w D e l h i

$ 2 , 9 2 5 f r o m

K a r a c h i

$ 4 , 1 0 0 f r o m

C o l o m b o

N A


f r e i g h t ( 4 0 ’ t o

R o t t e r d a m )

$ 3 , 6 0 0

$ 3 , 5 0 0 f r o m

D h a k a

$ 6 , 1 0 0 f r o m

K a t h m a n d u

$ 5 , 7 5 0 f r o m

B i r a t n a g e r

$ 5 , 0 0 0 f r o m

N e w D e l h i

$ 3 , 3 7 0 f r o m

K a r a c h i

$ 2 , 8 5 0 f r o m

C o l o m b o

$ 3 , 9 1 8 f r o m

G u a n g z h o u


f r e i g h t ( 4 0 ’ t o

Y o k o h a m a )

$ 1 1 0 0

$ 1 , 0 5 0 f r o m

D h a k a

$ 4 , 2 0 0 f r o m

K a t h m a n d u

$ 3 , 8 5 0 f r o m

B i r a t n a g e r

$ 3 , 0 0 0 f r o m

N e w D e l h i

$ 1 , 0 5 0 f r o m

K a r a c h i

$ 1 , 1 5 0 f r o m

C o l o m b o

$ 1 , 2 4 8 f r o m

G u a n g z h o u

A i r f r e i g h t r a t e s

f o r 1 , 0 0 0 k g

g a r m e n t s ( $ / k g )

t o N e w Y o r k

$ 3 . 5 0

$ 3 . 3 5 f r o m

D h a k a

$ 3 . 9 5 f r o m

K a t h m a n d u

$ 4 . 3 0 f r o m

B i r a t n a g e r

$ 3 . 5 5 f r o m

N e w D e l h i

$ 3 . 3 0 f r o m K a r a c h i

$ 3 . 7 5 f r o m

C o l o m b o

N A


f o r 1 , 0 0 0 k g

g a r m e n t s ( $ / k g )

t o L o s A n g e l e s

$ 3 . 3 5

$ 3 . 8 0 f r o m

D h a k a

$ 4 . 2 0 f r o m

K a t h m a n d u

$ 4 . 5 5 f r o m

B i r a t n a g e r

$ 3 . 6 0 f r o m

N e w D e l h i

$ 5 . 2 8 f r o m K a r a c h i

$ 3 . 8 0 f r o m

C o l o m b o

N A



2 3

( 1 ) S o u r c e : I F C s u r v e y ; ( 2 ) S o u r c e : I F C S u r v e y ; ( 3 ) S o u r c e : I F C B I C F S u r v e y ; ( 4 ) S o u r c e : P a k i s t a n B O I ; ( 5 ) S o u r c e : S r i L a n k a B O I ; ( 6 ) S o u r c e : I F C S u r v e y ; ( 7 )

S o u r c e : D o i n g B u s i n e s s

2 0 0 8 , I F C , W o r l d B a n k G r o u p

; ( 8 ) S o u r c e : I n d u s t r i a l D i s t r i c t s M a n a g e m e n t L i m i t e d ; ( 9 ) S o u r c e : V i s a k h a p a t n a m S p e c i a l E c o n o m i c Z o n e a n d M a d r a s E x p o r t P r o c e s s i n g Z o n e ; ( 1 0 )

S o u r c e : B a n g l a d e s h E x p o r t P r o c e s s i n g Z o n e A u t h o r i t y ( B E P Z A ) ; ( 1 1 ) S o u

r c e : G u a n g z h o u E c o n o m i c a n d T e c h n o l o g

i c a l D e v e l o p m e n t D i s t r i c t ; ( 1 2 ) S o u r c e : I F C S u r v e y ; ( 1 3 ) S o u r c e :

P a k i s t a n E x p o r t P r o c e s s i n g Z o n e A u t h o r i t y ; ( 1 4 ) S h e n z h e n G o v e r n m e n t O

n l i n e h t t p : / / e n g l i s h . s z . g o v . c n ; ( 1 5 ) S o u r c e : G a n

e s h A i r C a r g o , N e p a l , e x c e p t C h i n a . C h i n

a S o u r c e : M a e r s k . S e a

f r e i g h t r a t e s a r e f r o m p o r t t o p o

r t , a n d d o n o t i n c l u d e a n y f o b c h a r g e s a n d

p i c k - u p . D o e s n o t i n c l u d e i n s u r a n c e . A i r f r e i g h t r a t e s a r e i n c l u s i v e o f s e c u r i t y s u r c h a r

g e a n d f u e l s u r c h a r g e .

R a t e s a r e f r o m a i r p o r t t o a i r p o r t , a n d d o n o t i n c l u d e f o b c h a r g e s . ( 1 6 ) T a x

o n p r o f i t s f o r a t y p i c a l m e d i u m - s i z e d e n t e r p r i s e . S o u r c e : D o i n g B u s i n e s s 2 0 0 8 , I F C , W o r l d B a n k G r o u p ; ( 1 7 )

T a x c a l c u l a t e d a f t e r a l l o w i n g f o r t y p i c a l d e d u c t i o n s a n d e x e m p t i o n s o f a m e d i u m - s i z e d c o m p a n y . S o u r c e : D o i n g B u s i n e s

s 2 0 0 8 , I F C , W o r l d B a n k G r o u p ; ( 1 8 ) S o u r

c e : H o C h i M i n h C i t y

E x p o r t P r o c e s s i n g Z o n e A u t h o

r i t y ( H E P Z A ) ; ( 1 9 ) S o u r c e : “ V i e t n a m — O p

e n f o r B u s i n e s s ” i n w w w . b u s i n e s s - i n - a s i a . c o m ,

a n d “ O f f s h o r e S a l a r i e s : V i e t n a m i s C h e a p e

s t , B u t I n d i a I s S t i l l a

B a r g a i n ” i n w w w . i n f o r m a t i o n w e e k . c o m . ( 2 0 ) S o u r c e : B i m a n B a n g l a d e s h A i r l i n e s , F e d r e a l C a r g o S e r v i c e s L t d . A n d F T I C a r g

o S e r v i c e s , L t d . ; ( 2 1 ) S o u r c e : F e d e r a l C a r g o

S e r v i c e L t d . A n d F T I

C a r g o S e r v i c e s L t d .


f o r 1 , 0 0 0 k g

g a r m e n t s ( $ / k g )

t o A m s t e r d a m

$ 2 . 3 5

$ 3 . 1 0 f r o m

D h a k a

$ 2 . 7 7 f r o m

K a t h m a n d u

$ 3 . 1 2 f r o m

B i r a t n a g e r

$ 2 . 9 0 f r o m

N e w D e l h i

$ 2 . 7 0 f r o m K a r a c h i

$ 2 . 9 0 f r o m

C o l o m b o

N A


f o r 1 , 0 0 0 k g

g a r m e n t s ( $ / k g )

t o T o k y o

$ 2 . 2 0

$ 3 . 2 0 f r o m

D h a k a

$ 3 . 9 5 f r o m

K a t h m a n d u

$ 4 . 3 5 f r o m

B i r a t n a g e r

$ 2 . 4 0 f r o m

N e w D e l h i

$ 2 . 7 5 f r o m K a r a c h i

$ 2 . 6 0 f r o m S

r i

L a n k a

N A

S t a t u t o r y

C o r p o r a t e I n c o m e

T a x R a t e 1 6

4 0 %

( 3 0 % f o r

p u b l i c l y t r a d e

d

c o m p a n i e s ,

a c c o r d . N a t ’ l

B o a r d o f

R e v e n u e )

4 0 %

( 3 0 % f o r p u b l i c l y

t r a d e d

c o m p a n i e s ,

a c c o r d . N a t ’ l

B o a r d o f

R e v e n u e )

2 0 %

3 3 . 7 %

2 8 %

3 5 %

3 5 %

3 3 %

T o t a l C o r p o r a t e

I n c o m e T a x

R a t e 1 7

2 7 . 3 %

2 7 . 3 %

1 8 . 6 %

1 7 . 2 %

2 0 . 1 %

2 5 . 8 %

2 6 . 3 %

1 9 . 4 %

V A T 7

1 5 %

1 5 %

1 3 %

4 % ( C e n t r a l

S a l e s T a x )

1 2 . 5 % ( S t a t e

V A T )

1 0 %

1 5 %

1 5 %

1 7 %

A d m i n i s t r a t i v e

b u r d e n s p e n t

p a y i n g t a x e s

( H o u r s p e r y e a r ) 7

4 0 0

4 0 0

4 0 8

2 7 1

1 , 0 5 0

5 6 0

2 5 6

8 7 2

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24

Benchmarking Results

The benchmarking exercise illustrated that Sylhet compares favorably to most locations in terms ofthe basic costs associated with doing business. Labor costs—the most frequently mentioned

investment priority—were generally lower than all other surveyed locations. The Sylhet district alsohas important natural resources such as agricultural products and minerals. However, the availabilityof some important factors of production—such as skilled work force, reliable utilities, and presenceof suppliers and supporting industries—are currently lacking.

Most factory, software, and BPO business owners in Sylhet chose their locations because they arefrom the Sylhet district, and understand the tastes and purchasing power of residents in the district. There are numerous Sylhetis and NRSs, however, who chose to locate their enterprises in Dhaka,Comilla, or Chittagong. Like other Bangladeshis and foreign business owners, they want to takeadvantage of the synergies associated with existing industry clusters, and better air and seatransportation options—currently not available in Sylhet.

Company owners and managers interviewed for this analysis stated that the main deterrents tolocating a business in Sylhet were the following:

• Lack of serviced industrial land. Most BSCIC industrial estates in the vicinity of Sylhet cityhave reached full occupancy.

• Bureaucratic conditions associated with opening and operating a business. One investornoted that he had to write over 1,000 letters just to open his single factory in the Sylhet division.

• Inadequate power, water, and other necessary utilities. Use of expensive generators isrequired, and most firms must dig their own wells or have water delivered to their facilities

• Lack of skilled workforce in Sylhet area. In general, the workforce in Sylhet is well-educated,but not experienced with industrial manufacturing; though the service sector—software,

hospitality—is more developed.• Lack of industrial base and industry clusters in Sylhet area. Network of suppliers and

industry-specific support services do not exist in Sylhet, as they do in Dhaka, Chittagong,Guangzhou, and other surveyed areas.

• Unfamiliarity of Sylhet with foreign investors. The City of Sylhet is currently not on theradar screen of foreign investors, and although Sylhet is a large city, it is not accustomed todealing with foreigners and international corporations.

• Not a preferred location by NRSs. Sylhet is far from the community of risk-taking industrialBangladeshi entrepreneurs who are centered along the Dhaka-Chittagong corridor.

Most interviewed firms located in the Dhaka-Chittagong corridor were generally pleased with the

infrastructure provided by BEPZA or other industrial areas, rating it from ‘good’ to ‘excellent’. They noted recent improvements in the types of modern building facilities available, but also desirednecessary upgrades in utilities. Their primary reasons for locating there were the availability ofskilled labor, access to markets in Dhaka, and good transportation connections.

The IFC BICF team is optimistic about the low operating costs associated with doing business inSylhet. An economic zone in Sylhet will address and alleviate the top three concerns ofentrepreneurs—namely, i) lack of land, ii) troublesome bureaucracy, and iii) poor quality of utilities.



25

However, the most attractive investment locations in Bangladesh, according to business owners, arealong the Dhaka-Chittagong corridor, where freight and air transportation options are moreestablished and worker skills, suppliers, and specialty services already exist for a variety of industries. As long as industrial land and skilled labor continues to exist along this corridor, demand for land inSylhet will remain somewhat depressed in the near to medium term.

Trade Trends

The IFC BICF team analyzed Bangladeshi trade data as one way to understand the changing marketconditions in Bangladesh. Trade patterns provide an interesting proxy for investment patterns in acountry for several reasons: i) trade data is generally more available and more reliable than statisticson investment, ii) increased exports tend to mirror increased investment, particularly for export-oriented products, and iii) decreased imports are sometimes associated with increased investment inthe local production of import-substituting products.

ExportsFigure 5. Apparel Exports

Data on Bangladesh’s importsand exports were obtained forthe years 2001 to 2004 fromthe COMTRADE databaseavailable from the U.N.Statistics Division. The IFCBICF team examined the dataat the 2-digit StandardIndustry Trade Classification(SITC) code level.

The export trends ofBangladesh’s top ten exported

products—in terms of export revenues—are graphically shown in Figures 5 and 6. Investment inproduction facilities for each of these displayed products continues to grow, particularly in theDhaka-Comilla-Chittagong corridor. Exports in all product categories shown, increased during theanalyzed time period, except for textiles, footwear, and leather products. Reduction in textileexports is partially due to the closing of some textile operations, but also reflects a greater use ofBangladeshi textiles in the ready-made garment (RMG) sector.

Apparel Exports

3,600,000

3,700,000

3,800,000

3,900,000

4,000,000

4,100,000

4,200,000

4,300,000

4,400,000

4,500,000

2001 2002 2003 2004

U S $ ( t h o u s a n d s )



26

Figure 6: Top Exported Products (Excluding Apparel)

Top Exported Products (Excluding Apparel)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2001 2002 2003 2004

U S $ ( t h o u s a n d s )

Fish Products

Textiles

Leather Products

Textile Fibers

Footwear

Mineral and glass products

Petroleum products

Tobacco and products

Metal products

Imports

Examination of import flows can provide clues as to consumer goods demanded by Bangladeshis, as well as the capital equipment, raw materials, and intermediate goods required by the country’sindustrial sector. There are often clues as to what import substituting industrial are currentlyarising—or could arise—throughout Bangladesh.

Figure 7. Top Increasing Import Items

Top Increasing Imports

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2001 2002 2003 2004

U S $ ( t h o u s a n d s ) 32 Coal

07 Coffee, chocolate, spices

23 Rubber materials

05 Fruit and vegetable products

08 Animal feed

28 Ores

25 Paper pulp

33 Petroleum products

24 Rough wood

72 Specialty machinery

Bangladesh imports a wide variety of products—some in very small quantities; others in large volumes. The Team analyzed products with import volumes in excess of US$ 10 million per year.



27

The team then examined the sectors in which import volumes were most rapidly increasing (Figure7), and most rapidly decreasing (Figure 8).

Products with rapidly rising imports tend to be in raw material and natural resource sectors such ascoal, rubber, ore, paper pulp, petroleum, and wood, or capital inputs such as factory machinery.

Due to the complexion of these imports, these sectors are not good proxies for increased import-substituting investment. One exception, however, could be in the manufacturing of fruit and vegetable products, imports of which increased 92 percent between 2001 and 2002.

Examination of sectors where imports are decreasing can provide clues as to import-substitutinginvestment trends in Bangladesh. Figure 8 illustrates products with greater than US$ 10 million inannual imports, in which levels of imports have most rapidly decreased between 2001 and 2003.

Figure 8. Top Decreasing Import Items

Top Decreasing Imports

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2001 2002 2003 2004

U S $ ( t h o u s a n d s ) Metal products

Boilers and non-electric engines

Other manufactured items, n.e.s.

Apparel

Metalworking tools and machinery

Dairy

Pharmaceuticals

Basic plastic products

Instruments and meters, n.e.s.

Steel base metal products

Some of the products depicted in Figure 8—namely, apparel and metal products—have becomeexport leaders in Bangladesh. Local entrepreneurs and non-resident Bangladeshis (NRBs) have alsoincreasingly invested in factories to produce the above products specifically for the domestic market. This mirrors the existing types of industrial ventures currently seen in and around Sylhet—foodprocessing, agricultural machinery, pharmaceuticals, plastic products, metalworking, and otherfactories.

Investment Trends

When estimating the demand for serviced industrial land, it is helpful to understand recentinvestment trends. This helps determine the following:• Types of companies that locate in serviced industrial estates, free zones, and/or export

processing zones• Levels of investment over the past five years• Infrastructure requirements of companies in economic zones



28

• Degree of satisfaction that current tenants of such zones have with the infrastructure andservices provided

To assess the above factors, the IFC BICF team accessed investment data from BEPZA, BSCIC,and BOI and interviewed approximately 30 companies located in Sylhet, Dhaka, and Comilla. The

team also referred to surveys undertaken by Young Consultants for its report to the SCCI inNovember 2007.

Export-Oriented Investments

Figure 9, below illustrates the trend of new tenants locating in BEPZA’s EPZs each year between2003 and 2007.

Figure 9. New EPZ Tenants3

New EPZ Tenants

0

5

10

15

20

25

2003 2004 2005 2006 2007

(up to Sep.)

N u m b e r o f N e w

T e n a n t s

Garments/Knitting Garments Accessories

Agro products TextileMetal/Steel industry Plastic industry

Elect ronics & Electr ical Goods Power Industry

Footwerar & Leather Furniture industry

Paper industry Service Industry

Chemical & Fertilizer Tent

Misc.

Figure 9 shows that roughly 10 to 20 new RMG companies have located in Bangladeshi EPZs eachyear over the past five years. There are also about five to ten garment accessory firms, andapproximately five each of agro products, plastics, and metalworking firms locating in EPZs eachyear. This examination is useful for gauging the possibilities of export-oriented investments on anational scale. For instance, if the trend is for an average of 15 export-oriented RMG factories tolocate in economic zones each year, it is possible for an economic zone in Sylhet to attract a fraction of this. In the near and medium terms, this may be a small fraction, however, based on the tendencyof RMG operations to locate in clusters where forward and backward linkages are strong.

3 Source: IFC BICF aggregation of BEPZA data.



29

Local Investments

The demand for serviced industrial land extends beyond the types of companies that qualify fortenancy in Bangladesh’s EPZs. It was important, therefore, to also understand the investmentpatterns of local and largely non-exporting firms.

Figure 10 illustrates the numbers of local firms registered in Bangladesh over the past two fiscalyears and highlights investment—in terms of taka—in BSCIC industrial estates in the Sylhet districtfrom 2003 to 2007. Investments in all sectors are very low, generally under Tk. 10 million per year.Each rise in the graph in Figure 10 probably represents about one new investment—or continuedinvestment by the same company—pointing to the fact that the trend to locate industrial ventures inSylhet is historically very low.

Figure 10. Investment in Sylhet BSCIC Industrial Estates

Investment in Sylhet BSCIC Industrial Estates

0

10

20

30

40

50

60

2003 2004 2005 2006 2007

M i l l i o n T a k a

AgrobasedEngineering

Livestock

Textile

Pharmaceuticals

Food & Allied Products

Others (packing, stone crushing, etc)

Inquiries for industrial plots in Sylhet BSCIC industrial estates are mostly for food processing— frozen vegetables, spices, biscuits, fast food—and cooking burners. Inquiries are primarily fromSylhetis and potential investors from Dhaka. Industrial establishments in Sylhet tend to be low-risk ventures by Sylheti entrepreneurs, often started up without loans or other external means offinancing. Land requirements are typically quite small—less than 3,000 square meters—and

production usually caters to the Sylhet district market. The IFC BICF team expects this type ofinvestment to continue, with enterprises located within the proposed Sylhet Economic Zone.



30

Industries Experiencing Positive Trends

0 1 2 3 4 5 6 7

Food Processing

Garments

Leather

Textiles

Shoes

Packaging

Pharmaceuticals

Glass and Ceramics

Plastics

Agriculture Equipment

Toiletries

Software

Metalworking

Logistics Services

Electronics

Number of Responses

Figure 11. BOI Registered Local Industries

In the near term, additionalinvestments may be seen by NRSinvestors, if they judge the risk ofinvesting to be lowered by theexistence of the zone. NRSs havetraditionally been opposed to risky ventures or ventures with longpayback periods. One-stop provisionof bureaucratic services would assistimmensely in this regard by loweringinvestment risk. Investments inexport-oriented ventures, orcompanies established by non-Sylhetismight be possible once thetransportation corridor between

Chittagong and Dhaka has beenupgraded, and the ease of doing

business in the Sylhet Economic Zone has become firmly established. This will only occur if thezone is expertly developed, operated, and maintained.

Anticipated Investment Trends

The IFC BICF team surveyed companies and businesspersons in Sylhet, Dhaka, and elsewhere inBangladesh to get their input on trends they see emerging in future industrial and service-orientedinvestments. Interviewees were asked to name the sectors they felt were growing in strength inBangladesh, as well as the sectors that were doing poorly, or likely to experience future

disinvestment. The results of this survey are shown in Figures 12 and 13.

Figure 12. Industries Experiencing Positive Trends

The processed food sector was cited ashaving great future potential inBangladesh. Recent investments haveincluded facilities that produce orprocess condiments, poultry, animalfeed, tea, and shrimp. Shoemanufacturers in China are no longerable to keep pace with world demand,

which has resulted in investments inBangladesh. The leather sector is alsoquite healthy. Support industries arealso growing, including foil printing andpackaging materials forpharmaceuticals, processed foods, andfast-moving consumer goods such ascosmetics.

BOI-Registered Local Industries

0

200

400

600

800

1,000

1,200

1,400

A g r o - B a s e d

F o o d & A l l i e d

T e x t i l e s

P r i n t i n g &

P u b l i s h i n g

T a n n e r y &

L e a t h e r

C h e m i c a l s

G l a s s &

C e r a m i c s

E n g i n e e r i n g

S e r v i c e s

M i s c e l l a n e o u s

N u m b e r s o f N e w

C o m p a n i e s

2005-06

2006-07



31

Figure 13. Industries Experiencing Negative Trends

Bangladesh’s garment sector shows signsof maturing. This is evidenced byrelatively large numbers of new EPZtenants in the apparel and garmentaccessory sectors. Interviewedcompanies also noted that mid-levelmanagement in the RMG sector hasbecome more knowledgeable and skilled.However, respondents noted that, as thesector matures only larger operations willlikely be successful. This point hasinjected a degree of caution about thefuture growth of Bangladesh’s garmentsector. Some interviewees were skepticalabout the prospects of RMG and textiles,

particularly with the rise of competitors like Vietnam and Cambodia, and lack of innovation with

older textile plants. Dyeing of denim and other fabrics has also caused severe environmentaldamage in some areas, pointing to the need of strict regulatory controls and common effluenttreatment systems like the type proposed in the Sylhet Economic Zone.

Market Analysis Summary

The IFC BICF team conducted this market analysis to understand the conditions that will contributeto the demand for serviced industrial land in a Sylhet Economic Zone. In summary, the team’sinvestigations noted the following:

• Sylhet is a competitive location based on low labor rates. When benchmarked against

Dhaka (Bangladesh), Kathmandu (Nepal), Visakhapatnam and New Delhi (India), Ho ChiMinh City (Vietnam), Colombo (Sri Lanka), Karachi (Pakistan), and Guangzhou (China),Sylhet fairs well, as it delivers a low cost framework for doing business. Worker wages andsalaries in Sylhet are among the lowest in South Asian region. This is positive for companies with labor-intensive production processes. However, the Sylhet labor force also lacks skillsnecessary for industrial production or service-oriented exports.

• The favored location for investment is along the Dhaka-Chittagong corridor.Bangladesh has experienced an increase in exports in a variety of sectors such as apparel,leather, textiles, metal products, fish, footwear, mineral products (ceramics), and others. Although Sylhet can attract a small fraction of these investments, business owners still favor

locations along the Dhaka-Chittagong corridor.

• The location may only attract local investors selling to a local market. Most of thecompanies that will locate in the proposed Sylhet economic zone will be local firmsproducing goods and products for the local market. Some firms may also distribute goodsnationally, or export some items to northeast India.

Industries Experiencing Negative Trends

0 1 2 3 4 5 6

Textiles

Garments

Machinery and Engineering

Automotive

Jute

Food Processing

Chemicals

Electronics

Steel

Leather

Numbers of Responses



32

• NRS capital is high but they lack local industry knowledge. The non-resident Sylheti(NRS) community has shown great interest in locating ventures in the Sylhet economic zone.However, they generally lack industrial expertise, and require local investment partners withsuch knowledge.



33

V. Demand Forecast

The demand forecast stands as a key element of an economic zone pre-feasibility study and serves tohelp determine the development potential of the site. In this demand forecast, the IFC BICF teamidentified: i) the type of industries most likely to locate in the zone, ii) the number of tenantsproposed, and iii) the land and infrastructure requirements of companies proposed for the SylhetEconomic Zone over the course of a 15-year period. With this information, assumptions weredeveloped and two demand scenarios (a base case and aggressive case scenario) were produced. These scenarios were then used to obtain a more realistic view of the demand, developmentrequirements and timeframes of the project.

Methodology

The Demand Forecast is a necessary element of an economic zone pre-feasibility study. Theforecast allows planners, developers, venture capitalists, zone operators, and the government tomake the following estimates:

• Determine the ideal size of land to purchase. The Demand Forecast informs potential zoneowners, developers, and operators of the size of land necessary to accommodate the projecteddemand for serviced industrial land in a given location.

• Identify phased zone development. IFC BICF recommends phasing the development of theSylhet Economic Zone, based on projected and actual user demand over time.

• Estimate the cost of zone development and operation. The larger the demand, the moreland that must be developed and the more services required to operate the zone.

• Propose zone revenues. The revenues of the Sylhet Economic Zone will be directlyproportional to the demand for land in the zone.

• Determine economic benefits. The Demand Forecast provides information such as the

numbers of tenants, average tenant revenues, and employment.

The Demand Forecast made extensive use of the outcomes of the Market Analysis and of thefollowing data and information:

• Historical investment trends of domestic and export-oriented firms in Sylhet and Dhaka,utilizing interviews with existing firms, and data from BOI, BEPZA, and BSCIC

• Proclivity of NRSs to invest in the Sylhet Economic Zone, based on interviews withpotential NRS investors

• Expansion of trade, based on data from UNCTAD• Move toward import substituting industries serving local markets, based on company

interviews and trade data from UNCTAD• Realistic economic zone growth potential, based on data of growth trends of economic

zones around the world



34

Likely Industry Sectors

The market analysis in Chapter IV suggests that some industries will be more likely to locate in theSylhet Economic Zone than others. As such, the Demand Forecast was built around the followingsectors.

Food and beverage processingGarments and textilesCeramic and mineral productsChemicals, soaps, pharmaceuticalsMetalworkingElectronics and electricalappliances

Software and BPORubber and plastic products WarehousingOther manufactured itemsPrivately operated zone servicesPrivate operated power plant

When a Master Plan for the zone is eventually developed, the planner will efficiently design the zone with the above industries in mind. This includes designing proper plot sizes and infrastructure such

as waste treatment, power, water, sewers, and telecoms, etc., suitable for these types of tenants.

Number of Tenants

From the industry sectors listed above, the team developed forecast scenarios to determine theproposed number of tenants for the zone. The number of tenants is one factor, which determinesthe following design and operating parameters of the zone:• Size of zone. Proposed occupancy aids in determining the ideal size and phasing of a zone.• Infrastructure and utilities. Infrastructure and utility requirements (type, quality and quantity)

are determined by this analysis.• Revenues and Operating Costs. Revenue streams to the zone operator, based on the land and

space leased by tenants is identified through this analysis.

Operating Parameters

The IFC BICF team collected details regarding the operating parameters of the types of firms mostlikely to locate in the Sylhet Economic Zone. This included the following, based on informationcollected in company interviews in Bangladesh and in other South Asian countries:• Land demand. Determine the average amount of land required by firms in each industry sector

proposed for the site.• Utilities requirements. Determine the average demand for water and power by firms in

different industries.•

Employment. Number of workers hired in four labor categories-Management, Technical,Skilled and Unskilled.• Land and facility preferences. The percentage of firms in each industry that would prefer: i)

short term land leases, ii) long term land leases, iii) SFB rentals, or iv) office rental.

The specific operating parameters utilized in the demand forecast and financial and economicmodels represent average values, with the understanding that individual tenants may haverequirements in excess or less than those specified.



35

General Assumptions

The Sylhet Economic Zone does not yet have an owner, source of financing, developer, or operator. Additionally, there are currently no laws or regulations for a new economic zone regime inBangladesh, though a policy is in draft form and being reviewed. Therefore, IFC BICF made

assumptions about some aspects of the economic zone’s legal framework and developmentparameters, and crafted the demand forecast with these suppositions in mind.

The assumptions are:

• The Sylhet Economic Zone will be located on a designated site along the Sylhet-TamabilHighway just outside the expanded Sylhet City boundary.

• Companies will be allowed to locate in the Sylhet Economic Zone regardless of their exportingstatus. Firms that produce in the zone will be allowed to have unlimited sales to the Bangladeshidomestic market.

• The entire zone will be considered a bonded and duty-free area. All tenants will be able to takeadvantage of duty-free imported inputs. Tenants who do not export will pay duties on importedinputs at the time of sale into the domestic market. Exporters and non-exporters will not besegregated in different areas within the zone, allowing for maximum flexibility in the businessmodels of zone tenants.

• The zone will offer streamlined bureaucratic services at a one-stop office within the zone. This will include services such as business registration, licensing, permitting, environmental controls, work permits, and others.

• Laws and regulations will be upheld and enforced to the highest standards within the zone toprotect the environment, business owners, and the labor force.

• A power plant will be constructed in the zone by a private developer/operator. This willprovide a dedicated power supply for tenants in the zone.

• The government will construct and operate an inland container terminal (ICT) within the zone.

• The zone developer/operator will construct a common liquid and solid waste treatment facility within the zone, with mandatory usage tariffs for all tenants.

• Additional utilities such as natural gas, water, and telecommunications will be available to zone

tenants at market-rate tariffs.

• Tenants will have the option of short or long-term land leases, or rental of a prefabricatedstandard factory building (SFB) or office space in a building constructed by the zonedeveloper/operator.



36

The Demand Forecast assumes that all of the above elements will characterize the Sylhet EconomicZone. In the eventuality that some of these factors do not come into play, the levels of demandpresented in this report should be adjusted downward.

Forecast Scenarios

The Demand Forecast was developed under two scenarios to accommodate a variety of futureconditions and investment outcomes.

Base Case Scenario

The Base Case Scenario reflects the most likely business climate conditions and outcomes. Itpresumes the same general assumptions outlined on the previous page. In the Base Case, thepolitical and economic climate in Bangladesh remains stable, but with a continuation of the samegeneral bureaucratic underpinnings that have made it difficult to do business. The new economiczone regime will provide streamlined processes, but the business climate outside the zone will only

gradually improve, making it difficult to spur growth of suppliers, traders, and logistics handlerslocated outside zones. The Base Case also assumes that additional economic zones will be built orexpanded over time, particularly along the Dhaka-Chittagong corridor, thus providing competitionfor an economic zone in Sylhet.

The Financial and Economic Models presented in Chapter VI and VII of this report, utilize dataoutputs from the Base Case Demand Forecast Scenario.

Aggressive Scenario

The Aggressive Scenario proposes more positive assumptions about Bangladesh’s economic and

political climate. It differs from the Base Case Scenario in that the following assumptions are made:

• A streamlined regulatory process – more efficient one-window service. All bureaucraticservices will be provided and regulated within the zone itself. This differs from the Base Case, whereby agencies post representatives within the zone for expedited service, but the paperworkcontinues to go through normal bureaucratic channels.

• An improved political climate. The political climate in Bangladesh will improve over the nextfive years, with a dramatic restructuring and reforming of bureaucratic services for businesses.

• Improved national infrastructure and logistics. Significant improvements are made to the

road corridor between Chittagong and Sylhet, and active efforts are made to secure internationalcargo flights to Sylhet. Additionally, the proposed “Asian Highway” is constructed within thenext five years, which plays an important role in developing the importance of Sylhet as alogistics and manufacturing hub for the region.

• Minimal economic zone competition. Few new economic zones are built throughoutBangladesh, making the Sylhet Economic Zone more attractive for companies seeking well-runserviced industrial infrastructure.



37

• Pro-active Marketing and Promotion. Sylhet is actively promoted by the Board ofInvestment both domestically and internationally as an investment destination. The SylhetEconomic Zone also conducts its own intensive marketing campaign. BOI and other promoters will develop programs to match NRB capital with local and international technical and industrialexpertise.

• Improved Capital markets. Micro-financing and capital markets will be developed andexpanded in Sylhet, including adequate formal financing facilities for industrial investments.

Demand Forecast

The IFC BICF team undertook an extensive Market Analysis to understand past and future potentialgrowth trends of industries suited for location in an economic zone. The Demand Forecast madeextensive use of the outcomes of the Market Analysis and of the following data and information:• Historical investment trends of domestic and export-oriented firms in Sylhet and Dhaka,

utilizing interviews with existing firms, and data from BOI, BEPZA, and BSCIC•

Proclivity of NRSs to invest in the Sylhet Economic Zone, based on interviews with potentialNRS investors• Expansion of trade, based on data from UNCTAD• Move toward import substituting industries serving local markets, based on company interviews

and trade data from UNCTAD• Realistic economic zone growth potential, based on data of growth trends of economic zones

around the world

Number of Tenants

Figure 14 illustrates the number of tenants likely to locate in the Sylhet Economic Zone in both the

Base Case and Aggressive Scenario forecasts. In the Base Case, 160 firms will likely locate in thezone by Year 15. This expands to 290 firms in the Aggressive Scenario. A more detailed overviewof the tenants is in Annex 1: Demand Forecast.



38

Figure 14. Number of Tenants

Number of Tenants

0

50

100

150

200

250

300

350

Year

1

Year

2

Year

3

Year

4

Year

5

Year

6

Year

7

Year

8

Year

9

Year

10

Year

11

Year

12

Year

13

Year

14

Year

15

C u m u l a t i v e N u m b e r o f T e n a n t s

Aggressive

Base Case

Land Forecast

The SCCI has proposed that the Sylhet Economic Zone be located on approximately 389 hectaresof land outside Sylhet City along the Sylhet-Tamabil Highway. This designated site is sufficient toaccommodate the estimated growth of the zone in both the Base Case and Aggressive Scenarios.

The IFC BICF team forecasted the amount of land and facilities that would be leased to companiesin the zone over 15 years. This Land Forecast was developed by applying the ‘Required Land’figures in Figure 15 to the forecasted number of tenants in Figure 14. Figures 16 and 17, illustrates

the Land Forecast over the course of 15 years. Each industry is denoted in the figures by a differentcolor.



3 9

F i g u r e 1 5 . S y l h e t E c o n o m i c Z o n e T e n a n t O p e r a t i n g P a r a m e t e r A s s u m p t i o n s

R e q u i r e d L a n d M 2

P o w e r C a p a c i t y D e m a n d ( K V A )

P o w e r C o n s u m p t i o n ( k w / h / m o . )

W a t e r

( m 3 / m o . )

T o t a l E m p l o y m e n t ( P e r s o n s )

U n s k i l l e d E m p l o y m e n t

S k i l l e d E m p l o y m e n t

T e c h n i c a l /

P r o f e s s i o n a l E m p l o y m e n t

M a n a g e m e n t E m p l o y m e n t

P e r c e n t P r e f e r r i n g S F B R e n t a l

P e r c e n t P r e f e r r i n g S h o r t - T e r m L e a s e

P e r c e n t P r e f e r r i n g L o n g - T e r m L a n d L e a s e

P e r c e n t P r e f e r r i n g O f f i c e R e n t a l

F o o d a n d B e v e r a g e

P r o c e s s i n g

5 , 0 0 0

4 0 0

7 5 , 0 0 0

8 0 0

2 0 0

3 0

1 4 0

2 5

5

4 4 %

4 4 %

1 2 %

0 %

G a r m e n t s a n d T e x t i l e s

2

0 , 0 0 0

1 , 0 0 0

2 0 0 , 0 0 0

2 0 , 0 0 0

1 , 0 0 0

1 0 0

8 5 0

4 0

1 5

5 0 %

2 0 %

3 0 %

0 %

C e r a m i c a n d M i n e r a l

P r o d u c t s

4

0 , 0 0 0

4 , 5 0 0

1 0 0 , 0 0 0

7 , 0

0 0

8 0 0

2 3 0

5 0 0

5 0

2 0

0 %

0 %

1 0 0 %

0 %

C h e m i c a l s

1

5 , 0 0 0

2 , 0 0 0

3 5 0 , 0 0 0

7 , 5

0 0

4 0 0

2 5

3 0 0

6 0

1 5

0 %

3 0 %

7 0 %

0 %

M e t a l w o r k i n g

5 , 0 0 0

5 0 0

2 5 , 0 0 0

1 6 0

1 7 5

6 5

1 0 0

5

5

5 0 %

2 0 %

3 0 %

0 %

E l e c t r o n i c s

5 , 0 0 0

5 0 0

5 5 , 0 0 0

2 0 0

2 5 0

2 0

1 4 5

7 5

1 0

6 5 %

1 5 %

2 0 %

0 %

S o f t w a r e / B P O

5 0 0

1 0 0

1 0 , 0 0 0

1 0 0

7 5

5

5 0

1 7

3

0 %

0 %

0 %

1 0 0 %

R u b b e r a n d P l a s t i c s

5 , 0 0 0

4 5 0

1 2 0 , 0 0 0

5 0 0

1 3 0

2 0

8 5

2 0

5

2 5 %

2 5 %

5 0 %

0 %

W a r e h o u s i n g

1

0 , 0 0 0

7 0

5 , 0 0 0

2

0

1 7

1 0

5

1

1

0 %

5 0 %

5 0 %

0 %

O t h e r I n d u s t r i e s

5 , 0 0 0

4 0 0

5 0 , 0 0 0

7 5 0

2 0 0

5 0

1 1 0

3 5

5

5 0 %

2 0 %

3 0 %

0 %

P r i v a t e l y O p e r a t e d S u p p o r t

S e r v i c e s

3 5 0

8 0

2 , 0 0 0

1

5

1 0

2

3

4

1

0 %

0 %

0 %

1 0 0 %

P o w e r P l a n t

3

0 , 0 0 0

N A

N A

3 0 , 0 0 0

1 4 0

1 0

6 0

6 0

1 0

0 %

0 %

1 0 0 %

0 %



40

In the Base Case Scenario, the Sylhet Economic Zone will lease approximately 144 hectares of landand facilities to tenants. This corresponds to a gross land uptake of approximately 206 hectares over15 years—well within the 389-hectare size of the site. In the absence of a Master Plan, IFC BICFapplied a standard 70 percent net-to-gross planning ratio assumption. In other words, the amountof net leased land and facilities was divided by 0.7 to arrive at the amount of additional land required

for roads, administration building, green space, and other common area facilities such as wastetreatment and utilities.

Figure 16. Cumulative Leased Land – Base Case Scenario

Cumulative Leased Land--Base Case Scenario

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year10

Year11

Year12

Year13

Year14

Year15

S q u a r e

M e t e r s

Food and Beverage Processing Garments and Textiles

Ceramic and Mineral Products Chemicals

Metalworking Electronics

Rubber and Plastics Warehousing

Other Industries Privately Operated Support Services

Power Plant

Figure 17. Cumulative Leased Land – Aggressive Scenario

Cumulative Leased Land--Aggressive Scenario

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year

10

Year

11

Year

12

Year

13

Year

14

Year

15

S q u a r e M e t e r s

Food and Beverage Processing Garments and Textiles

Ceramic and Mineral Products Chemicals

Metalworking Electronics

Software/BPO Rubber and Plastics

Warehousing Other Industries

Privately Operated Support Services Power Plant



41

The Aggressive Scenario shown in Figure 17 estimates that the Sylhet Economic Zone will leaseapproximately 266 hectares of land and facilities within 15 years. This will correspond to a total of380 gross hectares of developed zone land—nearly all of the 389 hectares dedicated for the site.

Employment Forecast

The Sylhet Economic Zone will generate significant employment for Sylhet and the surroundingarea. Some employment would have been generated in the absence of the zone. However, mostnew employment will arise from investments that would not have otherwise been made without theexistence of the zone.

Figure 18. Employment Forecast

Employment Forecast

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Year

1

Year

2

Year

3

Year

4

Year

5

Year

6

Year

7

Year

8

Year

9

Year

10

Year

11

Year

12

Year

13

Year

14

Year

15

P e r s o n s

Aggressive Scenario

Base Case Scenario

Figure 18 shows the projected employment in the Sylhet Economic Zone in both the Base Case and Aggressive Demand Forecast Scenarios. The Employment Forecast was developed by applying theemployment parameters to the number of companies projected to locate in the zone. Based onthese estimates, tenants in the zone would employ 45,000 persons in the Base Case, and 90,000persons in the Aggressive Scenario by Year 15.

Utility Forecast

The Demand Forecast was created on the assumption that the Sylhet Economic Zone wouldprovide necessary utilities for tenants without regular interruptions in services. This means that

every tenant will have access to power, water, gas, and effluent treatment. The presence of qualityutilities will be a large draw for the zone in terms of attracting tenants. In the absence offunctioning utilities, the Demand Forecast presented in this report must be lowered.

The IFC BICF team projected the amount of water and power the Sylhet Economic Zone mustprovide its tenants over time. This forecast was developed by applying the utility operatingparameters to the forecasted number of tenants in the Base Case and Aggressive Scenarios.



42

Sylhet Economic Zone planners and developers must design and construct the zone toaccommodate the following projected utility needs. At a minimum, the zone should be constructedto the Base Case Scenario demands presented in Figure 19 below.

Figure 19. Monthly Usage of UtilitiesBase Case Aggressive Case

Year 5 Year 10 Year 15 Year 5 Year 10 Year 15Monthly Water Usage(cubic meters)

280,235 380.020 471,850 494,925 904,120 1,056,580

Monthly Power Usage(megawatt hours)

6,429 10,875 14,294 12,058 22,103 28,017

Demand Forecast Summary

The Demand Forecast is a necessary element of any economic zone feasibility study. The forecastallows planners, developers, venture capitalists, zone operators, and the government to make thefollowing estimates:

• Determine the ideal size of land to purchase. The Demand Forecast informs potential zoneowners, developers, and operators of the size of land necessary to accommodate the projecteddemand for serviced industrial land in a given location. The amount of gross land required inthe Sylhet Economic Zone will fall somewhere between 206 and 380 hectares, all of which canbe accommodated in the 389-hectare parcel recommended by SCCI. In the Base Case Scenario,only 53 percent of this total parcel will likely be utilized. This may prompt a developer topurchase less than the allocated 389-hectare site.

• Identify phased zone development. The IFC BICF recommends phasing the development ofthe Sylhet Economic Zone based on projected and actual user demand over time. The trend inEPZ construction in Bangladesh to date has been to develop 100 percent of zone infrastructure

at the beginning of the project. Not only does this increase the initial capital costs of the project,it also allows unused infrastructure to lie fallow and deteriorate. It is thus recommended that theSylhet Economic Zone be initially developed to accommodate the first seven years of projectedtenant Base Case Scenario demand.

While the entire site will be acquired at the beginning of the project, only an initial 180 hectaresshould be initially developed—site raised, roads constructed, utilities installed, and administrativefacilities and other common areas developed. Once this first phase is approximately 70 percentfull, it is normal for a developer to construct a second phase of infrastructure development. Inthe Base Case Scenario, this Phase 2 development is assumed to occur in Year 7, though theactual year of development would be determined by the zone owner based on actual demand

over time.

• Estimate the cost of zone development and operation. The Financial Analysis calls uponthe Demand Forecast to determine, in part, the cost of building and operating the zone. Thelarger the demand, the more land must be developed, and the more services required to operatethe zone.



43

• Project zone revenues. The revenues of the Sylhet Economic Zone will be directlyproportional to the amount of leased land and facilities. The Financial Analysis applies projectedlease rates—determined in part by the benchmarking analysis—to the Demand Forecast toarrive at projected zone revenues.

• Identify economic benefits. The Demand Forecast provides information such as the numbersof tenants, average tenant revenues, and employment. These figures are used in the Economic

Analysis to determine returns to the government in terms of personal and corporate taxation,and other measurable costs and benefits of zone development.



44

VI. Financial Analysis

The government of Bangladesh has expressed its willingness and desire to allow the private sector toshoulder greater portions of the burdens and rewards of developing infrastructure—power

generation, bridges, economic zones—throughout the country. The IFC BICF assumes, therefore,that the Sylhet Economic Zone will have a large degree of private sector involvement, particularlygiven that the local private sector, foreign investors, and the NRS’s have shown recent interest indeveloping zones. This chapter accordingly analyzes the financial viability of the Sylhet EZ basedon the cash flow seen by equity investors.

Figure 20. Overview of Key Assumptions

The analysis is based on thedemand for serviced industrial landset out in the demand projectionschapter and development costsdetailed in Annex 2. Assumptions

on operational costs, phasing,product configuration and pricing,and capital structure are alsopresented. The model developedproceeds to analyze the resultingrevenues and profits generated bythe zone, and the internal rate ofreturn (both for the project and forequity investors) and the netpresent value of the project. Thechapter concludes with anexamination of the project’ssensitivity to various factors—boththose under the direct control ofthe Sylhet EZ and externalinfluences. Key assumptions arepresented in Figure 20.

Methodology

This financial assessment has three goals: i) to assess the financial viability of the project, ii) to guideany pricing and timing issues that may be able to influence the profitability of the project, and (iii)

identify any requirements for public support. A model was constructed by the IFC BICF tocalculate projected revenue streams, and capital and operational costs, to enable the testing of anumber of variables for their effects on the finances of the Sylhet EZ. The primary outputs of themodel are estimates of the Internal Rate of Return and Net Present Value of the cash flow generatedby the Sylhet EZ for the project and its equity investors. The analysis is based on the Base CaseDemand Forecast presented in Chapter V of this report, as this represents the most likely growthscenario for the Sylhet Economic Zone.

Category Assumption

Land3,885,120 million gross square meters of land1,942,560 million square meters of plot space (netland)

Lease RevenuesServiced Land (250 Tk/m2/year) (US$3.58)SFB (3,000 Tk/m2/year) (US$43.01)

Lease RateEscalation

10.8% nominal increase per year (Taka terms)

Sale Revenues Serviced Land (3,500 Tk/m2 ) ($50.18)

Inflation 8.8% per year (Taka terms)Service Revenues Equivalent to 15% of applicable annual rent

Max OccupancyLevel

95% (to allow for transitional periods)

Lease and ServiceFee CollectionRate

95% (5% non-payment rate)

Depreciation25 years (infrastructure)25 years (buildings)5 years (equipment)

Grants None

Debt/ EquityRatio

70% (70% Commercial Debt, 30% Equity orReinvested Cash)

Long-term LoanLoan arrangement fee equal to 2% of the maximumcredit line.



45

The IFC BICF assessed the financial viability of the Sylhet Economic Zone through the followingestimations:

1. Capital costs of acquiring and constructing the zone2. Costs of operating the zone

3.

Revenues accruing to the zone owner/operator4. Government support necessary to make the project viable for private sector ownership,development, and/or operation

It is proposed that the Sylhet EZ funds all capital expenditures through debt financing. This debt issecured through all the assets of the project. The equity share of initial capital expenditures isfunded by investors. Subsequent requirements are funded through the use of retained cash whenever possible, and additional injections of external equity from investors when necessary.

The model additionally generates notional schedules of capital and recurrent expenditures, incomestatements, and balance sheets for the project. After examining the financial structure of Sylhet EZ,proposals for financing requirements are made.

Assumptions

The Sylhet Economic Zone does not yet have an owner, developer, or operator. In this “pre-feasibility” phase, the IFC BICF team had to make certain non-financial assumptions in the absenceof a master plan and development cost estimate. These assumptions are listed in Figure 21.

The SCCI specified that the IFC BICF team should conduct this pre-feasibility study for the 389-hectare parcel of land they have selected along the Sylhet-Tamabil highway, just outside the city ofSylhet. The Financial Analysis in this report pertains only to costs and revenues associated with that

site. Should a developer eventually choose a different site for the economic zone, then separatefeasibility study—including Demand Forecast, Financial Analysis, and Economic Analysis—willneed to be completed for the alternate location.

The Financial Analysis covers only the on-site development and operational costs and revenues ofthe economic zone. It is assumed that the government of Bangladesh will develop all off-siteinfrastructure. This includes all road, rail, and utility connections to the border of the economiczone. It is also assumed that the government will be responsible for acquisition of land anddevelopment of the proposed inland container terminal (ICT) as part of the zone site.



46

Figure 21. Sylhet Economic Zone Financial Model Assumptions Variable Assumed Value Notes

Size of gross land 3,885,129 square metersParcel of land along the Sylhet-Tamabil Highway, specifiedby SCCI, acquired and purchased by owner at beginning ofproject.

Gross/net land ratio 50%

50% of the gross land will be leasable. 30% will be devoted

to roads, utilities, green space, and common zone facilities.20% is deemed unusable due to the presence of rivers andsurface water.

Inland containerterminal

50,000 square metersPurchased, developed, owned, and operated by thegovernment.

Earth fillingrequirement (averagedepth)

18 feet Actual depths vary across the site. Average depth shown.

Average market price ofland (per sq. meter)

Tk. 1,300/m2

Information provided by the Sylhet Deputy Commissioner’soffice; may be provided by government under some PPParrangements.

Relocation and

compensation costs Tk. 7,478,484,000

Information provided by the Sylhet Deputy Commissioner’soffice; cost may be borne by government under some PPP

arrangements. Includes a 50% premium over current marketprices as required by law.

Corporate tax / VAT 0% Assumed government will waive corporate tax and VAT forthe developer as an incentive

Development PhasingPhase 1: 180 gross hectaresPhase 2: 150 gross hectaresPhase 3: 58.5 gross hectares

Infrastructure development in the zone is phased. Initiallyonly 180 hectares will be developed. When this phase is70% full, Phase 2 is built. In the Base Case, this occurs in Year 4. Phase 3 is built in Year 11.

Capital Costs

Capital costs are based on the market value of the land selected by SCCI, estimated relocation andcompensation payments made to landowners and residents, and the costs of on-site infrastructurefor the zone, including bulk earthworks, roads, institutional buildings, utilities, a waste treatmentplant, and standard factory buildings. Some costs required for the Sylhet EZ are best accounted foroutside of the phased construction of the zone, such as buildings for lease (SFBs). Accordingly, theIFC BICF disaggregated these items from the estimated cost of developing each phase. So, thephased development costs include costs related to the construction of all necessary infrastructureand common buildings, site preparation costs (filling, leveling, and compaction), initial landscaping,as well as the escalation, engineering and site inspection, preliminary and general requirements, andcontingency costs for these items.

Buildings to be leased to tenants are constructed and paid for upon request by an investor (provided

that enough serviced land is available given the development of the phases). Accordingly, the costsassociated with these buildings (including internal roads, parking, loading areas, ramps, hardscapepaving, landscaping, sidewalks, and the building itself) are timed in the financial model on an annualbasis according to investor demand. The costs for engineering and site inspection, preliminary andgeneral requirements, and contingencies for these buildings are included in these construction costs.

Land is assumed to become available for lease or sale in the same year as it is developed. Buildingsdesignated for lease are also assumed to become available in the same year that construction occurs.



47

The full annual breakdown of site development, equipment, and building costs is provided in Annex2.

In the base case, all three phases are developed by Year 11. The total fixed capital cost for thedevelopment of the Sylhet EZ over the 15-year period in the Base Case is projected to be

approximately US$ 364.8 million, which includes the impact of inflation. This cost is divided asfollows:

• Land Acquisition US$ 107 million

• Site development, infrastructure, and common buildings US$ 226.3 million

• Equipment costs US$ 3.4 million

The remainder of the cost is from the construction of buildings to be leased to tenants. For theBase Case, the assumed product configuration yields the following capital costs (which contribute tothe US$ 364.8 million figure mentioned above):

•

Standard Factory Buildings US$ 27.9 million

Phased Development

Best practice in economic zone development suggests that zones should be constructed in a phasedmanner. While the entirety of the land is acquired at the beginning of the project, the infrastructureis constructed to accommodate results of the Demand Forecast. Thus, normally Phase 1 of aneconomic zone project includes enough land and infrastructure to satisfy the first seven years ofexpected demand. The IFC BICF team incorporated the phased development concept into itsFinancial Model.

Figure 22. Sylhet EZ Phase Sizing

The analysis looks at a 16-year period of theSylhet EZ project, with 15 years of actualoperation. Once a phase is 70 percent occupied,construction for the next phase is begun. Thesizing of each phase is detailed in Figure 22. It isassumed that developed sites in a new phasebecome available in the same year that theconstruction takes place. The take-up of Sylhet EZ land under the Base Case scenario is illustratedin Figure 23. The estimated timing of development for each phase is matched to the demandprojections given in Chapter V.

Gross Area Net Area (Plot Area)

Phase 11,800,000 m2

(180 hectares)

900,000 m2

(90 hectares)

Phase 21,500,000 m2 (150 hectares)

750,000 m2 (75 hectares)

Phase 3585,120 m2

(~58.5 hectares)

292,560 m2

(~29 hectares)



48

Figure 23. Serviced Land Supply and Demand

In addition, the IFC BICF teamassumed that the Sylhet EconomicZone would rent standard factorybuildings (SFBs) to interested tenants.Figure 24 illustrates the supply anddemand for floor space in SFBs. TheIFC BICF team recommended thatSFBs be constructed in blocks of 10 ata time, based on tenant demand. Thefirst block (constructed during Phase 1development of the zone) would besmaller, at 4 units, so as to avoidcreating an oversupply of space inearly years.

Figure 24. Standard Factory Building Supply and Demand

Operating Costs

Operational costs with respect to theSylhet EZ are assumed for four areas – promotion costs, staffing/management costs, provision ofservices, and miscellaneous expenses.

Promotional costs for Year 0, Year 1,and Year 2 are set to 7 million Tk. After year 2, annual promotionalcosts are set to 4 million Tk.

Staffing/ management costs are basedon 5 upper level managers, 4 mid/low

level managers, 10 technical workers, 16 skilled workers, and 15 unskilled laborers. Based on thislevel of human resources, the initial annual wage bill for the Sylhet EZ administration would be justabove 23 million Tk. After Year 1, salaries are assumed to increase with inflation.

Service costs incorporate the cost of maintaining common spaces in the Sylhet EZ and insurancecosts. This cost is proportional to the number of sites and facilities that are occupied in any givenyear, though there is a minimum cost that would be incurred even if there were no tenants.Generally, service costs are equivalent to 85 percent of service fees assessed to tenants in any givenyear. The average service cost in the US is approximately 0.4 US$/m2/year for leased plot space or1.2 US$/m2/year for tenant-occupied leased buildings4. It is assumed that the minimum service costfor the Sylhet EZ is equivalent to the cost that would be incurred with a 25 percent occupancy rate.

4 Source: National Association of Industrial and Office Properties



49

Costs for other services provided to tenants (such as trash pickup, etc.) would be recovered throughusage fees on a cost-neutral basis.

Miscellaneous costs are those that cannot be easily recovered through tenant usage fees, includingany outside technical expertise used by the Sylhet EZ, unforeseen administrative costs, etc. It is

assumed that annual miscellaneous costs are equivalent to 3 percent of revenue, with a minimum of2.9 million Tk.

All other operational costs are assumed to be contracted on a full cost recovery basis. If projectrevenues are insufficient to fund operational costs, it is assumed that the project takes on short-termdebt. Interest on this debt must be paid off each year; payments to reduce the principal begin oncethe project becomes profitable.

Product Configuration

The financial model assumes that there are three methods for disposing of property (product

configurations) within the Sylhet EZ: lease of land, sale of land, and lease of pre-built facilities.Under the two methods, the Sylhet EZ would lease or sell serviced land to investors. Each investor would then construct his own facility. Construction would have to follow Sylhet EZ planningguidelines. In similar zones around the world, a slate of building designs from which the investorcan choose is pre-approved by the zone operator.

The second method for disposing of property would be for the Sylhet EZ to construct various pre-built standard factory buildings to lease to investors. The lease of SFB floor space would also entitlethe tenant to the use of a designated piece of serviced land attached to the facility.

Prices

In the model, lease and sale prices for land and buildings are assumed to increase at 10.8 percent perannum (2 percent above inflation). The price levels for leases were generated by analyzing prevailingrates in Sylhet, Bangladesh, and the region in the context of competing free zones, industrial estates,and commercial space, and by taking into account the likely increase in market rates due to inflation while the Sylhet EZ is being planned and constructed. The Sylhet EZ is also assumed to providebetter infrastructure and service to its tenants than competing locations, which would justifysomewhat higher than market rate prices. The price of land for sale was generated by analyzing thecost of improvements made to the land and by taking a multiple of the lease rate (generally sales are12 times higher than lease prices, but in this case, a higher multiple is utilized to reflect the high value of land inside an EZ).

Figure 25. Recommended Initial Prices and Current Market Rates (Tk)

A service charge is assessed on all occupants ofthe FZ under this model. This service chargedepends on the usage of the land, and isequivalent to 15 percent of the applicable leaserate. This charge covers the provision ofcommon services to the occupants of the Sylhet EZ, and ensures that the owners/operators of theSylhet EZ have a continuing solid basis for management of the zone when all of the developed land

Sylhet EZ

Rate

Current

Market Rates

Leased Serviced Land 250/m2/yr 140/m2/yr

Sale of Serviced Land 3,500/ m2 Unknown

Lease of SFB 3,500/m2/yr1,000-

2,500/m2/yr



50

has been passed on to investors. The collection rate for all fees is assumed to be 95 percent toaccount for delinquent payments and unpaid debts. For leased buildings, there is an additionaldiscount of 5 percent to account for transitional vacancies.

Capital Structure

The development of Sylhet EZ is assumed to require at least a 30 percent share of equity to secureany needed loans. All capital expenditures are assumed to be leveraged at a 70 percent debt-equityratio to maximize returns to investors. If possible, equity requirements are funded through retainedcash from the operations of the Sylhet EZ. When retained cash is not available (such as for theinitial investment), the model assumes that equity is provided from an external source (the investor). The sole investor in the development of the Sylhet EZ is assumed to be the developer/operator— hereafter referred to as Sylhet, Inc.

The model assumes that all new borrowing must be fully repaid within 6 years of the issuance ofdebt. The interest rate on long-term commercial loans is assumed to be 10 percent. For the first

two years after new borrowing, there is a moratorium on principal and interest repayments. Foryears 3-6 after borrowing, it is assumed that the Sylhet, Inc., pays its annual interest obligations andannually repays 25 percent of the principal borrowed. It is also assumed that Sylhet, Inc., must payupfront a one-time loan arrangement fee equivalent to 2 percent of the size of the credit facility.

Sylhet, Inc., carries a debt burden throughout the 15-year projection. This is because Sylhet, Inc.,funds capital expenditures throughout the project to construct pre-built units and renew equipment,and because Phase 3 construction occurs in Year 11.

Sylhet, Inc., may not be able to meet its debt service obligations during early years of operations. IfSylhet Inc., is unable to meet its debt obligations, it is assumed that additional external equity isprovided to clear the deficit. Debt considerations may require Sylhet EZ to lower its debt-equity

ratio from 70 percent to provide for better debt service coverage ratios. These issues are exploredfor each PPP scenario in the Results section.

Public Private Partnership Structure

As part of the financial analysis, the IFC BICF assessed several PPP structures to determine theirimpact on the viability of the Sylhet EZ. These four scenarios are detailed below. It is assumed thatScenario 1 is the preferred PPP structure; in the Results section of this chapter, the impact ofchanging the PPP structure to Scenario 2, 3, or 4 is presented.

1. In the first scenario, the IFC BICF team assumed that all on-site project costs would beborne by a private sector owner/developer/operator. The private entity would:

Acquire all land5 Pay for on-site infrastructurePay all operating costs throughout the life of the project

5 The land is paid for by the private sector, but acquired through the government’s right of eminent domain, following

all necessary stipulations required under Bangladeshi law .



51

Retain all profitsBear responsibility and risk for any and all losses

The government, for its part in Scenario 1, provides the following:

Resettlement and rehabilitation expenses associated with acquiring the landOff-site infrastructure such as road, rail, and utility connectivity to the border of thezone.Construction and operation of the ICT located on the zone site Waiver of corporate and VAT taxes for the zone developer/operator

2. Scenario 2 is defined by increased government involvement in the development of Phase 1infrastructure. This includes earthworks and construction of roads, utilities, waste treatmentplant, and common buildings for the first 180 hectares of the zone. The private entity wouldbe responsible for:

Paying for the acquisition of land

Constructing all SFBsDeveloping subsequent phases of the zone6 Paying all zone operating costsRetain all profits All risks and losses associated with zone operation

For its part, the government will:

Pay for development of Phase 1 infrastructurePay all resettlement and rehabilitation expenses associated with acquiring the landPay for and construct off-site infrastructure such as road, rail, and utility connectivity to

the border of the zone.Construct and operate the ICT located on the zone site Waiver of corporate and VAT taxes for the zone developer/operator

3. Scenario 3 differs in that the government pays for the acquisition of the land while theprivate owner/developer/operator pays all infrastructure development expenses. Under thisscenario, the private sector entity:

Pays for all on-site infrastructureConstruct all SFBsPays all operating costs throughout the life of the project

Retain all profitsBears responsibility and risk for any and all losses

The government provides the following:

6 The private sector developer/operator would be contractually obligated to develop Phase 2 within a certain number ofyears (10) if Phase 1 reaches a certain capacity (70%). Similar obligations could be added to require development ofPhase 3 under similar circumstances if necessary.



53

where the time period, n, is 15 years. Detailed income statements and revenue calculations tosupport the project cash flow analysis are provided in Annex 2, along with notional balances.

Results

Key financial indicators for the Sylhet EZ are presented in Figure 26 below in terms of US dollarsincluding the NPV of the project under each discount rate, the project’s IRR, cumulative projectreturns to the equity investor, the average debt load, the maximum debt load in any single year, andthe equity required to fund development. After this, the impact of changing various assumptions inthe model is explored.

Figure 26. NPV, IRR, Debt, and Equity for the Sylhet EZ (US$ Millions)

Scenario 1 Scenario 2 Scenario 3 Scenario 4

Project IRR 2.57% 8.54% 5.25% 11.40%Project NPV (0%) 89 196 150 57

Project NPV (10%) -110 -13 -55 3

Project NPV (15%) -132 -39 -79 -4

Project NPV (20%) -138 -49 -88 -7

Project Payback in Year NA NA NA 11

Equity IRR 9 NA NA NA 12.93%

Equity NPV (0%) -241 -95 -158 14

Equity NPV (10%) -167 -63 -108 1

Equity NPV (15%) -143 -53 -92 0

Equity NPV (20%) -125 -46 -80 -1

Equity Payback in Year None None None 9

Total External Equity Required 264 118 182 37

For Capital Expenditures 90.2 58.0 72.0 27.4

For Clearance of Deficits 173.8 60.3 109.7 9.5

Maximum Debt Balance 149 89 103 86

Average Debt Balance 80 56 66 40

Balance Sheet Value at Year 15 215 172 190 147

Undistributed Distributable Reserves

at Year 15 None 6.6 None 67

As shown above, in scenarios 1, 2, and 3, the project IRR is below the interest rate on long-termloans. This means that regardless of the debt/equity ratio utilized by Sylhet, Inc., equity investorscannot obtain a rate of return higher than the project IRR (which would be achieved by funding allcapital expenditures through cash rather than debt). Sylhet, Inc.’s ability to repay its debt servicingobligations under each scenario is best shown by several ratios defined in Figure 27 that arecalculated on an annual basis (see Figure 28).

9 At a 70 percent debt-equity ratio

n

NPV = Σ Net Cash Flow t / (1 + ratet )t=1



54

Figure 27. Definition and Purpose of Debt Coverage Ratios

Ratio Formula Purpose

Debt Service Coverage Ratio

(DSCR)

EBITDA / Annual Debt Service

Requirement

Measures Sylhet, Inc.’s ability to repay its

debt service obligation in the current year

Project Loan Life Coverage

Ratio (PLCR)

NPV of Future EBITDA / Sum of All

Future Debt Service Requirement

Measures Sylhet, Inc.’s ability to repay all

anticipated debt service obligations when

they become dueLoan Life Coverage Ratio

(LLCR)

NPV of Future EBITDA / Remaining

Debt Service Requirement on Loans

Drawn to Date

Measures Sylhet, Inc.’s ability to repay

anticipated debt service obligations related

to existing loans

Figure 28. Debt Coverage Ratios

As Figure 28 shows, Sylhet, Inc., does not have a strong ability to repay its debt in any of the 4scenarios. Typically, a bank would feel most comfortable lending to a developer whose coverage

ratios all remain above 1 throughout the project lifetime. At the very least, a lender would requireone of the ratios to remain above 1 throughout the project. For the Sylhet EZ, this is not possibleunder any of the four PPP scenarios.

Sensitivity to Capital Costs and Prices

The Sylhet EZ project generates very low returns even in Scenario 4. As such, it is important todetermine whether higher returns could be generated by reducing capital costs or increasing prices.



55

In scenario 1, price levels would need to be increased by 175 percent to surpass the minimumthreshold for investment (15 percent equity IRR). This would, however, likely cause demand forland and buildings in the Sylhet EZ to disappear. Alternatively, capital cost reductions of 65 percentcould generate an equity IRR above 15 percent.

In scenario 2, price increases of 62 percent would be required to boost equity IRR above 15 percent —which would also likely reduce demand significantly. A capital cost reduction of 33 percent wouldbe required to achieve a similar effect.

For scenario 3, price increases of 110 percent or capital cost reductions of 54 percent would berequired to boost equity IRR above 15 percent.

Finally, in scenario 4, the private sector developer contributes almost nothing to the development ofthe zone. The standard factory buildings, along with Phase 2 and 3 could be paid for entirely withretained earnings given either a 4 percent increase in prices or a 6 percent decrease in capital costs— suggesting that this PPP structure is very fragile, as the developer/operator would have little stake in

the success of the Sylhet EZ.

Financial Conclusions

The results of the financial modeling show that the Sylhet EZ is a not a financially feasible projectfor a developer/ operator unless capital costs can be reduced substantially. In PPP scenarios 1, 2,and 3, the project generates an IRR lower than the cost of capital—making it a poor investmentchoice. In PPP scenario 4, the private sector partner could see returns above the cost of capital, butthe benefit provided by such a developer is almost nil, as the project comes close to generatingenough cash to fund future development without the need for external equity.

In short, given the high capital costs at the selected site, and the market prices for land and buildingsin Sylhet, the project is not suitable for a PPP in which the private sector is expected to contributeequity. It could be suitable for a management contract PPP (in which an operator is paid a flat feeor percentage of net earnings) and the zone is developed by a public sector developer depending onthe economic benefits generated. However, given the stated objective of the government ofBangladesh to involve the private sector in the development of industrial land, a different site (with alower acquisition and development cost per square meter) would be required.

Financial statements generated by the IFC BICF Financial Model for Scenario 1 are included in thein Annex 2. These include statements for Capital Expenditures, Operating Costs, Revenues,Projected Cash Flows, and Projected Balance Sheets.



56

VII. Economic Analysis

The Financial Analysis presented in Chapter VI discussed the viability of the Sylhet Economic Zoneproject from the perspective of the private sector. Each scenario involves contributions from the

government of Bangladesh in various forms—foregone taxes, off-site infrastructure development,land acquisition, and on-site zone development. Government contributions to the Sylhet EconomicZone entail a cost to the government, but would also generate benefits for the government and—byextension—society. There are many valid reasons why the government would choose to expendresources on an economic zone project. These include enterprise formation, job creation, exportgeneration, urban and rural development, environmental clean-up, and others. It is crucial however,that the government understand and is able to estimate the costs and benefits of its involvement ininfrastructure projects. This has typically not been done in Bangladesh to date.

For the Sylhet EZ, the high capital costs of the project make it unfeasible for any kind of privatedeveloper. Given that the Government of Bangladesh has stated its preference for involving the

private sector in future EZs, the current site is not suitable and thus does not require a full-scaleeconomic analysis to justify public sector involvement—as no development is anticipated at this site.

If a suitable site is found in the future, a full-scale economic model should be used to justify anypublic contribution to the PPP. For the purposes of this study, however, it is sufficient to list thebenefits and costs associated with developing the Sylhet EZ at the current site.

1. Direct Costs. Direct costs are the cash expenses borne by the government for things like landacquisition, off-site infrastructure and on-site zone development (if necessary), operatingsubsidies, and equity shares in projects. Depending on the PPP agreements between thegovernment and the private sector partner, the government may also have to bear costs of

environmental mitigation and resettlement of current occupants of the land.

2. Indirect Costs. Indirect costs include quantifiable expenses such as the construction ofadditional public housing, utilities, schools, and recreation facilities to accommodate an influx of workers and their families after an economic zone has been constructed. Indirect costs alsoinclude non-quantifiable costs such as worker displacement and environmental degradation. The indirect costs associated with the current site envisioned for the Sylhet EZ are relativelyhigh due to environmental factors.

3. Direct Benefits. Direct benefits consist of taxes, income from fees and licenses, zone profits(if they partially belong to the public sector), income from the sale of government-owned land,and other payments made to the government as a direct result of Sylhet EZ operations.

4. Indirect Benefits. Indirect benefits are those that accrue to the government by virtue of thefact that an economic zone exists. These include quantifiable factors such as 1) the effects ofconsumption by workers in the zone; 2) backward linkage multiplier effects between firms in thezone and suppliers and designers outside the zone; and 3) forward linkage multiplier effectsbetween firms inside the zone and distributors, traders, manufacturers, and retailers outside thezone. Indirect benefits can also include qualitative items such as employment of women.



57

Scenario 1: 100% Private Sector Project

In the first scenario, direct government costs consist of building an ICT, developing all off-siteinfrastructure, and the resettlement of the current occupants of the Sylhet EZ. While giving a taxholiday to the private zone developer/operator is categorized as foregone revenue, it is very unlikely

that a developer would invest in an EZ without this incentive, so it should not be included as adirect cost. All other costs are borne by the private sector. Direct benefits in this scenario wouldinclude the sale of government owned land, and all taxes and fees levied on zone tenants.

Scenario 2: Government Develops Phase 1 Infrastructure

In the second scenario, direct government costs consist of building an ICT, developing all off-siteinfrastructure, the resettlement of the current occupants of the Sylhet EZ, and the cost of providingall Phase 1 infrastructure. All other costs are borne by the private sector. Direct benefits in thisscenario would include the sale of government owned land, and all taxes and fees levied on zonetenants.

Scenario 3: Government Acquires Land

In the third scenario, direct government costs consist of building an ICT, developing all off-siteinfrastructure, the resettlement of the current occupants of the Sylhet EZ, and the cost of acquiringthe land for the Sylhet EZ. This cost is rather high as a 50 percent premium over market price isrequired to purchase land through the right of eminent domain. All other costs are borne by theprivate sector. Direct benefits in this scenario would include all taxes and fees levied on zonetenants. As the land currently owned by the government would not be sold, it would constitute aforegone benefit, and should be included in the direct cost category as it is likely someone else would eventually purchase this land.

Scenario 4: Government Acquires Land and Develops Phase 1

This scenario provided the only equity IRR that is anywhere close to attractive for the privateinvestor. However, it would require substantial costs to the government. Direct costs would includeland acquisition, resettlement, off-site infrastructure, building an ICT, and building all Phase 1infrastructure. When the government acquires the zone land and develops Phase 1 infrastructure,the economic returns of the project will be lower, and it will take significantly longer to achieve apositive impact on the government budget. In order to justify creating this kind of PPP (with lowrisk to the private investor and little equity contribution), a very high economic rate of return wouldbe required—which is unlikely given the costs attached to this option.

Economic Analysis Summary

Recent trends in Bangladesh are to move away from wholly government funded economic zoneprojects to projects that include some kind of private sector participation. There are a number ofreasons for this including: i) the need for master planning for new zones, ii) the lack of government



58

funding for such projects and iii) the recognition that the private sector does a better job ofmanaging zones while the public sector does a better job of regulating them.

Therefore, the goal of public sector stakeholders in the Sylhet Economic Zone should be to makethe zone profitable to a private sector owner/developer/operator under a PPP situation. The IFC

BICF team has demonstrated four possible PPP scenarios in this pre-feasibility study. None ofthese scenarios is likely to generate the kind of IRR necessary to attract a private investor if thecurrent site is developed. A suitable IRR could be generated if the public sector were to providealmost all of the capital required to develop the zone (Scenario 4), but the economic returns to thepublic sector would fall proportionately. In this scenario, the financial structure would more closelyresemble a no-risk gift to the private sector developer rather than a true PPP in which both risk andreward are shared.

The IFC BICF recommends that a new site be identified for development. At such time, thegovernment should only participate in the initial capital development stages of the zone, rather thansubsidize zone operations or hold equity in the zone itself. The government can specifically discussthe fine details of its involvement once a new site has been selected and a private

owner/developer/operator has been identified.



59

VIII. Recommendations

There is significant interest from the private sector to develop an economic zone in Sylhet. Such azone has the potential to attract approximately 160 firms over 15 years in a Base Case growth

scenario. This is possible given the current lack of serviced industrial land in Sylhet, interest byentrepreneurs to start ventures in a zone, the low cost of doing business, and the positive effects azone could have on the business operating environment.

Private sector ownership, development, and operation of the zone are desirable for several reasons.Firstly, the government of Bangladesh is hesitant to pour funds into additional EPZs or economiczones. Secondly, privately developed zones are run more efficiently, and respond better totenant/client needs than government-operated zones. Finally, private developers will naturallydevelop zones in locations chosen to maximize their profit, and economic effectiveness.

The Sylhet Economic Zone project is not feasible at the proposed site as a purely private sector

project however. Though demand exists—as shown in Chapter V of this study—the high cost ofdevelopment in this location does not offset revenues to a degree that would be attractive to aprivate sector developer. Further, the cost of development is so high that the level of public sectorinvolvement required to make the PPP interesting to the private sector almost eliminates the needfor a private sector investor at all.

Given that demand for an economic zone is Sylhet does exist and that involving the private sector indeveloping a new zone is a government priority, a new site should be identified to reduce the cost ofdevelopment. Specifically, sites with lower requirements for earthworks and lower acquisition costsshould be identified.



6 0

A n n e x 1 : D e m

a n d F o r e c a s t

A g g r e s s i v e C a s e

D e m a n d

A g g r e s s i v e C a s e N u m b e r o f C o m p a n i e s

S l .

S e c t o r o f I n d u s t r i e s

F i r s t 5

Y e a r s

( N u m b e r

o f U n i t s )

S e c o n d 5

Y e a r s

( N u m b e r

o f U n i t s )

T h i r d 5

Y e a r s

( N u m b e r

o f U n i t s )

C u m u l a t i v e

N o .

Y - 1

Y - 2

Y - 3

Y - 4

Y - 5

Y - 6

Y - 7

Y - 8

Y - 9

Y - 1 0

Y - 1 1

Y - 1 2

Y - 1 3

Y - 1 4

Y - 1 5

T o t a l

A .

A g r o - b a s e d & F o o d P r o c e s s i n g I n d u s t r i e s

1

P o u l t r y I n d u s t r i e s ( B o l i e r & L a y e r )

0

1

0

0

1

1

0

0

0

0

0

1

0

0

0

4

2

A n i m a l a n d F i s h F e e d I n d u s t r i e s

0

1

1

0

0

0

1

0

0

0

0

0

0

0

0

3

3

M i l k a n d D a i r y P r o d u c t s I n d u s t r i e s

0

0

1

0

0

1

0

1

0

0

1

0

0

1

0

5

4

F i s h P r o c e s s i n g

0

1

1

0

0

1

0

0

0

0

0

0

1

0

0

4

5

M e a t P r o c e s s i n g

0

1

0

0

0

0

0

0

0

0

1

0

0

0

0

2

6

E d i b l e O i l I n d u s t r i e s

0

1

0

1

0

0

1

0

0

0

0

1

0

0

0

4

7

R e a d y F o o d P r o d u c t s I n d u s t r i e s

0

0

1

1

0

1

0

1

1

0

1

0

1

0

0

7

8

F r u i t P r o c e s s i n g I n d u s t r i e s

1

1

0

0

1

1

0

0

0

1

0

1

0

0

0

6

9

S p i c e s I n d u s t r i e s

0

1

0

0

1

0

0

1

0

0

0

0

0

0

1

4

1 0

B a k e r y a n d C o n f e c t i o n a r y I n d u s t r i e s

0

0

1

0

1

1

1

0

0

1

0

1

0

0

0

6

1 1

S w e e t m e a t I n d u s t r i e s

0

0

1

0

0

0

0

1

0

0

0

0

1

0

0

3

1 2

H o n e y P r o c e s s i n g a n d P a c k a g i n g I n d u r t r y

0

0

0

1

0

0

0

0

0

0

0

0

0

1

0

2

1 3

T e a B l e n d i n g a n d P a c k a g i n g

0

0

1

0

0

0

0

0

1

0

0

0

0

0

1

3

1 4

C e r e a l I n d u s t r i e s

0

0

1

0

0

0

1

0

0

0

0

0

1

0

0

3

1 5

A g a r I n d u s t r i e s

0

1

0

1

0

0

0

0

0

0

0

0

0

0

1

3

1 6

O t h e r A g r o a n d F o o d I n d u s t r i e s

0

0

1

0

0

0

1

0

1

0

1

0

0

1

0

5

S u

b - t o t a l

1

8

9

4

4

6

5

4

3

2

4

4

4

3

3

6 4

C u m u l a t i v e S u

b - t o t a l

1

9

1 8

2 2

2 6

3 2

3 7

4 1

4

4

4 6

5 0

5 4

5 8

6 1

6 4

6 4



6 1

S l .


F i r s t 5

Y e a r s

( N u m b e r o f

U n i t s )

S e c o n d 5

Y e a r s

( N u m b e r

o f U n i t s )

T h i r d 5

Y e a r s

( N u m b e r

o f U n i t s )

C u m u l a t i v e

N o .

Y - 1

Y - 2

Y - 3

Y - 4

Y - 5

Y - 6

Y - 7

Y - 8

Y

- 9

Y - 1 0

Y - 1 1

Y - 1 2

Y - 1 3

Y - 1 4

Y - 1 5

T o t a l

B .

R M G , T e x t i l e & J u t e I n d u s t r i e s

1

R e a d y M a d e G a r m e n t s ( K n i t w e a r )

1

1

1

1

0

1

0

1

1

1

0

0

1

0

0

9

2

R e a d y M a d e G a r m e n t s ( W o v e n )

0

1

1

0

1

1

1

0

0

1

1

0

0

0

0

7

3

S p e c i a l i z e d T e x t i l e s I n d u s t r i e s ( T o w e l , e t c . )

0

0

1

0

1

0

0

1

0

0

0

1

0

0

0

4

4

C o m p o s i t e T e x t i l e M i l l s ( K n i t & W o v e n )

0

0

0

1

0

1

0

0

0

1

0

0

0

0

0

3

5

B a c k w a r d L i n k a g e I n d u s t r i e s

0

0

1

1

0

1

1

0

0

0

0

0

0

0

0

4

6

J u t e I n d u s t r i e s

0

0

1

1

0

1

1

0

0

0

0

0

0

0

0

4

S u b - t o t a l

1

2

5

4

2

5

3

2

1

3

1

1

1

0

0

3 1

C u m u l a t i v e S u b - t o t a l

1

3

8

1 2

1 4

1 9

2 2

2 4

2 5

2 8

2 9

3 0

3 1

3 1

3 1

3 1

C .

C e r a m i c & G l a s s / M i n e r a l b a s e d I n d

u s t r i e s

1

C e r a m i c I n d u s t r i e s ( t a b l e w a r e )

0

1

0

1

0

1

0

0

1

0

0

0

0

0

0

4

2

C e m e n t I n d u s t r i e s

0

1

0

1

0

0

1

0

0

0

1

0

0

0

0

4

3

G l a s s I n d u s t r i e s

0

0

1

0

1

0

0

0

0

1

1

0

0

0

0

4

4

C o n s t r u c t i o n M a t e r i a l s ( s a n i t a r y w a r e , t i l e s , e t c . )

1

1

1

0

1

1

0

0

0

0

0

1

0

0

0

6

S u b - t o t a l

1

3

2

2

2

2

1

0

1

1

2

1

0

0

0

1 8


1

4

6

8

1 0

1 2

1 3

1 3

1 4

1 5

1 7

1 8

1 8

1 8

1 8

1 8

D .

C h e m i c a l s & F e r t i l i z e r I n d u s t r i e s

1

P h a r m a c e u t i c a l s

0

1

0

0

1

0

1

0

0

1

0

1

0

0

0

5

2

C h e m i c a l s I n d u s t r i e s

0

1

1

1

0

1

0

1

0

0

0

1

0

1

0

7

3

F e r t i l i z e r I n d u s t r i e s

0

0

0

1

0

0

0

0

1

0

0

0

0

1

0

3

4

H e r b a l C o s m e t i c s

0

0

1

0

0

0

0

1

0

0

1

0

0

0

0

3

5

T o i l e t r i e s I n d u s t r i e s

1

0

1

1

0

1

0

1

0

0

1

0

0

0

0

6

S

u b - t o t a l

1

2

3

3

1

2

1

3

1

1

2

2

0

2

0

2 4

C u m u l a t i v e S

u b - t o t a l

1

3

6

9

1 0

1 2

1 3

1 6

1 7

1 8

2 0

2 2

2 2

2 4

2 4

2 4



6 2

S l .


F i r s t 5

Y e a r s

( N u m b e r o f

U n i t s )

S e c o n d 5

Y e a r s

( N u m b e r

o f U n i t s )

T h i r d 5

Y e a r s

( N u m b e r

o f U n i t s )

C u m u l a t i v e

N o .

Y - 1

Y - 2

Y - 3

Y - 4

Y - 5

Y - 6

Y - 7

Y - 8

Y - 9

Y - 1 0

Y - 1 1

Y - 1 2

Y - 1 3

Y - 1 4

Y - 1 5

T o t a l

E .

S t e e l a n d E n g i n e e r i n g I n d u s t r i e s

1

K i t c h e n C a b i n e t a n d O v e n I n d u s t r i e s

1

0

1

0

1

1

0

0

0

0

0

0

0

0

0

4

2

R e - r o l l i n g I n d u s t r i e s

0

0

1

1

0

1

0

0

0

0

0

0

0

1

0

4

3

M a c h i n e r y

0

0

1

1

1

0

0

1

0

1

1

0

1

0

0

7

4

A l u m i n u m U t e n s i l s

1

0

1

0

0

1

0

1

0

0

0

0

0

0

0

4

5

O t h e r M e t a l w o r k i n g , I n c l u d i n g A l u m i n u

m F o i l

1

1

0

1

1

1

1

0

1

1

0

1

0

0

1

1 0

6

A g r i c u l t u r a l M a c h i n e r y a n d E q u i p m e n t

0

1

0

0

0

0

1

0

1

0

0

0

1

0

0

4

S u b - t o t a l

3

2

4

3

3

4

2

2

2

2

1

1

2

1

1

3 3


3

5

9

1 2

1 5

1 9

2 1

2 3

2 5

2 7

2 8

2 9

3 1

3 2

3 3

3 3

F .

E l e c t r o n i c s & E l e c t r i c a l G o o d s I n d u s t r i e s

1

E l e c t r i c B u l b I n d u s t r i e s

0

0

1

0

0

0

0

1

0

0

0

1

0

0

0

3

2

E l e c t r i c C a b l e I n d u s t r i e s

0

1

1

0

1

0

1

0

1

0

0

0

0

0

0

5

3

A p p l i a n c e A s s e m b l y

0

0

1

1

1

1

1

1

0

0

1

0

0

0

1

8

4

O t h e r E l e c t r i c a l I n d u s t r i e s

0

0

0

1

0

0

1

0

0

1

0

0

1

0

1

5

S u b - t o t a l

0

1

3

2

2

1

3

2

1

1

1

1

1

0

2

2 1


0

1

4

6

8

9

1 2

1 4

1 5

1 6

1 7

1 8

1 9

1 9

2 1

2 1

G .

S o f t w a r e a n d B P O

1

S o f t w a r e

0

1

0

2

1

1

2

1

0

1

2

1

0

1

1

1 4

2

B P O

0

0

1

0

0

1

1

0

1

0

0

1

1

0

1

7

S u b - t o t a l

0

1

1

2

1

2

3

1

1

1

2

2

1

1

2

2 1


0

1

2

4

5

7

1 0

1 1

1 2

1 3

1 5

1 7

1 8

1 9

2 1

2 1

H .


1

P l a s t i c P r o d u c t s

1

1

1

1

1

1

0

1

0

0

0

1

0

0

1

9

2

P V C P i p e s

0

0

1

0

1

0

0

1

0

0

1

0

0

0

0

4

3

M e l a m i n e

0

0

1

0

0

0

0

1

0

0

0

0

1

0

0

3

4

P l a s t i c P a c k a g i n g M a t e r i a l s

0

0

1

1

0

1

1

0

1

0

0

0

0

0

0

5

5

R u b b e r P r o d u c t s

0

0

0

1

0

1

0

0

0

0

0

0

1

0

0

3

S u b - t o t a l

1

1

4

3

2

3

1

3

1

0

1

1

2

0

1

2 4


1

2

6

9

1 1

1 4

1 5

1 8

1 9

1 9

2 0

2 1

2 3

2 3

2 4

2 4



6 3

S l .


F i r s t 5

Y e a r s

( N u m b e r o f

U n i t s )

S e c o n d 5

Y e a r s

( N u m b e r

o f U n i t s )

T h i r d 5

Y e a r s

( N u m b e r

o f U n i t s )

C u m u l a t i v e

N o .

Y - 1

Y - 2

Y - 3

Y

- 4

Y - 5

Y - 6

Y - 7

Y - 8

Y - 9

Y - 1 0

Y - 1 1

Y - 1 2

Y - 1 3

Y - 1 4

Y - 1 5

T o t a l

I .


T h i r d P a r t y W a r e h o u s e F a c i l i t y

0

0

1

0

0

0

1

0

0

0

1

0

0

0

0

3

S u b - t o t a l

0

0

1

0

0

0

1

0

0

0

1

0

0

0

0

3


0

0

1

1

1

1

2

2

2

2

3

3

3

3

3

3

J .


5

L e a t h e r a n d F o o t w e a r I n d u s t r i e s

0

1

0

1

0

0

1

0

1

0

1

1

0

0

0

6

7

F u r n i t u r e

0

1

0

1

1

1

1

0

1

1

0

1

0

0

0

8

9

O f f - s e t P r i n t i n g a n d P a c k a g i n g I n d u s t r i e

s

0

0

1

0

1

1

0

0

1

0

0

0

1

0

0

5

1 1

C o r r u g a t e d C a r t o n I n d u s t r i e s

0

1

0

1

0

1

0

1

0

0

0

1

0

1

0

6

1 2

C o m p u t e r i z e d A u t o m o b i l e S e r v i c e C e n t e r

0

0

1

0

0

0

0

0

0

1

0

0

1

0

0

3

1 4


0

1

0

1

0

1

0

0

1

0

0

0

1

0

1

6

S u b - t o t a l

0

4

2

4

2

4

2

1

4

2

1

3

3

1

1

3 4


0

4

6

1 0

1 2

1 6

1 8

1 9

2 3

2 5

2 6

2 9

3

2

3 3

3 4

3 4

K .

P r i v a r t e l y O p e r a t e d S u p p o r t S e r v i c e s

B a n k

1

1

0

1

0

0

1

0

0

0

0

0

0

0

0

4

T r a n s p o r t a t i o n / L o g i s t i c s P r o v i d e r O f f i c

e s

1

1

1

0

0

0

1

0

0

0

0

1

0

0

0

5

O t h e r

0

1

1

1

0

1

0

0

1

1

0

0

1

0

0

7

S u b - t o t a l

2

3

2

2

0

1

2

0

1

1

0

1

1

0

0

1 6


2

5

7

9

9

1 0

1 2

1 2

1 3

1 4

1 4

1 5

1

6

1 6

1 6

1 6

L .

P r i v a t e P o w e r P l a n t

P o w e r P l a n t

1

0

0

0

0

0

0

0

0

0

0

0

0

0

0

1

S u b - t o t a l

1

0

0

0

0

0

0

0

0

0

0

0

0

0

0

1


1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

T O T A L F O R E C A S T E D N E W T E N A N T S

1 1

2 6

3 5

2 7

1 8

2 8

2 1

1 7

1 5

1 3

1 4

1 5

1

4

7

8

2 6 9

C U M U L A T I V E T O T A L F O R E C A S T E

D

T E N A N T S

1 1

3 7

7 2

9 9

1 1 7

1 4 5

1 6 6

1 8 3

1 9 8

2 1 1

2 2 5

2 4 0

2 5 4

2 6 1

2 6 9

2 6 9



6 4

B a s e C a s e D e m a

n d

B a s e C a s e N u m b e r o f C o m

p a n i e s

S l .


F i r s t 5

Y e a r s

( N u m b e r

o f U n i t s )

S e c o n d 5

Y e a r s

( N u m b e r

o f U n i t s )

T h i r d 5

Y e a r s

( N u m b e r

o f U n i t s )

C u m u l a t i v e

N o .

Y - 1

Y - 2

Y - 3

Y - 4

Y - 5

Y - 6

Y - 7

Y - 8

Y - 9

Y - 1 0

Y - 1 1

Y - 1 2

Y - 1 3

Y - 1 4

Y - 1 5

T o t a l

A .

A g r o - b a s e d & F o o d P r o c e s s i n g I n d u s t r i e s

1

P o u l t r y I n d u s t r i e s ( B o l i e r & L a y e r )

0

0

0

1

0

1

0

0

0

0

0

1

0

0

0

3

2

A n i m a l a n d F i s h F e e d I n d u s t r i e s

0

0

0

0

1

0

1

0

0

0

0

0

0

0

0

2

3

M i l k a n d D a i r y P r o d u c t s I n d u s t r i e s

0

1

0

0

0

1

0

1

0

0

0

1

0

1

0

5

4

F i s h P r o c e s s i n g

0

0

1

0

0

1

0

0

0

0

0

0

0

0

0

2

5

M e a t P r o c e s s i n g

0

0

1

0

0

0

1

0

0

0

0

0

0

1

0

3

6

E d i b l e O i l I n d u s t r i e s

0

1

0

0

0

0

1

0

0

1

0

0

1

0

0

4

7

R e a d y F o o d P r o d u c t s I n d u s t r i e s

0

1

0

0

1

1

0

0

0

0

1

0

1

0

0

5

8

F r u i t P r o c e s s i n g I n d u s t r i e s

1

0

0

0

1

0

0

0

0

1

0

1

0

0

0

4

9

S p i c e s I n d u s t r i e s

0

1

0

0

1

0

0

1

0

0

0

0

0

0

0

3

1 0

B a k e r y a n d C o n f e c t i o n a r y I n d u s t r i e s

0

0

1

0

0

0

1

0

0

0

0

1

0

0

0

3

1 1

S w e e t m e a t I n d u s t r i e s

0

0

0

1

1

0

0

0

0

0

0

0

0

0

0

2

1 2

H o n e y P r o c e s s i n g a n d P a c k a g i n g I n d u r t r y

0

0

0

1

0

0

0

0

0

0

0

0

0

0

0

1

1 3

T e a B l e n d i n g a n d P a c k a g i n g

0

0

1

0

0

1

0

0

0

0

0

0

0

0

0

2

1 4

C e r e a l I n d u s t r i e s

0

0

0

1

0

0

0

0

0

0

0

0

1

0

0

2

1 5

A g a r I n d u s t r i e s

0

0

0

1

0

0

0

0

1

0

0

0

0

0

0

2

1 6

O t h e r A g r o a n d F o o d I n d u s t r i e s

0

0

0

1

0

0

0

0

0

0

1

0

0

0

0

2

S u

b - t o t a l

1

4

4

6

5

5

4

2

1

2

2

4

3

2

0

4 5

C u m u l a t i v e S u

b - t o t a l

1

5

9

1 5

2 0

2 5

2 9

3 1

3 2

3 4

3 6

4 0

4 3

4 5

4 5

4 5



6 5

S l .


F i r s t 5

Y e a r s

( N u m b e r o f

U n i t s )

S e c o n d 5

Y e a r s

( N u m b e r

o f U n i t s )

T h i r d 5

Y e a r s

( N u m b e r

o f U n i t s )

C u m u l a t i v e

N o .

Y - 1

Y - 2

Y - 3

Y - 4

Y - 5

Y - 6

Y - 7

Y - 8

Y

- 9

Y - 1 0

Y - 1 1

Y - 1 2

Y - 1 3

Y - 1 4

Y - 1 5

T o t a l

B .

R M G , T e x t i l e & J u t e I n d u s t r i e s

1

R e a d y M a d e G a r m e n t s ( K n i t w e a r )

0

1

1

1

0

0

0

0

0

0

0

0

0

0

0

3

2

R e a d y M a d e G a r m e n t s ( W o v e n )

0

1

0

0

0

0

0

0

0

0

0

0

0

0

0

1

3

S p e c i a l i z e d T e x t i l e s I n d u s t r i e s ( T o w e l , e t c . )

0

0

1

0

0

0

0

1

0

0

1

0

0

0

0

3

4

C o m p o s i t e T e x t i l e M i l l s ( K n i t & W o v e n )

0

0

0

1

0

0

0

0

0

0

0

0

0

1

0

2

5

B a c k w a r d L i n k a g e I n d u s t r i e s

0

0

0

0

1

0

0

0

0

0

0

0

0

0

0

1

6

J u t e I n d u s t r i e s

0

0

1

0

0

0

0

0

0

0

0

0

0

0

0

1

S u b - t o t a l

0

2

3

2

1

0

0

1

0

0

1

0

0

1

0

1 1


0

2

5

7

8

8

8

9

9

9

1 0

1 0

1 0

1 1

1 1

1 1

C .

C e r a m i c & G l a s s / M i n e r a l b a s e d I n d

u s t r i e s

1

C e r a m i c I n d u s t r i e s ( t a b l e w a r e )

0

1

0

0

0

0

1

0

1

0

0

0

0

0

0

3

2

C e m e n t I n d u s t r i e s

0

0

0

1

0

0

0

0

0

0

0

0

0

0

0

1

3

G l a s s I n d u s t r i e s

0

1

0

0

0

0

0

0

0

1

1

0

0

0

0

3

4

C o n s t r u c t i o n M a t e r i a l s ( s a n i t a r y w a r e , t i l e s , e t c . )

0

0

1

1

0

1

0

0

0

0

0

0

0

1

0

4

S u b - t o t a l

0

2

1

2

0

1

1

0

1

1

1

0

0

1

0

1 1


0

2

3

5

5

6

7

7

8

9

1 0

1 0

1 0

1 1

1 1

1 1

D .

C h e m i c a l s & F e r t i l i z e r I n d u s t r i e s

1

P h a r m a c e u t i c a l s

0

0

0

1

0

0

1

0

0

0

0

1

0

0

0

3

2

C h e m i c a l s I n d u s t r i e s

0

0

1

0

0

0

0

1

0

0

0

1

0

0

0

3

3

F e r t i l i z e r I n d u s t r i e s

0

0

0

0

1

0

0

0

0

0

0

0

0

0

0

1

4

H e r b a l C o s m e t i c s

0

0

1

0

0

0

0

1

0

0

0

0

0

0

0

2

5

T o i l e t r i e s I n d u s t r i e s

1

0

0

0

0

0

0

1

0

0

1

0

0

0

0

3

S

u b - t o t a l

1

0

1

1

1

0

1

3

0

0

1

2

0

0

0

1 1

C u m u l a t i v e S

u b - t o t a l

1

1

2

3

4

4

5

8

8

8

9

1 1

1 1

1 1

1 1

1 1



6 6

S l .


F i r s t 5

Y e a r s

( N u m b e r o f

U n i t s )

S e c o n d 5

Y e a r s

( N u m b e r

o f U n i t s )

T h i r d 5

Y e a r s

( N u m b e r

o f U n i t s )

C u m u l a t i v e

N o .

Y - 1

Y - 2

Y - 3

Y - 4

Y - 5

Y - 6

Y - 7

Y - 8

Y - 9

Y - 1 0

Y - 1 1

Y - 1 2

Y - 1 3

Y - 1 4

Y - 1 5

T o t a l

E .

S t e e l a n d E n g i n e e r i n g I n d u s t r i e s

1

K i t c h e n C a b i n e t a n d O v e n I n d u s t r i e s

1

0

1

0

0

1

0

0

0

0

0

0

0

0

0

3

3

M a c h i n e r y

0

0

1

0

0

0

1

1

0

0

1

0

0

0

1

5

4

A l u m i n u m U t e n s i l s

0

0

1

0

0

0

0

1

0

1

0

0

0

0

0

3

5

O t h e r M e t a l w o r k i n g , I n c l u d i n g A l u m i n u

m F o i l

1

1

1

2

1

1

0

0

1

1

0

1

1

1

2

1 4

6

A g r i c u l t u r a l M a c h i n e r y a n d E q u i p m e n t

0

1

0

0

0

1

0

0

0

0

0

0

1

0

0

3

S u b - t o t a l

2

2

4

2

1

3

1

2

1

2

1

1

2

1

3

2 8


2

4

8

1 0

1 1

1 4

1 5

1 7

1 8

2 0

2 1

2 2

2 4

2 5

2 8

2 8

F .

E l e c t r o n i c s & E l e c t r i c a l G o o d s I n d u s t r i e s

1

E l e c t r i c B u l b I n d u s t r i e s

0

0

1

0

0

0

0

1

0

0

0

0

0

0

0

2

2

E l e c t r i c C a b l e I n d u s t r i e s

0

1

0

0

0

1

0

0

0

0

1

0

0

0

0

3

3

A p p l i a n c e A s s e m b l y

0

0

0

1

0

0

0

1

0

0

0

0

0

0

0

2

S u b - t o t a l

0

1

1

1

0

1

0

2

0

0

1

0

0

0

0

7


0

1

2

3

3

4

4

6

6

6

7

7

7

7

7

7

G .


1

P l a s t i c P r o d u c t s

1

1

0

1

1

0

1

0

0

0

0

1

0

0

0

6

2

P V C P i p e s

0

0

0

1

0

0

0

1

0

0

1

0

0

0

0

3

3

M e l a m i n e

0

0

0

0

0

1

0

0

0

0

0

0

0

0

0

1

4

P l a s t i c P a c k a g i n g M a t e r i a l s

0

0

1

0

0

0

0

0

1

0

0

1

0

0

0

3

5

R u b b e r P r o d u c t s

0

0

0

0

0

0

0

1

0

0

0

0

0

0

1

2

S u b - t o t a l

1

1

1

2

1

1

1

2

1

0

1

2

0

0

1

1 5


1

2

3

5

6

7

8

1 0

1 1

1 1

1 2

1 4

1 4

1 4

1 5

1 5



6 7

S l .


F i r s t 5

Y e a r s

( N u m b e r o f

U n i t s )

S e c o n d 5

Y e a r s

( N u m b e r

o f U n i t s )

T h i r d 5

Y e a r s

( N u m b e r

o f U n i t s )

C u m u l a t i v e

N o .

Y - 1

Y - 2

Y - 3

Y

- 4

Y - 5

Y - 6

Y - 7

Y - 8

Y - 9

Y - 1 0

Y - 1 1

Y - 1 2

Y - 1 3

Y - 1 4

Y - 1 5

T o t a l

H .


T h i r d P a r t y W a r e h o u s e F a c i l i t y

0

0

0

1

0

0

0

0

0

0

0

1

0

0

0

2

S u b - t o t a l

0

0

0

1

0

0

0

0

0

0

0

1

0

0

0

2


0

0

0

1

1

1

1

1

1

1

1

2

2

2

2

2

I .


5

L e a t h e r a n d F o o t w e a r I n d u s t r i e s

0

0

0

0

0

0

1

0

1

0

1

0

0

0

0

3

7

F u r n i t u r e

0

0

1

0

1

0

0

0

1

0

0

1

0

0

0

4

9

O f f - s e t P r i n t i n g a n d P a c k a g i n g I n d u s t r i e

s

0

1

0

0

0

0

0

0

1

0

0

0

1

0

0

3

1 1

C o r r u g a t e d C a r t o n I n d u s t r i e s

0

0

0

0

1

1

0

1

0

0

0

0

0

0

0

3

1 2

C o m p u t e r i s e d A u t o m o b i l e S e r v i c e C e n t e r

0

0

0

0

0

1

0

0

0

0

0

0

0

0

0

1

1 4


0

0

0

1

0

0

0

1

0

0

0

0

0

0

1

3

S u b - t o t a l

0

1

1

1

2

2

1

2

3

0

1

1

1

0

1

1 7


0

1

2

3

5

7

8

1 0

1 3

1 3

1 4

1 5

1

6

1 6

1 7

1 7

J .

P r i v a r t e l y O p e r a t e d S u p p o r t S e r v i c e s

B a n k

1

0

0

1

0

0

0

0

0

0

0

0

0

0

0

2

T r a n s p o r t a t i o n / L o g i s t i c s P r o v i d e r O f f i c

e s

1

1

0

0

1

1

0

0

0

0

0

0

0

0

1

5

O t h e r

0

0

1

1

0

0

1

0

0

1

0

0

0

1

0

5

S u b - t o t a l

2

1

1

2

1

1

1

0

0

1

0

0

0

1

1

1 2


2

3

4

6

7

8

9

9

9

1 0

1 0

1 0

1

0

1 1

1 2

1 2

K .

P r i v a t e P o w e r P l a n t

P o w e r P l a n t

1

0

0

0

0

0

0

0

0

0

0

0

0

0

0

1

S u b - t o t a l

1

0

0

0

0

0

0

0

0

0

0

0

0

0

0

1


1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

T O T A L F O R E C A S T E D N E W T E N A N T S

8

1 4

1 7

2

0

1 2

1 4

1 0

1 4

7

6

9

1 1

6

6

6

1 6 0

C U M U L A T I V E T O T A L F O R E C A S T E

D

T E N A N T S

8

2 2

3 9

5

9

7 1

8 5

9 5

1 0 9

1 1 6

1 2 2

1 3 1

1 4 2

1 4 8

1 5 4

1 6 0

1 6 0



6 8

A n n e x 2 : F i n a

n c i a l A n a l y s i s – S c e n a r i o 1

F i g u r e 3 : P h a s e T i m i n g

P h a s e 1

P h a s e 2

P h a s e 3

B a s e C a s e

Y e a r 0

Y e a r 4

Y e a r 1 1


Y e a r 0

Y e a r 3

Y e a r 6

F i g u r e 4 : I n f l a t e d P h a s e C o n s t r u c t i o n C o s t s ( T a k a m i l l i o n s )

P h a s e 1

P h a s e 2

P h a s e 3

T o t a l

B a s e C a s e

1 2 , 6 1 2 . 4

5 , 2 1 9 . 4

7 , 5 2 1 . 5

2 5 , 3 5 3 . 4


1 2 , 7 0 4 . 2

5 , 6 5 7 . 9

5 , 9 8 3 . 2

2 4 , 3 4 5 . 3

F i g u r e 5 : S t a n d a r d F a c t o r y

B u i l d i n g C o n s t r u c t i o n C o m p l e t i o n

S c h e d u l e ( m 2 )

0

1

2

3

4

5

6

7

8

9

1 0

1 1

1 2

1

3

1 4

1 5

T o t a l

B a s e C a s e

1 0

, 0 0 0

2 5 , 0 0 0

2 5 , 0 0 0

2 5 , 0 0 0

-

2 5 , 0 0 0

-

-

-

-

-

2 5 , 0 0 0

-

-

5 , 0 0 0

-

1 4 0 , 0 0 0


5 0

, 0 0 0

-

5 0 , 0 0 0

5 0 , 0 0 0

5 0 , 0 0 0

-

5 0 , 0 0 0

5 0 , 0 0 0

-

-

-

-

-

-

-

-

3 0 0 , 0 0 0

F i g u r e 6 : I n f l a t i o n A d j u s t e d C a p i t a l E x p e n d i t u r e s f r o m A l l S o u

r c e s ( T a k a t h o u s a n d s ) ( B a s e C a s e )

0

1

2

3

4

5

6

7

8

9

1 0

1 1

1 2

1 3

1 4

1 5

L a n d A c q u i s i t i o n

7 , 4 7 8 , 4 8 4

P h a s e C o n s t r u c t i o n

4 , 2 2 6 , 0 1 3

-

-

-

4 , 8 1 0 , 9 8 7

-

-

- -

-

-

6 , 7 4 5 , 7 3 7

-

-

-

-

S t a n d a r d F a c t o r y

B u i l d i n g

9 0 , 0 0 0

2 4 4 , 8 0 0

2 6 6 , 3 4 2

2 8 9 , 7 8 1

-

3 4 3 , 0 2 6

-

- -

-

-

5 6 8 , 9 8 4

-

-

1 4 6 , 5 6 1

-

E q u i p m e n t

1 7 , 0 0 0

-

-

-

-

2 5 , 9 1 8

-

- -

-

3 9 , 5 1 3

-

-

-

-

6 0 , 2 4 0

T o t a l

1 1 , 8

1 1 , 4 9 7

2 4 4 , 8 0 0

2 6 6 , 3 4 2

2 8 9 , 7 8 1

4 , 8 1 0 , 9 8 7

3 6 8 , 9 4 3

-

- -

-

3 9 , 5 1 3

7 , 3 1 4 , 7 2 1

-

-

1 4 6 , 5 6 1

6 0 , 2 4 0

F i g u r e 7 : I n f l a t i o n A d j u s t e d C a p i t a l E x p e n d i t u r e s f r o m A l l S o u

r c e s ( T a k a t h o u s a n d s ) ( A g g r e s s i v e C

a s e )

0

1

2

3

4

5

6

7

8

9

1 0

1 1

1 2

1 3

1 4

1 5

L a n d A c q u i s i t i o n

7 , 4 7 8 , 4 8 4

P h a s e

C o n s t r u c t i o n

4 , 2 2 6 , 0 1 3

-

-

4 , 4 2 1 , 8 6 3

-

-

4 , 4 2 4 , 7 1 1

-

-

-

-

-

-

-

-

-

S t a n d a r d F a c t o r y

B u i l d i n g

4 5 0 , 0 0 0

-

5 3 2 , 6 8 5

5 7 9 , 5 6 1

6 3 0 , 5 6 2

-

7 4 6 , 4 2 5

8 1 2 , 1 1 0

-

-

-

-

-

-

-

-

E q u i p m e n t

1 7 , 0 0 0

-

-

-

-

2 5 , 9 1 8

-

-

-

-

3 9 , 5 1 3

-

-

-

-

6 0 , 2 4 0

T o t a l

1 2 , 1 7 1 , 4 9 7

-

5 3 2 , 6 8 5

5 , 0 0 1 , 4 2 4

6 3 0 , 5 6 2

2 5 , 9 1 8

5 , 1 7 1 , 1 3 6

8 1 2 , 1 1 0

-

-

3 9 , 5 1 3

-

-

-

-

6 0 , 2 4 0



7 1

F i g u r e 1 0 : S y l h e t I n c . C a s h

F l o w ( T a k a m i l l i o n s ) ( S c e n a r i o 1 ) ( B a s e C a s e )

0

1

2

3

4

5

6

7

8

9

1 0

1 1

1 2

1 3

1 4

1 5

A n n u a l C a s h F l o w s

R e v e n u e s

0 . 0

1 7 6 . 7

4 8 4 . 1

6 2 4 . 5

1 , 0 4 3 . 3

7 5 1 . 1

9 8 1 . 5

1 , 1 0 1 . 5

1 , 3 6 2 . 6

1 , 3 9 0 . 5

1 , 5 0 1 . 4

2 , 0 8 0 . 3

2 , 1 2 9 . 6

2 , 0 0 0 . 1

2 , 7 4 6 . 9

2 , 5 6 1 . 4

O p e r a t i n g C o s t s

- 4 1 . 4

- 4 7 . 1

- 6 4 . 2

- 8 4 . 4

- 1 1 6 . 8

- 1 2 2 . 1

- 1 4 2 . 8

- 1 6 3 . 7

- 1 9 8 . 9

- 2 2 0 . 4

- 2 4 2 . 6

- 2 8 9 . 7

- 3 3 3 . 2

- 3 6 3 . 8

- 4 3 2 . 7

- 4 6 6 . 8

C a p i t a l E x p e n d i t u r e s

- 1 1 , 8 1 1 . 5

- 2 4 4 . 8

- 2 6 6 . 3

- 2 8 9 . 8

- 4 , 8 1 1 . 0

- 3 6 8 . 9

0 . 0

0 . 0

0 . 0

0 . 0

- 3 9 . 5

- 7 , 3 1 4 . 7

0 . 0

0 . 0

- 1 4 6 . 6

- 6 0 . 2

N e t P r o j e c t

C a s h f l o w

- 1 1 , 8 5 2 . 9

- 1 1 5 . 3

1 5 3 . 6

2 5 0 . 2

- 3 , 8 8 4 . 4

2 6 0 . 0

8 3 8 . 6

9 3 7 . 8

1 , 1 6 3 . 7

1 , 1 7 0 . 1

1 , 2 1 9 . 3

- 5 , 5 2 4 . 1

1 , 7 9 6 . 5

1 , 6 3 6 . 3

2 , 1 6 7 . 6

2 , 0 3 4 . 3

L T L o a n s

8 , 4 7 5 . 6

1 7 1 . 4

1 8 6 . 4

2 0 2 . 8

3 , 3 6 7 . 7

2 5 8 . 3

0 . 0

0 . 0

0 . 0

0 . 0

2 7 . 7

5 , 1 2 0 . 3

0 . 0

0 . 0

1 0 2 . 6

4 2 . 2

L T L o a n

A r r a n g e m e n t F e e

- 2 0 7 . 6

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

S T L o a n s

4 1 . 4

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

L T D e b t S e r v i c e

0 . 0

0 . 0

- 3 , 5 0 1 . 5

- 3 , 3 2 4 . 0

- 3 , 1 4 7 . 6

- 2 , 9 7 2 . 6

- 1 , 6 3 0 . 7

- 1 , 5 6 9 . 4

- 1 , 3 9 1 . 5

- 1 , 2 1 4 . 3

- 8 5 . 9

0 . 0

- 1 1 . 7

- 2 , 1 7 9 . 3

- 2 , 0 2 3 . 6

- 1 , 8 6 7 . 9

S T D e b t S e r v i c e

0 . 0

- 4 6 . 8

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

E q u i t y D r a w n f o r

C a p e x

3 , 5 4 3 . 4

7 3 . 4

0 . 0

8 6 . 9

1 , 4 4 3 . 3

1 1 0 . 7

0 . 0

0 . 0

0 . 0

0 . 0

1 1 . 9

1 , 0 2 1 . 5

0 . 0

0 . 0

0 . 0

0 . 0

A n n u a l C a s h

S u r p l u s / S h o r t a g e

0 . 0

8 2 . 8

- 3 , 1 6 1 . 5

- 2 , 7 8 4 . 0

- 2 , 2 2 1 . 1

- 2 , 3 4 3 . 6

- 7 9 2 . 0

- 6 3 1 . 6

- 2 2 7 . 8

- 4 4 . 2

1 , 1 7 2 . 9

6 1 7 . 8

1 , 7 8 4 . 8

- 5 4 3 . 1

2 4 6 . 6

2 0 8 . 6

R e t a i n e d C a s h U s e d

f o r C a p e x

0 . 0

0 . 0

7 9 . 9

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

1 , 1 7 2 . 9

0 . 0

0 . 0

4 4 . 0

1 8 . 1

E q u i t y D r a w n t o

C l e a r D e f i c i t s

0 . 0

0 . 0

3 , 0 7 8 . 8

2 , 7 8 4 . 0

2 , 2 2 1 . 1

2 , 3 4 3 . 6

7 9 2 . 0

6 3 1 . 6

2 2 7 . 8

4 4 . 2

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0


t o C l e a r D e f i c i t s

0 . 0

0 . 0

2 . 9

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

5 4 3 . 1

0 . 0

0 . 0

C u m u l a t i v e C a s h

B a l a n c e

0 . 0

8 2 . 8

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

1 , 1 7 2 . 9

1 , 7 9 0 . 6

3 , 5 7 5 . 4

3 , 0 3 2 . 3

3 , 2 7 8 . 9

3 , 4 8 7 . 6



7 2

F i g u r e 1 1 : S y l h e t I n c . C a s h

F l o w ( T a k a m i l l i o n s ) ( S c e n a r i o 1 ) ( A g g r e s s i v e C a s e )

0

1

2

3

4

5

6

7

8

9

1 0

1 1

1 2

1 3

1 4

1 5

A n n u a l C a s h F l o w s

R e v e n u e s

0 . 0

3 6 7 . 6

8 1 9 . 3

1 , 1 4 6 . 9

1 , 3 8 2 . 8

1 , 4 6 4 . 4

2 , 1 0 0 . 5

2 , 0 9 9 . 5

2 , 1 6 5 . 2

2 , 2 0 3 . 4

2 , 6 2 8 . 1

2 , 9 6 8 . 6

3 , 2 8 9 . 2

3 , 6 4 4 . 4

4 , 0 3 8 . 0

4 , 4 7 4 . 1

O p e r a t i n g C o s t s

- 4 1 . 4

- 5 2 . 9

- 7 8 . 8

- 1 1 6 . 2

- 1 5 3 . 4

- 1 8 2 . 9

- 2 4 7 . 5

- 2 9 0 . 6

- 3 3 7 . 3

- 3 8 0 . 9

- 4 4 7 . 2

- 5 0 2 . 2

- 5 5 5 . 1

- 6 1 3 . 6

- 6 7 8 . 2

- 7 4 9 . 7

C a p i t a l E x p e n d i t u r e s

- 1 2 , 1 7 1 . 5

0 . 0

- 5 3 2 . 7

- 5 , 0 0 1 . 4

- 6 3 0 . 6

- 2 5 . 9

- 5 , 1 7 1 . 1

- 8 1 2 . 1

0 . 0

0 . 0

- 3 9 . 5

0 . 0

0 . 0

0 . 0

0 . 0

- 6 0 . 2

N e t P r o j e c t

C a s h f l o w

- 1 2 , 2 1 2 . 9

3 1 4 . 7

2 0 7 . 8

- 3 , 9 7 0 . 7

5 9 8 . 9

1 , 2 5 5 . 6

- 3 , 3 1 8 . 2

9 9 6 . 8

1 , 8 2 7 . 9

1 , 8 2 2 . 5

2 , 1 4 1 . 3

2 , 4 6 6 . 3

2 , 7 3 4 . 0

3 , 0 3 0 . 8

3 , 3 5 9 . 8

3 , 6 6 4 . 1

L T L o a n s

8 , 7 5 2 . 9

0 . 0

3 7 2 . 9

3 , 5 0 1 . 0

4 4 1 . 4

1 8 . 1

3 , 6 1 9 . 8

5 6 8 . 5

0 . 0

0 . 0

2 7 . 7

0 . 0

0 . 0

0 . 0

0 . 0

4 2 . 2

L T L o a n

A r r a n g e m e n t F e e

- 2 3 2 . 9

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

S T L o a n s

4 1 . 4

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

L T D e b t S e r v i c e

0 . 0

0 . 0

- 3 , 6 0 8 . 2

- 3 , 3 5 0 . 5

- 3 , 2 5 0 . 7

- 4 , 4 6 4 . 4

- 1 , 6 9 9 . 1

- 1 , 5 7 6 . 2

- 2 , 8 6 5 . 3

- 1 , 8 1 7 . 7

- 1 , 5 4 3 . 6

- 1 , 4 1 0 . 8

- 2 0 0 . 9

- 1 0 . 9

- 1 0 . 0

- 9 . 2

S T D e b t S e r v i c e

0 . 0

- 4 6 . 8

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

E q u i t y D r a w n f o r

C a p e x

3 , 6 5 1 . 4

0 . 0

0 . 0

1 , 5 0 0 . 4

1 8 9 . 2

7 . 8

1 , 5 5 1 . 3

8 9 . 7

0 . 0

0 . 0

7 . 1

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

A n n u a l C a s h

S u r p l u s / S h o r t a g e

0 . 0

2 6 8 . 0

- 3 , 0 2 7 . 6

- 2 , 3 1 9 . 8

- 2 , 0 2 1 . 3

- 3 , 1 8 2 . 8

1 5 3 . 9

7 8 . 8

- 1 , 0 3 7 . 4

4 . 8

6 3 2 . 5

1 , 0 5 5 . 5

2 , 5 3 3 . 2

3 , 0 1 9 . 9

3 , 3 4 9 . 7

3 , 6 9 7 . 1


f o r C a p e x

0 . 0

0 . 0

1 5 9 . 8

0 . 0

0 . 0

0 . 0

0 . 0

1 5 3 . 9

0 . 0

0 . 0

4 . 8

0 . 0

0 . 0

0 . 0

0 . 0

1 8 . 1

E q u i t y D r a w n t o

C l e a r D e f i c i t s

0 . 0

0 . 0

2 , 7 5 9 . 6

2 , 3 1 9 . 8

2 , 0 2 1 . 3

3 , 1 8 2 . 8

0 . 0

0 . 0

8 0 4 . 7

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0


t o C l e a r D e f i c i t s

0 . 0

0 . 0

1 0 8 . 1

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

2 3 2 . 7

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

0 . 0

C u m u l a t i v e C a s h

B a l a n c e

0 . 0

2 6 8 . 0

0 . 0

0 . 0

0 . 0

0 . 0

1 5 3 . 9

2 3 2 . 7

0 . 0

4 . 8

6 3 7 . 3

1 , 6 9 2 . 7

4 , 2 2 5 . 9

7 , 2 4 5 . 9

1 0 , 5 9 5 . 6

1 4 , 2 9 2 . 7



7 3

F i g u r e 1 2 : S y l h e t I n c . E q u i t y H o l d e r C a s h F l o w ( T a k a t h o u s a n

d s ) ( S c e n a r i o 1 ) ( B a s e C a s e )

0

1

2

3

4

5

6

7

8

9

1 0

1 1

1 2

1 3

1 4

1 5

E q u i t y D r a w n

- 3 , 5 4 3 , 4 4 9

- 7 3 , 4 4 0

- 3 , 0 7 8 , 7 5 5

- 2 , 8 7 0 , 9 0 7

- 3 , 6 6 4 , 3 7 5

- 2 , 4 5 4 , 3

1 6

- 7 9 2 , 0 3 8

- 6 3 1 , 5 8 3

- 2 2 7 , 8 4 1

- 4 4 , 2 4 9

- 1 1 , 8 5 4

- 1 , 0 2 1 , 5 4 7

0

0

0

0

C h a n g e i n

R e t a i n e d C a s h

0

8 2 , 7 5 3

-

8 2 , 7 5 3

0

0

0

0

0

0

0

1 , 1 7 2 , 8 6 9

6 1 7 , 7 5 8

1 , 7 8 4 , 7 5 1

- 5 4 3 , 0 5 8

2 4 6 , 6 2 2

2 0 8 , 6 2 9

N e t C a s h

F l o w

- 3 , 5 4 3 , 4 4 9

9 , 3 1 3

- 3 , 1 6 1 , 5 0 8

- 2 , 8 7 0 , 9 0 7

- 3 , 6 6 4 , 3 7 5

- 2 , 4 5 4 , 3

1 6

- 7 9 2 , 0 3 8

- 6 3 1 , 5 8 3

- 2 2 7 , 8 4 1

- 4 4 , 2 4 9

1 , 1 6 1 , 0 1 5

- 4 0 3 , 7 8 9

1 , 7 8 4 , 7 5 1

- 5 4 3 , 0 5 8

2 4 6 , 6 2 2

2 0 8 , 6 2 9

F i g u r e 1 3 : S y l h e t I n c . E q u i t y H o l d e r C a s h F l o w ( T a k a t h o u s a n

d s ) ( S c e n a r i o 1 ) ( A g g r e s s i v e C a s e )

0

1

2

3

4

5

6

7

8

9

1 0

1 1

1 2

1 3

1 4

1 5

E q u i t y

D r a w n

- 3 , 6 5 1 , 4 4 9

0

- 2 , 7

5 9 , 6 3 5

- 3 , 8 2 0 , 2 2 3

- 2 , 2 1 0 , 4 2 3

- 3 , 1 9 0 , 5 8 9

- 1 , 5 5 1 , 3 4 1

- 8 9 , 7 1 7

- 8 0 4 , 7 5 0

0

- 7 , 0 8 5

0

0

0

0

0

C h a n g e i n

R e t a i n e d

C a s h

0

2 6 7 , 9 5 4

- 2 6 7 , 9 5 4

0

0

0

1 5 3 , 9 1 6

7 8 , 7 6 1

- 2 3 2 , 6 7 7

4 , 7

6 9

6 3 2 , 5 0 5

1 , 0 5 5 , 4 7 0

2 , 5 3 3 , 1 7 1 3 , 0 1 9 , 9 3 5

3 , 3 4 9 , 7 2 1

3 , 6 9 7 , 1 0 3

N e t C a s h

F l o w

- 3 , 6 5 1 , 4 4 9

2 6 7 , 9 5 4

- 3 , 0 2 7 , 5 8 9

- 3 , 8 2 0 , 2 2 3

- 2 , 2 1 0 , 4 2 3

- 3 , 1 9 0 , 5 8 9

- 1 , 3 9 7 , 4 2 5

- 1 0 , 9 5 6

1 , 0 3 7 , 4 2 6

4 , 7 6 9

6 2 5 , 4 2 0

1 , 0 5 5 , 4 7 0

2 , 5 3 3 , 1 7 1

3 , 0 1 9 , 9 3 5

3 , 3 4 9 , 7 2 1

3 , 6 9 7 , 1 0 3

F i g u r e 1 4 : R e s i d u a l V a l u e o f F u t u r e C a s h F l o w s t o E q u i t y H o l d e r s a f t e r Y e a r 1 5 ( T a k a t h o u s a n d s ) 1 0 ( S c e n a r i o 1 )

S c e n a r i o

B a s e C a s e

- 1 , 8 7 0 , 3 0 8


2 4 , 5 9 6 , 8 1 9

F i g u r e 1 5 : I R R t o E q u i t y H

o l d e r s 1 1 ( S c e n a r i o 1 )

S c e n a r i o

B a s e C a s e

N o n e


6 . 6 9 %

1 0 C a l c u l a t e d a s t h e n e t c a s h f l o w i n Y e a r 1 5 d i v i d e d b y a d i s c o u n t r a

t e o f 0 . 1 5 . N e g a t i v e r e s i d u a l v a l u e s i n d i c a t e t h a t t h e p r o j e c t o w e s m o r e m o n e y

t h a n i t i s w o r t h a t

t h e e n d o f Y e a r 1 5

1 1 C a l c u l a t e d a s t h e n e t c a s h f l o w i n Y e a r 1 5 d i v i d e d b y a d i s c o u n t r a

t e o f 0 . 1 5 . N e g a t i v e r e s i d u a l v a l u e s i n d i c a t e t h a t t h e p r o j e c t o w e s m o r e m o n e y

t h a n i t i s w o r t h a t

t h e e n d o f Y e a r 1 5

(2008.08) pre-feasibility study for sylhet economic zone

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