Competitive, Green and Resilient

Industries in Bangladesh

April, 2019

Etienne Kechichian
Sr. Private Sector Specialist
Finance, Competitiveness & Innovation
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 Enhancing competitiveness of industrial sectors in Bangladesh

This project aims to work

with Bangladesh Economic Zone Authority
(BEZA) and the Government of Bangladesh to encourage industries and
Economic Zones to improve their branding power and competitiveness
through more sustainable and resilient pathways.

Green and Resilient Economic zones will increase competitiveness by:

• Increasing utility cost savings, capital / energy / resource efficiency,
thereby collectively reducing operational costs
• Mitigating waste generation and GHG emissions through incentives promoting
green innovation
• Minimizing operational risks and the impacts of extreme weather events
on economic zones and local supply chain, and ensuring business continuity even
at times of emergencies.
• Attracting major global buyers conscious of market demands for climate-friendly
products and climate-sensitive supply chains
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 Green and Resilient EZs are in line with the latest global trend.
• The number of EIPs is rapidly growing (appr. 300 self-defined EIPs globally)
• Global demand for more climate-friendly products and climate-sensitive supply chains is increasing.
• WBG aims to help Bangladesh become the leading-edge of this trend by integrating latest innovative
sustainability and resilience measures into the development of economic zones in Bangladesh.
Examples of industrial parks with innovative sustainability measures
Höchst Industrial Park (Germany)
Competitiveness: Generated 6.65 bln Euro investment; 22,000 jobs created.
Environmental Performance: Increased investment one of the largest industrial wastewater
treatment plants (WTP) in Germany, with a state-of-the-art two-stage activated sludge
process.
Management: With its extensive portfolio of services, Infraserv Höchst assists the companies
achieving their environmental goals. Services include permit procedures, audits and
management systems, remediation management, water protection, emission control.
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Padova Industrial Park (Italy)
Competitiveness: 1,500 companies operating.
Environmental Performance: Increased investment in green
infrastructures through 18% of the park is dedicated to green areas
(19,000,000 sqm). On-site energy generation from renewable energy
sources.
Ulsan Eco-Industrial Park (Korea)
Competitiveness: Gov. Investment of $14.8 million. Income: $65 million
/ year from selling by-products and waste for recycling. Additional
$78.million /year generated from energy and material saving (2016).
Environment: Energy saving (280,000 tones of oil eq.), reduced CO2
emissions (665,712 tons) and water consumption (80,000 tons) through
industrial symbiosis
Management: KICOX oversaw the overall planning, budget accounting,
approval of EIP project proposals, in liaison with government bodies
and regional EIP centers.
 Resilience measures adopted in leading industrial parks

Upgrading disaster defense infrastructure / Regulatory reforms to promote advanced defense infrastructure
• Upgrade of technical standard for port facility near industrial parks to incorporate lessons learned from the earthquakes (Japan)
• Improving technical standards to promote resilient flood protection investment in industrial park infrastructure (Thailand)
• Modifying industrial zoning regulations to facilitate retrofit / construction of flood-resilient infrastructures including warehouses (U.S. NYC)
• Flood protection upgrades for industrial park infrastructure and facilities (Japan: Fujishiro park, U.S.: NYC Resilient Industry Initiative)

Enhancing operational resilience of firms and infrastructures within and surrounding industrial parks
• Area-BCP for the industrial parks (Japan: Akemi Industrial park)
• Installation of microgrids in industrial parks (Japan: F-grid project)
• Emergency plans piloted in the industrial parks (India: Telengana, Viet Nam: Hoa Khanh
Industrial Zone in Danang)

Improving evidence-decision making for resilient infrastructure

investment
• Climate risk assessment conducted for industrial parks in Telangana (India)
• Additional investment decision-making based on rapid damage assessment of industrial
zones in the aftermath of the earthquake (Haiti)

Providing safety net and financial support for SMEs operating within the
industrial park
• Establishment of the National Catastrophe Insurance Fund (Thailand)
• Disaster Risk Financing for SMEs (Morocco)
System diagram of F-grid project in Miyagi Prefecture, Japan
4 • GRiF for ensuring continuity of critical industrial infrastructure
 Bangladesh is well-placed to lead this innovative effort

Competitive, Green and Resilient Industries aligns with Bangladesh’s national priorities.
Rapid growth of Bangladeshi manufacturing sector National priorities and policy imperatives

Bangladesh: 11% Vision 2021 & Perspective Plan of Bangladesh

Industrial growth and

(2010 – 2021)
Aims to become a middle-income country by 2021 through developing

diversification
World: 2%
competitive industries through: accelerating growth in the industry and
services sectors; creating a competitive investment climate;
increasing global market access by Bangladeshi firms, etc.
7th Five Year Development Plan (2016 – 2020)
Aims to hire economic growth by diversifying manufacturing industries
Annual % growth of manufacturing sector with both export oriented and import substitution industrialization.
(Source: World Bank)

BEZA Vision (2015)

Exposed to high risks of flooding and extreme heat. Aims to establish 100 Economic Zones on 30,000 ha of land by 2030.

DRM
Disaster Risk Management Act (2012)
Outlines the country’s legal framework for disaster management

Sustaina
Carbon intensity and environmental/ social impact The Renewable Energy policy (2009), etc.

bility
Committed to facilitate both public and private sector investment in
Carbon intensity (kg per kg of oil equivalent energy use) Renewable Energy projects and scale up contributions of existing
has been rapidly increasing from 1.2 in 1990 to 2.1 in 2014. Renewable Energy based electricity productions.
(Source: World Bank)
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 International Framework for Eco-Industrial Parks & Resilient
Industries
Economic performance Resilience POLICY & REGULATORY SYSTEM
Institutional arrangements, regulatory tools/ reforms to
▪ Employment generation Improved business continuity
increase resource and energy efficiency, as well as policies to
▪ Local business and SME promotion mitigate, manage and prepare for impacts of climate change
▪ Economic value creation Economic and natural disasters (e.g. modification of policies governing
Social performance energy and environmental performances, SEZ regulations,
national guidelines on BCP, zoning / construction regulations
Park management ▪ Social management and building codes, and overall policy framework
▪ Park management Park systems implemented to increase industry competitiveness.)
services management Social ▪ Social infrastructure
FINANCIAL PROTECTION & FINANCING MECHANISMS
▪ Monitoring and risk ▪ Community outreach and Comprehensive financial mechanisms including PPPs and fiscal
management dialogue incentives to promote green and resilient economic zones
▪ Planning and zoning ▪ Joint financing of investments for green infrastructures
Environmental ▪ Preferential tariff for renewable energy technologies
▪ Incentives on technologies promoting resource efficiency &
BCP implementation
▪ Disaster risk financing mechanisms to cover projected losses
and ensure business continuity (e.g. national insurance fund,
preferential loans based on BCP investments)
Resilience

Measures to improve
coordination and Environmental performance
operation of industrial
▪ Environmental management and monitoring
zones and tenant RESILIENT INDUSTRIAL INFRASTRUCTURE

Resilience
firms before, during ▪ Energy management Measures to integrate DRM considerations into
▪ Water management critical industrial infrastructure within and
and after disasters.
▪ Waste and material use surrounding economic zones/ industrial parks
(e.g. flood barriers, retention walls)
6 ▪ Climate change and the natural environment
 Proposed Technical Assistance Program on
Green and Resilient Industries to Enhance Competitiveness in Bangladesh

To support the government of Bangladesh in developing more sustainable and resilient

economic zones through:
1) Diagnostics and
design of green and
resilient economic zone
solutions within ongoing EZs
Assess, design and develop green and resilient EZs and surrounding critical
infrastructure at the EZ level to ensure competitiveness, resilience and sustainability by:
• Minimizing environmental and social impacts of EZs, by increasing energy &
resource efficiency of EZ construction and operations, and ensuring social safety,
rights, and benefits of the workers. Ensuring that EZs are “future-ready” on
sustainability both in terms of Industry 4.0 and safeguards.
• Reducing vulnerability of EZ infrastructure, firms, and surrounding critical
infrastructure located in low-lying coastlines, flood-prone areas, and other high disaster
risk contexts. Increasing business continuity of the planned EZs and resident firms
in Bangladesh.
• Proposed site: Mirsarai Economic Zone

2) Developing a national
guideline and solutions
for green and resilient
economic zones
7 financial instruments to support post-disaster relief efforts for EZs.
Assess, design and develop ways of scaling green and resilient EZs and surrounding
critical infrastructure at the national level to ensure competitiveness, resilience and
sustainability by:
• Developing a guideline for Competitive, Green and Resilient EZ in Bangladesh
• Reviewing and integrating international good practices and conducting knowledge
exchanges wherever appropriate
• Raising awareness among various stakeholders and catalyzing partnerships
• Explore national level solutions, such as: development of standards, regulations, and
policy guidelines, establishment of pre-arranged contracts and agreements to fast-
track deployment of experts and services post-disasters; development of national level
 Potential Sustainability and Resilience Measures Applicable to EZs
in Bangladesh
Policy: Develop a policy framework that enables green and resilient infrastructure investments through:
• reform of policies governing energy and energy performance (e.g. energy governance/ infrastructure regulations that enable the
installation of microgrids/ energy storage systems within the zones, hazardous waste management laws that have implications
for waste management within and across the zones)
• upgrades of industrial building codes /standards such as energy efficient and flood-resistant construction standards
• national-level technical standards on the acceptable level of disaster/ climate risks for industrial zones
• development of climate risk assessment tools tailored for Bangladeshi EZs
• Area-Business Continuity Plan (BCP) guideline/ emergency preparedness manuals for EZs
Infrastructure: Installation of or investment in green and resilient infrastructures in EZs including:
• solar power plants through the installation of solar panels on the rooftops and street lighting
• pyrolysis plants
• dykes/ walls to protect the Zones from recurring river floods
• stormwater infrastructures within zones
• back-up power system through energy storage subsystem (ESS) and factory energy management system
• Dry/wet flood-proofing or elevation of key collective spaces, buildings and equipment such as warehouses
Financial mechanisms: PPP for green infrastructures, preferential loans for building factories /facilities or based on BCPs
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 Sustainable and resilient industrial infrastructure solutions (ex)

Distributed sensor system

Energy Storage System & Factory EMS

Solar panels in parking lots, factory rooftops, green space, etc.

Dykes and flood protection walls

Pyrolysis plant
Underground storm water detention system

Energy efficient factory bldgs. Energy efficient warehouses

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 Preliminary Assessment of Potential Solutions to Increase Sustainability:
Solar Power Plant/ ESS/ Factory EMS in Mirsarai Economic Zone
Output: 531 GWh/yr
GHG emission reduction: 282,602 ton CO eq/yr
Total Investment: US$ 277 Mln (Phase 1)
IRR: 16%
Available data and assumptions:
• Solar Insolation Mirsarai: 5.137
kWh/m2/day
• Total building area for Phase 1 (excluding
Power plant area): 570 ha
• Total usable roof surface: 30% of total
building area
• Solar Panel efficiency:16%
• Performance loss per year: 0.8%
• Electricity cost: 0.1 US$/kWh
• Inflation rate per year: 6%
• O&M cost: 10,000 US$/MW
• Rooftop rental: 0.5 US$/m2 per month
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Upgrade for increasing resilience of the power supply
Energy storage System (Phase 1): 150 MW Utility scale Li-ion 4 hr duration
Total cost: US$ 137 mln
IRR: 11%
Maximize Financing for Development
PPP structure: BOO
• SPV: BEZA + Private Investor
• EPC Contractor: international tender, Buyer’s credit for goods
• O&M: International tender
• PPA: pre-determined minimum amount of renewable power to be dispatched
to tenant firms
Main benefits:
➢ Reduces development risk
➢ Reduces public capital investment
➢ Improves efficiencies/quicker completion
➢ Improves cost effectiveness
➢ Shares/allocates risks
 Preliminary Assessment of Potential Solutions to Increase Sustainability:
Pyrolysis Plant in Mirsarai Economic Zone
Output: 20-35 Mln stm3/yr Maximize Financing for Development
Potential applications for Phase 1: PPP structure: Private Ownership PPP model
• 15-30% of total gas required for 150 MW CCGT power plant (0.11 US$/m3)
• EPC Contractor: international tender,
• 30-40% of total gas required for steam generation by manufacturing sector (0.09 US$/m3) Buyer’s credit for goods
GHG emission reduction: 77,830 ton CO2 eq/yr • O&M: International tender
• PPA: pre-determined minimum amount of
Total investment: US$ 27 Mln syngas to be dispatched to tenant firms
IRR: 16 - 19%
Main benefits:
Available data and assumptions:
• Estimated organic solid waste produced in manufacturing: 1.5 kg/employee ➢ Reduces development risk
• Estimated number of employee per ha: 280 ➢ Reduces public capital investment
➢ Improves cost effectiveness
• Manufacturing area per Phase 1: 570 ha ➢ Allocates risks
• Total organic solid waste per Phase 1: 52,668 ton/yr
• Total waste water treatment sludge per Phase 1: 89 ton/yr
• Inflation rate per year: 6%
• General costs (personnel, O&M): US$ 42,000/yr
• Area rental: 1 US$/m2
• Total area required: 0.6 ha
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 Preliminary Assessment of Potential Solutions to Increase Sustainability
Street lighting in Mirsarai Economic Zone
Pole design: resilient to 130 mph wind speed
Led spotlight: 120 W equivalent to 250 W Metal Halide (MH)
Efficiency: LED 52% less energy than a 250 W MH
Number of poles per Phase 1 (estimate) : 1,500
Cost per pole: US$ 6,500
Cost per 250 MH bulb per pole: US$ 5
Cost per Led Spotlight per pole: US$ 150
Maintenance cost per year per MH bulb: US$ 80
Maintenance cost per year per Led: US$ 15
Total initial investment (pole with MH bulb): US$ 9,757,500
Total initial investment (pole with LED): US$ 9,975,000 (var.: + US$
217,500)
IRR LED vs MH based on net incremental investment (15 year period): 60%
Total cost saving per year – 15 year period (LED vs MH): US$ 136,000
Total energy saving per year (LED vs MH): 487,500 kWh
Total GHG emission reduction per year (LED vs MH): 268 ton CO2 eq.

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 Preliminary Assessment of Potential Solutions to Increase Resilience:
Potential interventions in Mirsarai Economic Zone

Increase investment attractiveness

• Underground electric lines:

The primary benefit of placing new or existing distribution lines underground is that it reduces the
frequency of outages, particularly those caused by storms. Undergrounding reduces the costs of post-
storm restoration of the electric system and reduces revenue losses for electric utilities resulting from
these outages.
Cost per mile: US$ 0.5 Mln
Mirsarai Phase 1 (132 KV transmission line): US$ 5 Mln

• Innovative underground draining system:

The primary benefit is to significantly reduce the water volume in the drainage system, facilitating the
infiltration in the subsoil in order to prevent surface floods. allows the construction of underground
basins to dispose efficiently and rapidly the water flowing from loading and unloading areas or from
the roofs of the warehouses.
Cost per ha: US$ 0.7 Mln
Mirsarai Phase 1 (510 ha): US$ 3.5 Mln

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 Preliminary Assessment of Potential Solutions to Increase Resilience:
Potential interventions in Mirsarai Economic Zone
Increase access to finance through smart resilient infrastructure monitoring system
Smart monitoring of infrastructures for real-time risk analysis (Risk Assessment in the pre-event phase and in the post-event phase with support to the
crisis management)

Objectives:
• Assess and monitor the resilience of industries and industrial districts in real time
• Create local engineering skills in monitoring and repair

The system has three fundamental components: a sensor network (MHS) able to detect basic structural parameters (tilt, acceleration, stress) and to transfer them in
real time to the cloud, a cloud service, where raw data provided by the MHS are stored and processed, and a network of Engineering Partners able to translate the
information into a precise analysis and diagnostics of the present status of the structure. In case measurements exceed alarm thresholds established by the
Engineering Partner, alarms are activated towards all interested parties. Advanced analytics help precise diagnostics of the detected problem.

Though appropriate structural ageing models and probabilistic simulations, SCS

platform enables to simulate the effect of different scenarios and preventive
maintenance strategies, in order to identify the actions capable of extending the service
life of the structure/ infrastructure and / or to minimize the overall life-cycle cost. This is
believed to represent the best support to a transparent, defensible and “proactive”
management of structural portfolios.

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 On-going WBG’s similar projects

Turkey Green Organized Industrial Zones (WBG)

• Project owner: Ministry of Science , Industry and Technology
• Implementation timeframe: Jan 1, 2016 – June 30, 2020
• Budget set for Tech. Assistance: $1,335,000 (Lending estimate: $ 500 million)
• Objective: To boost competitiveness and move the manufacturing sector of Turkey on a sustainable path
through the implementation of an national EIP framework
• Outcome: Developed a National Green OIZ Framework
• Recent progress: Opportunity to link Technical Assistance (TA) to WB lending operation and IFC investment

Vietnam Eco-industrial park initiative (WBG & UNIDO)

• Project owner: Ministry of Planning and Investment of Viet Nam
• Budget set for Tech. Assistance: $1,000,000 (Lending is still being defined)
Bangladesh, Chittagong • Implementation timeframe: 3 years
• Objective: Aims to transfer the existing industrial zones into eco-industrial parks through clean and low-
carbon production technologies to minimize GHG emissions, POPs releases and water pollutants, while
enhancing energy and resource efficiency.
• Outcome: The Government of Vietnam issued Decree No. 82”) in 2018
to regulate the management of industrial zones (IZ) and economic zones (EZ)
based on the technical findings and guidelines provided by WBG and UNIDO.
• Recent progress: The Manual on “Prevention, preparation and response to environmental disasters
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from industrial zones” is also being developed.
 A suggestive work plan & timeline

WORK PLAN TIMELINE

Launch Green & Resilient EZ project Jun – Jul. 2019

Engage key stakeholders*

Diagnostics
• Conduct technical analysis in the selected zones
• Policy and regulatory analysis June – Oct. 2019
• Institutional analysis
• Analysis of financial needs

Develop a national Green and Resilient EZ guideline

• Policy and regulation reform Nov. 2019 – Oct. 2020
• Establish governance structures and coordinating agencies
• Finalize financing mechanisms

Monitor, report and verify

Scale up and mainstream the Green & Resilient EZ Nov. 2020 -
guideline

* The project will engage the public and private stakeholders continuously throughout the national guideline development and implementation processes.
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 THANK YOU

For further information:

Etienne Kechichian | Senior Private Sector Specialist
ekechichian@ifc.org
Sumit Manchanda | Senior Private Sector Specialist
smanchanda@ifc.org
Shoko Takemoto | Disaster Risk Management Specialist
stakemoto@worldbank.org

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