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Investment is bouncing back in Bangladesh textile and clothing sector

According to the Bangladesh Bank statistics Bangladesh’s textile and clothing sector secured a growth in achieving Foreign Direct Investment (FDI) in the last fiscal year (FY16). A significant investment came in this sector which successfully stood up at $396 million in the last fiscal year. It’s 11 percent higher than last fiscal year when it was $351.62 million.

After enrolling a record inflow of FDI value $445.82 million in FY14, a recession on foreign investment in the textile and clothing sector followed. Bangladesh is the third largest apparel exporters in the world after China and European Union. And it was $ 28094.16 Million dollar last FY 2015-16.

An under construction floor of a garment factory near Dhaka. Many of such factories are investing by complying global green certification like LEED.
Figure 1: An under construction floor of a garment factory near Dhaka. Many of such factories are investing by complying global green certification like LEED.

Besides foreign investment local investment is also on the rise in the textile and apparel industry. It has been understood from some of the industry owners that many of their investment plans are moving now. Many investments are going towards back linkage industry. Denim fabric manufacturing sector is seeing major investment in recent times. An industry owner mentioned that if we get grid power line connection hassle free and assurance of gas or LPG supply we would invest more in textile and apparel sector.

Though apparel makers think that FDI should not be in apparel sector, Bangladesh government is building special economic zones to attract foreign investments not only to infrastructure and high tech sector also to textile and apparel sector. A good number of land and facilities are being offered to countries like China, Japan and India.

Figure 2: A graphic of a planned Special Economic Zone in Mirasharai, Chittangong.
Figure 2: A graphic of a planned Special Economic Zone in Mirasharai, Chittangong.

Meanwhile industry insiders say that many plots of different EPZs which have been allotted to foreign companies are being fall empty for long time. They gave the plan of investing in those plots but particularly through last five or more years they are building much of new factories. A local entrepreneur told to this report in the clause of anonymity, “As foreign companies are not yet investing in their existing plots in different EPZs of the country, giving those new special economic zones means these investments also will be delayed. A country which is having scarcity in lands and resources should make sure effective and intelligent use of them.”

However the government is also offering economic zones to the large companies of the country. At this opportunity some local groups are claiming low lands, farm lands, agricultural lands which are very precious for the country. Industry insiders opined that those resources must be well utilized and proper industrial investment should be made.

Bangladesh Garments Manufacturers and Exporters Association (BGMEA) set a goal two years ago in Apparel Summit 2014 for increasing annual export of readymade garments to US$50 billion by 2021 on the 50th anniversary of the People’s Republic of Bangladesh.

Table 1: Comparative statement on export of rmg and total export of Bangladesh
YEAR EXPORT OF RMG
(IN MILLION US$)
TOTAL EXPORT OF BANGLADESH
(IN MILLION US$)
% OF RMG’S TO TOTAL EXPORT
2014-15 25491.40 31208.94 81.68
2015-16 28094.16 34257.18 82.01

 

Bangladesh enjoys duty free market access in EU, Canada, Australia and other developed countries of the world except the United States. Whereas, Bangladesh is fulfilling all types of American requirements. As per Bangladesh government, the country has implemented all 16 points action plan as per the US suggestions.  In a recent joint press briefing of Commerce Minister Tofail Ahmed and US Ambassador Marcia Bernicat, arranged at Minister’s secretariat, Tofail claimed that the US excluded Bangladesh from duty privileges on political grounds. When Dnald Trump took office with a strategy of encouraging domestic manufacturing it is most likely that Bangladesh may not be able to achieve GSP from USA shortly. Now Bangladesh is giving up to 15 percent duty to export the clothes from Bangladesh in the US market.

Within the total foreign investment on textile and clothing in the last fiscal year $222.86 million was inspired as reinvested earnings of the current companies operating in Bangladesh. In the EPZs one of the South Korean firms invested $111.61 million, almost one-third of the FDI, in the textile sector and also followed by Hong Kong’s $89.07 million.

A recently organized seminar called 3rd FACTS held in Dhaka summed up that the investments in textile and sector should be monitored and guided well. Investments should in right places as if the sector achieves a balance. In a world where production lead time is reducing quickly a strong backward linkage industry is must for a sustainable textile sector. More investment is required in woven fabric manufacturing sector, accessories sector etc. Experts mentioned that investment in manmade fiber production and manmade fiber based apparel manufacturing must be done. FDI should be welcome only to the high-tech new such plants who can support local apparel makers well by supplying input materials- experts opined in the seminar.

For its strategic location Bangladesh has huge potential to attract more foreign direct investment as the central point of eastern part of South Asia, being a connector between South and East Asia.

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