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FDI in apparel and textile industries posts disappointing flow

It was expected that Bangladesh textile and apparel industries will receive more foreign direct investment (FDI) in 2018 than the previous year. But unfortunately, the FDI downed by 3.24 percent from the previous year in 2018.

While total FDI in the country saw a 68% rise to $3.61 billion, Bangladesh textile and apparel sector received $408 million, which is down by $13 million than last year.

FDI in BD apparel and textile

As per Bangladesh Bank (BB) data, Hong Kong was the largest investor with an investment of $83 million in the country’s textile and garment industry, followed by United Kingdom with $43 million, China with $40 million, South Korea $35 million, British Virginia Islands $33 million and Bermuda with $31 million.

Top three foreign investors BD
Figure 1: Top three foreign investors in Bangladesh textile and apparel sector.

While asked sector people about the reason behind the slow investment they blamed the rise in the production cost and difficult process of getting factory permission along with the scarcity of land.

“In making an investment in any country, investors seek security and return of their investment. Since the production cost is higher here due to rise in gas and electricity prices coupled with land scarcity, FDI is low,” said Mohammad Ali Kokhon, President, Bangladesh Textile Mills Association (BTMA).

Why FDI investment declines IN BD

In order to further increase the FDI in the sector, the government has to promote investment opportunities by creating a business climate and offering incentive to keep production cost a reasonable level, Khokon mentioned.

As Bangladesh badly needs to produce high -end products and increase production capacity in the apparel industry, FDI in the area can play an important role in technology transfer from the skilled foreign professionals, economists and trade analysts believe.

Steps to attract more FDI BD
Figure 2: To attract more FDI Bangladesh needs to concentrate on the above things.

Business leaders think such FDI should come in backward linkage textile and high-end products of the readymade garment as it will help transfer foreign and latest technologies to embolden local industry.

FDI in these segments can be an advantage for Bangladesh economy in moving towards the value-added products.

“Since there is a gap between demand and supply of raw materials for the apparel, we need foreign investment in the primary textile, which needs huge investment,” Mohammad Ali Kokhon emphasized.

But the FDI will not be attracted unless the government policy becomes favorable and production cost is reduced offering utility services including gas and electricity at affordable prices.

According to BTMA, currently, the primary textile sector can meet around 90% yarn demand for knit RMG and 40% yarn demand for woven RMG.

On the other hand, denim fabrics in the country can meet around 50% demand, where higher-end fabric is mostly dependent on import. Generally, apparel makers do not encourage FDI in basic product manufacturing as Primary Textile Sector has enough capacity in basic and medium segments.

Under the Bangladesh Export Processing Zones Authority (BEPZA) and Bangladesh Economic Zones Authority (BEZA), 100% FDI is allowed in the textile and apparel sector but it discourages such investment for basic items.

They encourage overseas investment in high-value items such as jackets, suits, army dress, fashion jackets, outwear and protective jacket.

However, a foreign investor can invest outside EPZs or SEZs and she/he has to take permission from the Bangladesh Investment Development Authority (BIDA) and then become a member of BGMEA or BKMEA for exporting clothing items.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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