Bangladesh’s textile and apparel sector has seen a sharp rise in Foreign Direct Investment (FDI) in the last year, thanks to government initiatives to entertain foreign investors.
According to Bangladesh Bank (BB) data, in the calendar 2017, Bangladesh’s textile and apparel sector has received a foreign investment of $421.68 million, which is 15.70% higher compared to $364.44 million in the year 2016.
However, the overall net inflows of foreign direct investment in the country declined by 8.42% to $2.15 billion in 2017 from $2.33 billion a year ago.
South Korea has made the largest investment of $103 million in the country’s textile sector, while Hong Kong $66.13 million and the United Kingdom (UK) $42 million.
Why investment sees a jump
Since, Bangladesh is the second largest exporters of apparel products in the world after China, there is a huge investment opportunity in the textile and garment industry.
The available workforce at a reasonable wage, duty-free market access in major export destination, preferential location in the heart of the Asia-Pacific region and government policy support acted as a catalyst to attract foreign investment in the textile and apparel industry, stakeholders opined.
“Since, the RMG sector is growing very fast in Bangladesh, foreign investors chose the country as an investment destination in the textile sector,” Abdus Salam Murshedy, a Former President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said the Textile Today.
Bangladesh has to import a huge amount of woven fabrics to meet the local demands. Foreign investment in the textile sector will help Bangladesh building a strong backward linkage for the woven sector, said Salam, also Managing Director of Envoy Textile Limited.
On top of that, new investment will create jobs for Bangladeshi people, a crying need for reduce the unemployment rate and meeting the government vision of a developing country, he added.
“As a government organization, Bangladesh Investment Development Authority (BIDA) is providing all-out service through one-stop service. While the digitized system has made the process very easy, which pushed the foreign investment in the textile sector up,” BIDA Executive Chairman Kazi M Aminul Islam said.
As per the direction of Prime Minister Sheikh Hasina, we are working very hard to attract investment from foreign countries. Though overall FDI has seen a slight decline last year, we are hopeful to see a jump in the current year as Bangladesh is ready with better infrastructure and SEZs, he added.
Bangladesh government has taken steps to establish 100 Special Economic Zones (SEZs). On the other hand, it has given importance to ease the registration process for the foreign as well as the local investors through one-stop service, Commerce Minister Tofail Ahmed said to Textile Today.
As a result, foreign investors have become more interested to invest here. In the year to come, the investment in the textile sector from the foreign investors will see a sharp rise as the SEZs are becoming ready for investment, he added.
Textile industry needs FDI to produce value-added products
Bangladesh is producing mostly basic clothing items. In moving forward in the value-added product, Bangladesh needs investment in high-tech manufacturing to exchange experience of the developed country.
“We can allow foreign investment where there is a need such as in high tech-fabrics manufacturing and technology-based garment manufacturing to make value-added products, former financial advisor to caretaker government AB Mirza Azizul Islam said to Textile Today.
However, Bangladesh government has to set the policy to allow investment based in the country’s trade policy and global market situation. On the other hand, the government has kept in mind about the protection of local industry, said Islam.
Joint venture investment in the apparel sector can be a tool to move for the value-added product, as we lack technical expertise and technology in this area, the economist added.
However, the local manufacturers are opposing FDI as they think that the foreign investment will grab a larger market share.
“We welcome FDI in any sector from any country in any sector. But there is a little unwillingness from the RMG manufacturers in entertaining investment in the sector,” seeking anonymity an official of the Bangladesh Investment Development Authority (BIDA).
However, we did not pay heed to the oppose by the apparel makers, if there is no lack of document as per Bangladeshi laws, he added.
As we are the second in the export market, we should think about the value-added product, as it will help to remain competitive in the market. Investment in textile and apparel industry will help to produce high-quality fabrics as the foreign investors have expertise in this area, said a local manufacturer.
Recently, Chinese company Huaren Linen Group is going to invest in Bangladesh jointly with Anwar Group, one of the veterans and the oldest company of Bangladesh, to set up dyeing mill.