"Foreign direct investment (FDI) in Bangladesh’s textile sector at the end of September 2016 stood at $2,438.21 million. Struggling with labour issues and energy shortages, the industry is ready to adopt advanced technology and skill training to get out of the turmoil. While the country is a favoured investment destination owing to its inherent properties such as abundant cheap labour, strategic location as a gateway to Asia-Pacific region, and a legislative framework conducive to doing apparel business."

Foreign direct investment (FDI) in Bangladesh’s textile sector at the end of September 2016 stood at $2,438.21 million. Struggling with labour issues and energy shortages, the industry is ready to adopt advanced technology and skill training to get out of the turmoil. While the country is a favoured investment destination owing to its inherent properties such as abundant cheap labour, strategic location as a gateway to Asia-Pacific region, and a legislative framework conducive to doing apparel business. It is also marred by weak infrastructure, inconsistent energy supply, lack of land, weak financial sector, corruption and red tape in the bureaucracy.

FDI inflows

Statistics from Bangladesh Bank reveals, South Korea has invested $758.08 million from September 2015 to 2016. The corresponding figures for Hong Kong are $421.7 million; British Virgin Islands invested $214.02 million and garnered the third spot among the highest FDI figures for Bangladesh for the period ending September 2016. The other countries that made a significant contribution to Bangladesh textile FDI during the same period are: Taiwan with $155.24 million, China $93.71 million, Singapore $67.4 million and India $66.71 million.

It’s the smaller nations in the neighborhood of Southeast Asia and Eastern Asia that have contributed in terms of FDI as compared to the combined FDI corpus of neighbouring giants China and India. FDI from the United States stood at a modest $33.02 million. Bangladesh government will have to facilitate ease of business in a big way to attract major investors from the West like France, Germany and US. This includes the setting up of adequate infrastructure whereby the textile industry can locate itself in clusters in a special economic zone with adequate facilities for both workers and the visiting industry honchos. China has already provided some assistance in this direction for Bangladesh to set up a special textile park. According to the Bangladesh government, negotiations are on and it won’t be long before this is realised.

Government initiatives

The government is proactively seeking FDI not only in textiles but also in the allied energy and infrastructure sectors that will help boost volumes in textile trade. Some of the measures already undertaken include favourable industrial policy, export growth incentives and Public-Private partnership launched in 2009 and ratified for further enhancement ever since. If policy indications are anything to go by then western world wants Bangladesh to further reform its labour laws and provide enhanced package of minimum wages to its workers. In addition, they have expressed concern about safety norms adopted by the industry. However, of late, Bangladesh has monitored the upgrade of safety norms and has made a marked improvement.

The big cache lies in resolving minimum wages. This may not get ratified soon as it’s bound to impact the cost competitiveness of Bangladeshi garments. The alternative available for Bangladesh is to boost FDI inflow from India. On a promising note, Bangladesh has signed 30 bilateral trade agreements and the current Trump administration has scraped the TPP that made Vietnam a favourable destination for textiles which goes in favor of bilateral trade pacts.

From the holistic perspective, major contributing countries to Bangladesh’s export earnings are China, South Korea, India, Egypt, UK, UAE and Malaysia. With bright prospects ahead, the textile sector is headed for an exciting period in the near future given the inclination of stakeholders, government and foreign players.