Bangladesh as a lucrative investment destination

Bangladesh had long tried to be a lucrative investment destination for foreign countries and companies. The result was mix. But at a time when Donald Trump's reciprocal tariff has upset the world order of trade and commerce, an unexpected window of opportunity has opened before Bangladesh against all odds. This is the Chinese firms' interests in investment or relocation of their manufacturing units in this South Asian neighbour. That the country Trump considered its rival may have suddenly found a mutually beneficial investment climate here is quite logical. Actually, the clinching factor was the last-minute diplomatic foray which succeeded to negotiate -- no matter with some clauses reserved for non-disclosure -- a reduction of reciprocal tariff from 35 to 20 per cent. Already, a number of Chinese companies have signed deals with the Bangladesh Export Processing Zones Authority (BEPZA) and more are likely to follow suit soon. Even a South Korean firm has also signed a deal for investment of $8.06 million in Mongla Export Processing Zone (EPZ).

However, China has come forward in a big way with 45 of its companies committing over $1.0 billion in investment. Five of those industries have started commercial operation, another five are well set to start operation soon and 22 factories are under construction. But the number does not speak the full story. The manufacturing Chinese firms that are entering Bangladesh are of diverse nature -- not limited to readymade garment (RMG). From footwear to household products and bags to lingerie and undergarments in which Chinese companies have ruled the roost the production and export basket here will receive expansion and diversity. Even the Korean firm has added an unconventional dimension to the export basket by taking up production of tents and tent-related accessories, camping chairs, trekking gears, arrows and pet furniture. All such initiatives add diversity to Bangladesh's production range and export basket.

Yet another immediate benefit is the likely creation of 19,000 jobs for the nationals of the host country. But where the industrial sector is likely to get the greatest boost is the introduction of advanced and economical factories and industries with their cutting-edge technology. All the units which have started operation so far and clinched the deals with the BEPZA will use water economically and have solar panels along with the arrangement for harvesting rain water. Bangladesh may thus have a paradigm shift in manufacturing mechanism and investment order. Other countries vastly affected by Trump's tariff may as well find Bangladesh a lucrative destination for investment.

While all this goes in favour of Bangladesh, there are some restrictive clauses in the bilateral agreement with America. This was disclosed during the agreement reached between Vietnam and the USA. For example, components originating in other countries or having foreign copyright -- primarily meaning China here -- will not fall under the concessionary tariff negotiation. It is not unlikely to be any different for Bangladesh. How the Chinese firms and the BEPZA tide over the critical issue will be of importance. However, in case of exporting goods from manufacturing plants of foreign origin to European market, there should be no such problem. The authorities concerned in Bangladesh and China will have to apply their diplomatic and commercial acumen at its best in this regard.