NY firm to invest $200m for RMG modernisation

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Ismail Hossain | Published: May 06, 2014 00:00:00 | Updated: November 30, 2024 06:01:00

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A New York-based investment firm is planning to invest a significant portion of its US$1.0 billion global fund in the ready-made garment (RMG) and textile industries of Bangladesh.
"Modernisation and transformation of the country's apparel and textile industries will be in the prime focus of its Bangladesh investment plan," chief executive officer (CEO) of Tau Investment Management (TIM) Oliver Niedermaier told The FE in an interview Sunday at a city hotel.
"We are currently raising a $1.0 billion fund targeting textile and apparel industries. And we have a plan to invest up to $200 million or 20 per cent of the total global fund in Bangladesh," said Mr Niedermaier, who is also chairman of the company.
Keeping this in view, TIM has launched Tau Bangladesh on Sunday at a city hotel in the presence of Commerce Minister Tofail Ahmed, Bangladesh Bank Governor Dr Atiur Rahman and Deputy Chief of US embassy in Bangladesh Jon Danilowicz and leading apparel business leaders.
"We want to work with bigger players in the industry and they must be hyper-compliant," Mr Niedermaier replied when asked about the categories of the factories to be picked for receiving the fund.
He said: "We are ready to invest in a few garment makers that generate over $100m annual sales and will make them avail world-class expertise along with access to low-cost financing sources in order to create increased profitability.
Tau plans to acquire minority stakes in factories, and to be an active owner, not unlike other private equity firms. "Our business is transformation and modernisation, not only investment," Mr Niedermaier said.
Asked why they chose Bangladesh and its garments industry, he said, "We actually believe that there are huge opportunities in upgrading and modernising global garment manufacturing supply chain, and Bangladesh is the second-largest supplying nation which is just growing and needs a lot of upgrading and it is very good investment opportunity for us."
The fund to be injected is aimed at improving the supply chain of the companies through upgrading and de-risking supply chain. Furthermore, the venture intends to make the companies attain international standards in terms of becoming socially responsible and compliant, Mr Niedermaier noted.
Tau promises to deliver "improved transparency, greater dignity for workers, cleaner environments for communities, and enhanced performance and value for stakeholders".
"We are investing to help build a few companies enabling them to become stronger strategic suppliers due to which incremental revenues are expected to be generated," said Oliver Niedermaier.
The TIM CEO said: "We have analysed more than a thousand companies across the world; among them we did in-depth research into 100 factories including Bangladesh, now we have pretty good understanding of what works and what does not work towards the path of modernisation."
After more than a decade of corporate investment in social responsibility programmes, executing codes of conduct, operating teams of inspectors and public reporting, he believes it is the perfect time to work for modernisation of garment industries.
"If anybody wants to work to improve the garment industry, where is the better place than Bangladesh," he wondered.
Tau is planning to set up a regional office in Hong Kong.  The $1.0 billion fund would be invested for the modernisation of the garment and textile industries in Indonesia, Cambodia, Vietnam, China and, to a lesser extent, in Turkey.
He said, "After the Rana Plaza incident, it has become easier for us to make people understand the need for funds to modernise the factories."
Differing with the buyers, retailers and the government's way of solution to the current problems in the industry, the TIM CEO said businesses should instead try to act like capitalists, using markets and the potential of investment gains to reform their global supply chains.
Mr Niedermaier termed their initiative a "capitalist solution to a capitalist problem'. He said, "What the buyers want today is a transactional relationship with suppliers; especially after the Rana Plaza incident, we want to facilitate the new demand of the buyers."
Mr Niedermaier predicts that after the current 'global initiatives' following the Rana Plaza and Tazreen Fashions catastrophes, the number of the factories in Bangladesh would be reduced significantly.    
"The fittest ones would survive," he added.