FDI likely in RMG outside EPZs with no string attached

The government will soon take a decision on allowing foreign investment in readymade garment (RMG) industry outside the export processing zones (EPZs) without any conditions, a move that has been vehemently opposed by local apparel industry owners.
The Ministry of Commerce (MoC) will convene a meeting next week with stakeholders to settle the issue of allowing foreign investment outside the EPZs in both high-fashioned and basic garments, according to officials concerned.
Stakeholders in October last had agreed to accept foreign investment outside the EPZs provided those factories will produce fashion items and export those in non-traditional and new markets like Russia, Brazil, China, South Africa, India, Australia and Mexico.
Officials said, the government is under pressure from several countries to allow FDI in basic garments without any condition.
"We will sit with the stakeholders next week to settle the issue," Commerce Secretary Hedayetullah Al Mamoon told the FE without elaborating.
A senior MoC official told the FE months back stakeholders at a meeting with officials of the Export Promotion Bureau (EPB) had agreed on conditional acceptance of FDI in the RMG sector outside the EPZs.
"But immense pressure is there to accept FDI in RMG sector without imposing any condition. Foreigners want to invest in basic garment production as well," he said.
He said the EPB has forwarded the new proposal to the ministry concerned for decision-making since they could not convince the stakeholders to allow FDI in low-end garment items.
 "We will have to take a decision immediately. Our Prime Minister had to face questions on this issue during her several overseas visits," said the official preferring anonymity.
Vice-President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Shahidullah Azim told the FE Friday that allowing foreigners in low-end garment items will create chaos in the industry.
Referring to previous experience, Mr Azim said some joint venture factories, located outside the EPZs, had paid excess wages to their workers which the nearest other local factories could not afford.
As a result, workers of local factories, who were getting wages according to the government wage structure, had demanded additional pay. This led to labour unrest.
"We are good enough to produce basic garments.
Interested foreigners can invest in fashion items as well as backward linkage industries," he said adding local garment-makers won't accept foreign investment in basic items.
Officials said, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) are entitled to provide utilisation declaration (UD) certificates for RMG factories. The two trade bodies have been issuing UD certificates to their member-factories only.
The two trade bodies do not issue UD certificates to factories having foreign investments on grounds that such investment outside the EPZs would pose threat to the local RMG industry.  
According to the law of the land, membership of the concerned associations and UD certificates are a must for the export-oriented factories to import raw materials under bonded-warehouse facility.
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