Garment industry now open to FDI outside EPZs

The government has finally agreed to conditionally allow foreign direct investment (FDI) in the garment industry outside the export-processing zones (EPZs) for boosting apparel exports.   
Officials and sector-insiders said the agreement came at a recent meeting of the government with apparel-sector stakeholders at the Export Promotion Bureau (EPB).
Senior officials of commerce ministry, EPB and leaders from BGMEA and BKMEA were present.
At the meeting, the trade bodies finally agreed to issue utilization declaration (UD) certificates to the foreign-owned garment factories outside the EPZs.
Earlier, the garment association did not issue membership and utilization declaration (UD) certificates to foreign investors on grounds that foreign investment outside the EPZs would pose threat to the local entrepreneurs.  
According to the law of the land, membership from the association concerned and UD certificate are a must for the export-oriented factories to import goods under bonded- warehouse facility.
"The government has finally come to a consensus with the garment-industry leaders to allow FDI outside the EPZs under certain conditions," A K Azad, a director of the EPB, told the FE.
He is upbeat about a significant boost to country's exports both in traditional and the comparatively new markets across the globe as a result of the move to open the sector to foreigners.
"Bangladesh has only 6.09 per cent stake in global apparel trade which means huge opportunities are still lying untapped. So acceptance of FDI will not at all bring harm to the local entrepreneurs," he said.
"Besides, conditional acceptance of FDI will enhance areas of garment export and our manpower will be trained in making high-end garment products, which will ultimately strengthen our capability and longevity."
According to Mr Azad, Japan imported garment products worth US$31.78 billion in the last fiscal. And in this huge trade cake Bangladesh's share was worth only a peanut--$0.56 billion.
"So can you imagine how vast opportunity is waiting for us? So, we believe that FDI in garments would not harm the local exporters," he went on elaborating on merits of opening up the sector.
Experts and industry-insiders consulted on the significant development in the economic field hailed the government decision, saying it would usher in a new era of business for the country.  
"We were opposing FDI in making traditional garments but new decision of accepting foreign investment for making high-end garments would open new opportunity of export earning for the country," Vice President of BGMEA Md Shahidullah Azim told this financial daily.
Former adviser of a caretaker government Dr Akbar Ali Khan said keeping foreigners away from investment was not at all a wise decision as foreign investment always enhances capability and helps technology transfer.
"We have learned garment making and export from the foreigners. So how can we say that FDI will make local entrepreneurs less competitive in the export market?" he questioned.
"I do hail the government and the sector-insiders for their decision to accept FDI in garment industry."
However, under the new decision, the foreign investors have to invest only in producing high-fashioned, non-traditional and costly garment items.
Under the conditions, the foreign investors have to export their makes to their respective countries and to the non-traditional markets like Russia, Brazil, China, Sough Africa, India, Australia and Mexico.
This will enhance market base.
Besides, the investors also have to ensure investment of a certain amount of foreign currencies which would be fixed by the government later.
At present, nearly 140 foreign companies have invested in Bangladesh's garment sector.  They are operating factories in eight EPZs across the country.  Their aggregate investment in the factories amounts to around $1.5 billion.
Besides, around 10 other foreign companies are also in operation outside the EPZs under joint-venture agreement with the local entrepreneurs.

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