Kamruzzaman Bablu :
Bangladesh government would welcome Foreign Direct Investment (FDI) in readymade garment industries located outside the export processing zones (EPZs).
According to EPB source, Japan is particularly interested to invest in Bangladesh’s apparel sector both in high end and basic garments. Some other countries have also expressed interest to invest in this field. Thus, government has in principle taken the decision to respond to repeated calls from various countries for FDI. Foreigners usually want to invest in high-end fashion garments where local manufacturers’ participation is very low.
It is learnt talking with the industry insiders says that local manufacturers oppose foreign investment in the garment sector outside export processing zones (EPZs) fearing an anarchy as they think that the foreign companies will employ workers paying higher wages compared with them. Over 300 foreign-funded apparel factories are being operated inside the EPZs. There are eight export processing zones in the country.
Industry insiders observed when a joint venture factory offers wages higher than the government wage structure, workers in local factories also demand the same. Local manufacturers are not against allowing FDI in the RMG sector, but they say foreigners should also invest in the backward linkage industry.
They reiterate that Bangladeshi manufacturers are good enough to invest in basic garments, but don’t want any anarchy in these products. They add that they have built the apparel industry with great effort and over a long period. Now any foreign investment could undercut their main competitive advantage of the low wages.
Garment is the main exports of Bangladesh. In FY 2015-16, Bangladesh’s earning from the export sector was $31.21 billion of which over $28 billion was from apparels.
EPB will issue UD certificate
The EPB (export promotion bureau) will be given the responsibility to issue UD (utilization declaration) certificate for foreign investment in apparel sector. Usually the BGMEA and the BKMEA issue UD certificates to its members, which is necessary for utilizing bonded warehouse facility.
Under bonded warehouse system, 100 per cent export-oriented factories bring in raw materials from abroad without paying import duty.
“We will soon issue a directive employing the EPB in issuance of UD certificate for foreign investment in apparel sector,” commerce secretary in-charge Subhashish Bose told. “We want foreign investments in all sectors,” he noted.
Drawing foreign investment in RMG is a long pending issue, he said adding that foreigners usually want to invest in high-end fashion garments where local manufacturers hardly have any stake.
Subahashis Bose said he will sit with all the stakeholders soon to resolve the issue.
Local manufacturers oppose
Local manufacturers oppose foreign investment in apparel sector outside the EPZs. “When a joint venture factory offers wages higher than the government wage structure, workers in local factories also demand the same which we can’t afford,” Senior Vice-President of BGMEA Faruque Hassan told.
He said the BGMEA is not against allowing FDI in apparel sector, but they should also invest in backward linkage industry.
“The interest rate of bank loan in Japan is very low, which is comparatively very high in Bangladesh. Japan is welcome in capital-intensive industry,” Hassan said. He opposed the decision to provide UD certificates through the EPB.
Local apparel manufacturers said usually a joint-venture factory offers Tk 8,000 per month to a low-skilled worker against Tk 5,000 set as minimum wage for this category of workers. Local factories cannot afford such high wage, refusal of which will lead to labour unrest.
Bangladesh government would welcome Foreign Direct Investment (FDI) in readymade garment industries located outside the export processing zones (EPZs).
According to EPB source, Japan is particularly interested to invest in Bangladesh’s apparel sector both in high end and basic garments. Some other countries have also expressed interest to invest in this field. Thus, government has in principle taken the decision to respond to repeated calls from various countries for FDI. Foreigners usually want to invest in high-end fashion garments where local manufacturers’ participation is very low.
It is learnt talking with the industry insiders says that local manufacturers oppose foreign investment in the garment sector outside export processing zones (EPZs) fearing an anarchy as they think that the foreign companies will employ workers paying higher wages compared with them. Over 300 foreign-funded apparel factories are being operated inside the EPZs. There are eight export processing zones in the country.
Industry insiders observed when a joint venture factory offers wages higher than the government wage structure, workers in local factories also demand the same. Local manufacturers are not against allowing FDI in the RMG sector, but they say foreigners should also invest in the backward linkage industry.
They reiterate that Bangladeshi manufacturers are good enough to invest in basic garments, but don’t want any anarchy in these products. They add that they have built the apparel industry with great effort and over a long period. Now any foreign investment could undercut their main competitive advantage of the low wages.
Garment is the main exports of Bangladesh. In FY 2015-16, Bangladesh’s earning from the export sector was $31.21 billion of which over $28 billion was from apparels.
EPB will issue UD certificate
The EPB (export promotion bureau) will be given the responsibility to issue UD (utilization declaration) certificate for foreign investment in apparel sector. Usually the BGMEA and the BKMEA issue UD certificates to its members, which is necessary for utilizing bonded warehouse facility.
Under bonded warehouse system, 100 per cent export-oriented factories bring in raw materials from abroad without paying import duty.
“We will soon issue a directive employing the EPB in issuance of UD certificate for foreign investment in apparel sector,” commerce secretary in-charge Subhashish Bose told. “We want foreign investments in all sectors,” he noted.
Drawing foreign investment in RMG is a long pending issue, he said adding that foreigners usually want to invest in high-end fashion garments where local manufacturers hardly have any stake.
Subahashis Bose said he will sit with all the stakeholders soon to resolve the issue.
Local manufacturers oppose
Local manufacturers oppose foreign investment in apparel sector outside the EPZs. “When a joint venture factory offers wages higher than the government wage structure, workers in local factories also demand the same which we can’t afford,” Senior Vice-President of BGMEA Faruque Hassan told.
He said the BGMEA is not against allowing FDI in apparel sector, but they should also invest in backward linkage industry.
“The interest rate of bank loan in Japan is very low, which is comparatively very high in Bangladesh. Japan is welcome in capital-intensive industry,” Hassan said. He opposed the decision to provide UD certificates through the EPB.
Local apparel manufacturers said usually a joint-venture factory offers Tk 8,000 per month to a low-skilled worker against Tk 5,000 set as minimum wage for this category of workers. Local factories cannot afford such high wage, refusal of which will lead to labour unrest.
