Local apparel-makers lift objection to FDI in RMG outside EPZs

Syful Islam | Published: July 18, 2017 08:23:42 | Updated: October 24, 2017 15:06:19

The country's apparel-makers have finally withdrawn their objection to foreign direct investment (FDI) in readymade garment (RMG) industry outside the export processing zones (EPZs), officials said.


Now the government will assign the Export Promotion Bureau (EPB) with the task of issuing utilisation declaration (UD) certificates for foreign-funded apparel factories after getting approval from the Prime Minister's Office (PMO), they added.

The apparel-makers made known about the change of their mind at a meeting last week at the ministry of commerce (MoC) with commerce secretary in-charge Shubhashish Bose in the chair. Prospective foreign investors also attended the meeting.

Sources said the representative of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) agreed that the apex apparel body will issue UD certificates in favour of foreign-funded garment factories if they take membership of the Association.

The membership procedure of the BGMEA will be made complication-free so that the FDI-funded factories can avail it easily.

Without UD certificates, no factory can avail the bonded warehouse facility.

Under bonded warehouse system, 100 per cent export-oriented factories can bring in raw materials from abroad without paying import duty.

However, the BGMEA representative refused to issue UD certificates to FDI-funded garment factories that would not take membership of the organisation.

In this case, the government will employ the EPB for issuing UD certificates.

The EPB had been issuing UD certificates for a long period and the responsibility later was shifted to the BGMEA and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

A senior MoC official said the BGMEA expressed reservation about allowing foreign-funded factories in basic garments. The foreign investors agreed that they will only produce high-end fashion apparels instead of basic ones.

The BGMEA representative, who attended the meeting, could not be reached for a comment despite several attempts.

However, earlier BGMEA vice president Faruque Hassan told the FE allowing FDI in apparel sector outside the EPZs will create chaos in the industry as foreign companies will employ workers paying higher wages compared to them.

"When a joint-venture factory offers wages higher than the government wage structure, workers in local factories would also demand the same which we can't afford," he 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 a high wage denial of which will lead to labour unrest.

Over 300 foreign-funded apparel factories are now operating inside the EPZs. Some joint ventures are also operating outside the EPZs.

Commerce secretary Mr Bose was found determined in allowing FDI in readymade garment sector outside EPZs saying he wants foreign investments in all sectors.

Drawing foreign investment in RMG is a long-pending issue, he told the FE earlier, adding that foreigners usually want to invest in high-end fashion garments where local manufacturers hardly have any stake.

Officials said Japan is particularly interested in investing in Bangladesh's apparel sector both in high-end and basic garments.

Some other countries have also expressed interest to invest in this field on different occasions.

In fiscal year 2016-17, earnings from apparel shipments increased marginally to US$28.14 billion from $28.09 billion in previous fiscal.


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