Should you invest in Bangladesh?

The Canton Fair ended last week, and the export results were not satisfactory. According to Liu Jianjun, spokesman for the Canton Fair and deputy director of the China Foreign Trade Center, the total export turnover of the Canton Fair this year was 194.61 billion yuan (equivalent to 31.69 billion US dollars). Compared with the Spring Fair in April this year, the turnover dropped significantly, with a month-on-month drop of 10.9%.

As the traditional protagonist of the exhibition, the demand for textile and clothing products is also "cold". Statistics show that in September this year, the national textile and garment trade export was 26.58 billion US dollars, an increase of 5.8%, which was significantly lower than that from January to September. From January to September, the export of textiles and clothing increased by 12%.

Bangladesh, the second largest garment manufacturer and exporter after China, Its total exports in July-September rose as high as 21.2% to US$7.63 billion. The growth trend of Bangladesh's garment industry deserves the attention of Chinese related companies.

Bangladesh is gaining traction with more and more international apparel brands and retailers such as Gap, Tesco, JC Penny, Wal-mart, H&M, Kohl's and Marks & Spencer due to low labor costs etc.

Many Chinese textile and garment enterprises are also feeling the pressure of lower labor costs from Bangladesh. Some Chinese manufacturers have moved their factories to Bangladesh. Taken together, whether investing in Bangladesh can achieve lower labor costs Cost? Is it really necessary for Chinese suppliers to travel thousands of miles to set up factories? On this issue, Cai Xianpu, a senior researcher at China Research Institute, a well-known industry research institution, explained the pros and cons of investing in Bangladesh to a reporter from CEConline in detail.

As one of the least developed countries, the textile and garment industry that Bangladesh has successfully cultivated is the most concerned industry by the government. Therefore, Bangladesh welcomes foreign investment, especially foreign investment in the textile and garment industry.

Bangladesh The advantage of low cost is huge

According to Cai Xianpu's analysis, the textile and garment industry plays a very important role in Bangladesh's economy, accounting for about 38% of the total industrial output value and 75% of the export income. However, as the upstream The textile industry of the industry is not perfect, and it is dominated by the garment processing industry.

The most direct benefit of investing in Bangladesh is the low labor cost. According to Cai Xianpu, wages in Bangladesh are very competitive (Bangladesh stipulates that textile enterprises The minimum wage is 1662 taka (about RMB 180), which is incomparable with the domestic minimum wage of thousands of yuan.

In addition to the advantages of low labor force, Bangladeshi garments are exported to the European Union, the United States, Japan, Australia, Canada and other countries enjoy preferential policies:

Bangladesh enjoys quota-free and duty-free preferential treatment in the EU market. Even in the "post-quota era", these preferential treatment will still be retained, which is why Bangladesh's textile industry is superior to other competitions.

In 2004 and before, Meng Textiles obtained tariff-free and quota-free market access preferential treatment in Canada, Norway, Japan, New Zealand, and Australia.

In the US market, Meng has 30 The category of ready-to-wear products is subject to quota restrictions and is much smaller than China’s restricted product categories. In recent years, the Bangladeshi government has been actively lobbying the United States to grant zero-tariff access to Bangladeshi clothing (compared with 33 other least developed sub-Saharan and Caribbean The same as other countries).

Supply chain and other drawbacks should not be underestimated

But investing in Bangladesh is not without cost. According to Cai Xianpu's analysis, Bangladeshi investment faces at least the following obstacles:

1. Bangladesh's textile raw materials rely on imports. 95% of cotton used in Bangladesh's textile industry, 80% of yarn for weaving and more than 70% of grey fabrics for printing and dyeing need to be imported. Therefore, Bangladesh's textile raw material supply is heavily dependent on the import market. If the cotton supply in the international market is tight, It will inevitably lead to the tight supply of local fabrics in Bangladesh, and garment investment companies in Bangladesh will face the embarrassment that they have to import a large amount of fabrics, but it is difficult to obtain a certificate of origin situation.

Second, the infrastructure is seriously backward. The Asian Development Bank has called Bangladesh's Chittagong "a dead end in the supply chain". The average time of a container in port is 15 days. In the event of port congestion or worker strikes, shipments or pickups may not be available for more than 30 days.

Three, workers strike frequently. According to estimates by the United Nations, Meng's annual losses due to strikes account for 4% of GDP.

Fourth, the officials of the Bangladeshi government are procrastinating. Starting a business in Bangladesh requires contact with government officials at different levels, such as purchasing land, opening a telephone, applying for business licenses and work permits for foreign employees.

5. The financial services of China and Bangladesh need to be improved. The amount of investment in setting up factories overseas is relatively large, and the company's own strength is limited, so it needs to borrow from banks, but domestic banks have not really reflected the preferential financing arrangements for "going out" companies.

Investment Opportunities in Upstream Industries

Investing in Mengjiala, in addition to setting up a local garment processing factory in the form of industrial transfer, can also take advantage of the local industrial characteristics of strong garment manufacturing and weak textile raw material production. Looking for investment opportunities in the fields of dyeing and finishing and textile machinery.

With the deepening of China's economic transformation and upgrading, it is an irresistible trend for the low-end and mid-end processing industries to move to lower-cost regions. Investing in Bangladesh is a viable investment destination, but how to implement it requires careful analysis.