Apparel investors eye low-cost sourcing opportunities
Textile and apparel companies - especially those from emerging nations - are increasingly looking for new investment opportunities in poor Asian and African economies, and gradually shifting operations away from costlier settings such as China, says a United Nations report.
The relocation is particularly pronounced in companies manufacturing labour-intensive low-priced items such as T-shirts, says James Zhan, director of investment and enterprise at the UN Conference on Trade and Development (UNCTAD), and lead author of the report.
The UN official stressed that the harmonisation of corporate taxes and the loss of tax rebates for exports of textiles and apparel, coupled with big wage increases, are factors also weighing against China in this sector.
In Bangladesh, the South Korean company Youngone in 2008 invested an estimated $100m in a greenfield investment generating 1,785 jobs in the textiles sector, and injected an additional $9.8m last year, the report says.
Big ticket textile and apparel investments have also been made in other Least Developed Countries (LDCs) located in Asia such as Laos, Cambodia, and Myanmar, the study shows.
UNCTAD's 'Foreign direct investment in LDCs,' which examines trends between 2001 and 2010, highlights that in 2007 Japan's Yagi invested $40m in a textile project in Laos that created 1,475 jobs.
The report also shows that major greenfield investment projects are also being made in sub-Saharan African countries including Ethiopia, Madagascar and Mozambique.
In Ethiopia, the report lists that foreign direct investment projects in textiles and apparel have included outlays by China's Xinxiang Kuroda Mingliang (2010: $67m), Turkey's Ayka Textile (2007: $100m), and India's Tata group (2008: $2.2m).
Similarly, in Madagascar, the report outlines that Mauritius based Ciel Textile has injected $30.5m in a manufacturing project.
The preferential duty-free access sub-Saharan African countries have in rich cash markets is also a pull factor, says UNCTAD's Zhan.
An interactive databank with intelligence on the major apparel sourcing countries
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