Japanese retail group Fast Retailing is setting up a joint venture company to make fabric and garments for its Uniqlo casual clothing chain in Bangladesh, as part of plans to create a global supply network to support the roll-out of its stores around the world.

The new company, CPAT (Singapore) Private Ltd, will also help the retail giant reduce its reliance on China, where around 90% of all Uniqlo products are currently made.

The announcement follows a story published on just-style earlier this week, in which Fast Retailing president Tadashi Yanai said the firm's competitiveness "will be boosted by expanding our bases in Bangladesh and other countries with lower production costs than China."

Partners in the joint venture are Chinese firms Pacific Textiles Holdings Limited and Crystal International Limited, along with Ananta Group of Bangladesh. 

Fast Retailing says it eventually hopes to locate one third of total production in countries outside of China as its Uniqlo operation expands worldwide.

The CPAT joint venture company is based in Singapore and has a total capitalisation of US$80m, of which Fast Retailing has contributed $8m or 10% of the total.

It is due to open for business by the end of 2009.

Hong Kong listed Pacific Textiles Holdings Limited makes fibre for knitwear products and has production bases in China and Sri Lanka, while Crystal International manufactures garments for customers such as Uniqlo, M&S and Gap.

The two companies will have a combined 83% stake in the joint venture.

The remaining 7% will be held by Ananta Group, a garment manufacturer in Bangladesh with customers including Gap and H&M.

Fast Retailing says it will also set up a joint venture between Chinese firm Bros Eastern Company Ltd and CPAT to build a spinning plant in Bangladesh. Bros already operates cotton processing and spinning plants throughout mainland China.  

As well as its cheaper production and raw material costs, Bangladesh enjoys tariff and quota-free access to European and Japanese markets.

Fast Retailing, which operates 757 Uniqlo stores, aims to achieve sales of JPY1 trillion in 2010.

In the year to August, profits rose 37% to JPY43.5bn, and sales were up 11.7% year-on-year to reach JPY586.4bn (US$5.822bn).

The company also owns brands such as Cabin Co, Comptoir Des Cotonniers and Princesse Tam.Tam.