GENEVA — New investments in the global textile and apparel industry, led by big greenfield projects in low-cost Asian and African nations, and major outlays in retail segments in rich economies, reached a record $28.2 billion in 2014, up 16.8 percent on the previous year’s $24.1 billion, a United Nations report said.
Some of the biggest new greenfield investments were made by Chinese companies sensitive to the rising labor costs in the sector, and eager to relocate and establish factories in developing countries with lower costs.
James Zhan, director of investment and enterprise at the U.N. Conference on Trade & Development and lead author of “The World Investment Report 2015,” said foreign investors, and Chinese companies in labor-intensive industries like garment manufacturing, are divesting from China and establishing factories in Myanmar, Bangladesh and East African countries such as Ethiopia and Kenya.
Zhan said excess capacity in China’s textiles and apparel sector, and an interest by companies to operate in countries that benefit from preferential market access to the U.S. and European Union markets to take advantage of “trade barrier” hopping, are also push factors driving this.
The report said that last year Ethiopia, one of the beneficiary countries under the African Growth and Opportunity Act that was just reapproved by Capitol Hill and provides preferential terms on apparel exports to the U.S., attracted more than 11 new projects in textiles and apparel valued at more than $1.8 billion. This includes a $500 million greenfield project in Ethiopia by Jiangsu Lianfa Textile Co. Ltd., a Chinese yarn and apparel producer, that will generate 3,000 jobs; an investment in Pakistan by Shanghai Challenge Textile that will create hundreds of jobs, and a project in Myanmar by China’s C&H Garments Company expected to establish 200 new jobs.
Similarly, China’s Black Peony Group announced a $100 million investment in Vietnam that will create 3,000 jobs, UNCTAD said.
Greenfield is a form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new facilities from the ground up.
The UN report said new investments in textiles and apparel in rich economies last year reached $17.4 billion, up from $13.7 billion a year earlier, with the bulk going largely in retail commitments by major brands based in France, Italy, Germany, Spain, Sweden, and the U.S., including Levi’s, PVH Corp., Calvin Klein, VF Corp. and Nike Inc.
Overall, in 2014 the report said global foreign direct investment declined 16 percent to $1.23 trillion, but forecasts an upturn this year of 11 percent to $1.4 trillion. In 2014, China was the top host economy and attracted FDI inflows of $129 billion, up 4 percent on $124 billion the year before, followed by Hong Kong with $103 billion, and the U.S. with $92 billion.