GENEVA — Some of the world’s poorest nations, including Bangladesh, Cambodia, Ethiopia and Myanmar, are increasingly being targeted as prime locations for direct investments in textiles and apparel, a United Nations report revealed.
The new trend in investments is driven by a variety of factors, including increasing costs in the world’s biggest producer, China, due to rapid wage hikes, loss of tax rebates for exports and shortages of labor, said James Zhan, director of investment and enterprise at the U.N. Conference on Trade and Development, which issued the report.
This has led to divestments by foreign investors, especially in labor-intensive, low-value apparel, in low-cost nations such as Cambodia and Bangladesh, he said.
The increase in investment in poor African nations, Zhan said, is largely driven by “barrier hopping,” as goods manufactured in these countries have lower wage costs and duty free access to major markets such as the U.S., while apparel from China faces higher duties and protectionist pressures.
In Bangladesh, the biggest apparel exporting nation among the world’s 48 Least Developed Countries, corporations based in South Korea have injected large investments into the sector. These include an estimated investment of $100 million in 2008 and a further investment of $9.8 million in 2010 by the Youngone Group, the report said.
The report, “Foreign Direct Investment in LDCs,” which tracks trends between 2001 and 2010, also notes that Cambodia is a preferred location for apparel investments. The report outlines that in 2009, the New Island Clothing Co., based in Mauritius, invested $56 million in textile manufacturing, helping to generate 1,670 new jobs on the island nation.
Reflecting the shifting investment patterns in a globalized economy, the report notes that the Turkish company Aldundas Textile made a greenfield investment worth $41.2 million in Myanmar’s textile sector, creating an estimated 1,654 jobs. Moreover, one of Africa’s poorest nations, Ethiopia, has also emerged as a new destination for investment projects in textiles and apparel, concludes the study, which was released this week ahead of an international conference on LDCs in Istanbul next week. This has included an investment last year valued at $67 million by Chinese company Xinxiang Kuroda Mingliang, which created some 1,000 jobs, and a $100 million investment by Turkey’s Ayka a few years earlier that created 5,000 jobs.
Madagascar, Mozambique and Yemen have also attracted solid investments in textiles and apparel manufacturing in the last few years.