Foreign direct investment in EPZs drops 22.33%, exports rise 22.41% in Jul-Dec

Highlights:

• Bepza zones attracted $424m of $1.47b total FDI
• Bepza zones accounted for 16% ($7b) of Bangladesh's $49b exports in FY24
• Bepza consistently contributes 15-20% to Bangladesh's annual exports
• Jul-Dec YoY (2023-2024): EPZ exports up 22%, investments down 22%

Foreign direct investment in export processing zones (EPZs) dropped 22.33% year-on-year during the July-December period of 2024, while exports increased by 22.41%.

According to the Bangladesh Export Processing Zones Authority (Bepza), foreign investment in EPZs declined to $126.33 million from $162.66 million in the second half of 2023. 

Bepza, which manages EPZ operations, attributed the investment decline to political and economic volatility surrounding the July-August uprising and global instability.

Meanwhile, exports from EPZs rose to $4.12 billion, up from $3.37 billion in the final six months of 2023, according to Bepza data.

"Investment in Bepza has declined slightly, though much less than in other sectors," said Bepza Executive Chairman Maj Gen Abul Kalam Mohammad Ziaur Rahman during a press conference at its Green Road office in the capital today (27 January).

"Recent reports indicate a 71% drop in overall investment nationwide, as highlighted by newspapers and business complaints, which has also impacted Bepza," he added in response to a journalist's question.

The Bepza chairman said the investment decline is not solely due to domestic changes but also reflects global market instability, including reduced buyer demand, rising gas prices in Europe from the Russia-Ukraine war, and broader economic challenges affecting orders and investments worldwide.

"However, we are addressing this downturn. Regular discussions with EPZ traders indicate a positive shift," he added. 

Maj Gen Ziaur expects this situation to improve in the future.

"Domestic and foreign investors are already approaching us. Some foreign companies have told us that with the new president in the USA, there will be challenges exporting goods from China to the USA," he said. 

"These companies are now considering relocating their establishments from China to Bangladesh. Recently, a foreign company proposed a $150 million investment, and investors are showing interest in manufacturing solar panel components and chemicals."

He expressed hope that foreign investment in Bangladesh could rise as the Trump administration's additional tariffs on Chinese exports may prompt some Chinese industries to relocate, with Bangladesh being a prime destination.

The Bepza executive chairman explained that the Trump administration's China policy is a significant factor driving increased investment in Bangladesh. 

He noted that additional tariffs on Chinese products entering the US market, coupled with China's shrinking workforce, rising wages, and increased production costs, are making Chinese goods less competitive.

To counter these challenges, many Chinese investors are considering relocating their operations to other countries, he said. 

At various investment summits, Bangladesh has emerged as the top destination among options like Vietnam, Cambodia, Indonesia, Sri Lanka, and Myanmar, said Maj Gen Ziaur. 

Chinese firms are showing interest not only in ready-made garment production but also in other sectors, such as manufacturing raw materials like silicon dioxide for solar panels, he added. 

He expressed optimism that investments will continue to grow in the future.

Water challenge in Mirsarai

When Bangladesh was eager to attract foreign investment, Bepza had to reject a $135 million proposal from a Chinese investor due to a water shortage at the Bepza Economic Zone in Mirsarai, Chattogram. 

Maj Gen Ziaur explained that the proposed textile company required substantial water, which could not be supplied, making water availability a critical challenge in Mirsarai.

While gas and electricity are not issues in the zone, securing adequate water remains a concern. To address this, Bepza has taken steps to mitigate the problem.

EPZs attract 29% of country's total FDI in FY24  

According to Bepza Member (Investment Promotion) Md Ashraful Kabir, Bepza accounted for 29% of the country's total FDI in fiscal 2023-24. 

Despite occupying only 3,445 acres (13.95 square kilometers) of land, the eight EPZs and Bepza Economic Zone attracted $424.29 million in FDI out of a total $1,468.17 million.

In 2024, 28 domestic and foreign companies signed agreements with Bepza to invest $568.49 million. Bepza has attracted a total of $6.91 billion in investments and facilitated exports worth $114.91 billion to date.