Foreign direct investment in EPZs declines while RMG exports surge in Bangladesh

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In a notable trend for Bangladesh’s economy, foreign direct investment (FDI) in export processing zones (EPZs) has seen a significant decline of 22.33 per cent year-on-year during the July-December period of 2024. This drop brought FDI in EPZs down to US $ 126.33 million from US $ 162.66 million in the corresponding period of the previous year.

The Bangladesh Export Processing Zones Authority (Bepza), which oversees EPZ operations, attributed this decline to ongoing political and economic volatility following the July-August uprising, coupled with global market instability. Despite this downturn in investment, exports from EPZs have experienced a remarkable uptick, rising by 22.41 per cent to reach US $ 4.12 billion, up from US $ 3.37 billion in the latter half of 2023.

Bepza Executive Chairman Maj Gen Abul Kalam Mohammad Ziaur Rahman, speaking at a press conference, emphasised that while investment in Bepza has decreased, it remains relatively resilient compared to other sectors, which have faced a staggering 71 per cent drop in overall investment nationwide.

He pointed out that the investment drop is influenced by both domestic factors and global market challenges, such as reduced buyer demand and rising energy prices in Europe due to the ongoing Russia-Ukraine conflict.

Despite these challenges, Ziaur expressed optimism about the future, citing ongoing discussions with EPZ traders that suggest a potential positive shift. He highlighted the changing dynamics in international trade, particularly with the new US administration’s policies, which could make Bangladesh an attractive alternative for companies looking to relocate from China.

However, the Bepza chairman also pointed out critical challenges, such as a water shortage that has hindered investment prospects in certain areas. A recent US $ 135 million proposal from a Chinese textile investor was rejected due to inadequate water supply at the Bepza Economic Zone in Mirsarai, Chittagong.

Despite these hurdles, Bepza remains a significant player in attracting FDI, accounting for 29 per cent of the country’s total FDI in the fiscal year 2023-24. With a total of US $ 424.29 million in FDI out of US $ 1,468.17 million nationwide, Bepza’s eight EPZs have facilitated a robust export landscape, contributing to the overall growth of Bangladesh’s economy, particularly in the RMG sector.

As Bangladesh continues to position itself as a prime destination for foreign investment, particularly in the RMG industry, industry leaders remain hopeful that the current economic climate will improve, leading to increased investment and export opportunities in the near future.

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