Bangladesh apparel sector to draw more FDI for US-China trade war

BDApparelNews Desk
13 December 2018  

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The ongoing trade war between China and the US will draw more investment for Bangladesh's apparel sector, says the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP).

“Major players in the garment industry in the Asia-Pacific region, such as Bangladesh and Vietnam, are expected to benefit by acquiring a larger share in exports to the US, and thus attracting more investment,” it said in its flagship annual report.

The report, the Asia-Pacific Trade and Investment Report (Aptir), was unveiled yesterday at the UN ESCAP office in Bangkok. It has been made public on the internet.


Developing countries in the region continue to attract investment in labour-intensive sectors, particularly the garment industry, it said in the report.

Bangladesh's textile and apparel sector received $422 million in FDI in 2017, which is 1 percent higher than a year earlier, the Aptir report said.

“The upward trend was recorded despite lingering concerns about the sustainability of the country's garment sector.”

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The Aptir also apprehends bad impact on the Asia Pacific economy if the trade war prolongs. “The US-China trade tensions have also begun to disrupt existing supply chains and dampen investor confidence, as evidenced by the deceleration in trade growth after the first half of 2018.”

If the trade tensions remain, export growth may slow to 2.3 percent in 2019, compared to a nearly 4 percent growth in export volume in 2018.

The FDI inflows to the region are also expected to continue in their downward trend next year, following a 4 percent drop in 2018.

Tariff hikes that have already taken place are expected to cut global GDP by $150 billion and regional GDP by a little over $40 billion if they remain. Since many of the main export industries in the region are relatively labour-intensive, a contraction of export could spell at least temporary hardship for many workers.

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At a minimum, Asia and the Pacific will see a net loss of 2.7 million jobs due to the trade war, with unskilled workers, often women, shouldering more severe impact.

If the tariff war further escalates in 2019 and investor and consumer confidence drop, global GDP could ultimately be cut by nearly $400 billion, also driving regional GDP down by $117 billion.

Almost 9 million people could be put out of work in the region, with many more workers also moving to new jobs in different sectors.

“As production shifts take place and resources are reallocated across sectors and borders due to the trade conflicts, tens of millions of workers may see their jobs displaced and be forced to seek new employment,” said Mia Mikic, director of the Trade, Investment and Innovation Division at ESCAP.

Regional integration will be important to create new economic opportunities.

But other complementary policies, such as labour, education and retraining policies plus social protection measures to support people negatively affected must also be placed high on the policymakers' agenda if the region is to continue making progress towards the Sustainable Development Goals, she added.