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Korea – Next relocation ideal for Bangladesh

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AKM Asaduzzaman Patwary,

Research Fellow, Head of R&D, DCCI.

Korea and Bangladesh maintains a longstanding diplomatic and bilateral economic relation since independence of Bangladesh. Korea has been endowed with rich heritage of industrialization and five percent share of global trade. South Korea has been globally recognized for its unique productivity technique and immense strength in Shipbuilding, Electronics, Semi-conductor and automotive industry. The unprecedented quality and retention of the quality have unfolded many success stories for Korea in World industrial and business history. Japanese style of manufacturing and management were largely replicated and practiced in Korea which helped Korea to grab global attention and allow grabbing wider access to global market since 1990s.

01Due to geo-economic trend change, most of the immensely industrialized economies encountered manifold economic and climate change and sustainability challenges to sustain their golden industrial heritage like Japan, China and Korea are in a row. In line with the global demand and sustainable development vision, Korea, better to be late than never echoes China to reduce the conventionally labour intensive manufacturing engagement for securing sustained living condition in the days to come. Since Korea is looking ahead to new economic era characterized by high value products and service intensive economic concentration, it triggers plenty of opportunities for many emerging and LDCs.

Bangladesh upholds the philosophy of export oriented manufacturing industrialization led economic development and constantly battles being an LDC in South East Asia to create extensive manufacturing industrialization elevating to 33 percent of GDP contribution in order to securing 8 percent plus GDP growth.

02Bangladesh enjoys DFQF privilege to Korean market since late 2000 for 4800 products. Despite DFQF privileges, Bangladesh has got trade imbalance with Korea. Our trade gap marks incremental almost $600 Million over last couple of years though efforts are there for rationalization. Korea had longstanding low cost manufacturing outsourcing experience in textile, leather products in Bangladesh encouraging presence of leading companies like Hyundai, Daweoo alongside Youngone in Bangladesh. Alongside Tech giant Samsung electronics and Mobile phones have got widespread reputation in Bangladesh.

To recap the Korean investment history in Bangladesh, Korea brought the ever first foreign investment in Textile sector in RMG which followed more and the latest aggregate investment from Korea was almost $1 Billion over last five years and $245 Million in 2016. It was worth mentioning that Korean Tech giant Samsung proposed $2 Billion Investment proposition in Bangladesh which didn’t work out in negotiation. Korean was the first investor to set up exclusive foreign Export processing zone KEPZ to source wider variety of products in 1990s in Bangladesh which substantial benefit Korea.

03Korea is apparently pioneer in wide-ranging Ship building and supply for world market and our shipbuilding industry has got heritage of five century which allows huge invest synergy for Bangladesh.

China was the single largest trading partner of Korea having 20 percent share vice versa. Due to massive change in global trade and manufacturing order, Korea and China are not being able to maintain the same trade pace since China and Korea are going to cap the manufacturing growth.

Amidst this backdrop of trade and manufacturing in China and Korea, World industrial heavyweights confronted higher cost of production forcing labour intensive and expensive industries shut and relocate into third countries. Bangladesh, India, Sri Lanka, Vietnam are in the front line to allow sunset industries to rehabilitate and underpin the global supply chain of these products.

Since Bangladesh has convincingly proven its competitiveness and attraction as low cost unexplored manufacturing investment hub in South Asia featured by inexpensive, easily trainable labour and low energy cost, Investment benefit package and investment protection policy regime guaranteed by MIGA, OPIC, ICSID, WAIPA, and WIPO which allow industrial operations and foreign investment more in Bangladesh.

It is worth mentioning that JETRO found in their studies Bangladesh as ideal, cost competitive enabling Investment location across Southeast Asia over last two consecutive years and most trusted to CEOs in this region.

Since Bangladesh endeavourers pro-business and investment environment to cater foreign Investment in Bangladesh, the Korean relocation potential of Manufacturing of Electronics, Shipbuilding, Textile and leather goods are unprecedentedly shaping up. To accommodate the growing planned local industrialization and foreign investment including relocation business, new 100 economic zones are in progress to be operational by 2030.

Meanwhile, 50 Chinese units relocation have registered with BOI over last two years and the trend continue which motivates Korea to join the pipeline.

04It is estimated that around $30 billion sunset industrial relocation will happen in different South East Asian and Latin American countries within next decade. Since Bangladesh has meanwhile stunned the World as next low cost industrialization hub, private sector is to be led by the policy leaders, economists and government agencies; Ministry of foreign affairs, Ministry Commerce and BIDA,PPP to have a lion share of the potential relocation industries as many countries are in aggressive race to win investment negotiations.

To mobilise the momentum in relocation spree, investment diplomacy, dynamic move of private sector coordinated by Government should roll out without any further delay and result-oriented and focused events like sectoral matchmaking to disseminate the industry, policy, process, and benefit package and sign deals. Bangladesh envisions becoming middle-income country by 2021 characterized by import substitute 28 percent manufacturing Industry and GDP ratio, 50 percent Trade and GDP ratio resulting $58 Billion export earning,10 million new employment. To fuel these targets, local industrialization stand alone is unable to meet unless extensive relocation from industrially heavyweight and geo-economic friends of Bangladesh happens and Korea is one of those preferences being our alliance to march our industrial growth to a new era of inclusive economic excellence.

 

 

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