Bangladesh: garment industry to benefit from billion dollar Japanese loan

The Japan International Cooperation Agency (JICA) has signed official development assistance (ODA) loan agreements with Bangladesh to provide up to 133 billion yen (1.09 billion US dollars) for six major development projects.

The first project, which will benefit the garment industry, is to encourage industrial diversification and to promote economic growth by improving the investment climate in Bangladesh. Concretely, this would mean inviting foreign direct investments (FDI) and to ease currently complicated bureaucratic procedures. One step in this direction is the Foreign Direct Investment Promotion Project, which will encourage FDI through two-step loans, project sector loans and equity-back finance for the development of economic zones.

In addition, access to financing needs to improved as well as the basic infrastructure to help Bangladesh introduce new technology from overseas and to nurture high value-added export-oriented enterprises and diversify its industries.

Though Bangladesh's garment industry makes up 80 percent of the country's exports and, at a stable ten percent growth over the past ten years, is a main growth driver, in view of fierce global competition and a lack of competitiveness in the industrial sectors, it will be increasingly difficult for the sector to keep its pace.

The other five major development projects are ensuring stable power supply, safer and efficient transportation, improving health services to a higher level, urban building safety and improving public services, JICA said in a press release.

In a country with only 62 percent electrification rate (in 2013), a power supply capacity of 80 percent and an increasing power demand at 8.5 percent per year, power outages are the norm rather than the exception. The second major development project will focus on stabilising power supply to the Dhaka Metropolitan Area and on strengthening the Dhaka-Chittagong main power grid, both garment producing hubs with a high density of garment factories.