Despite the many problems that currently ails the Bangladesh industry, the country is still considered a major force for future growth in the global textile scenario, attracting foreign investment. A recent example is a venture investment of US $ 200 million made in Bangladesh by New York based, Tau Investment Management, a growth-equity venture investment firm that lives with the philosophy that global supply chains are in crisis. The venture christened Tau Bangladesh will buy minority ownership in large textile companies of the country. The fund to be injected is aimed at improving the value-chain of the companies through upgrading and de-risking supply chain. Further, the venture intends to make the companies it invests in socially responsible and compliant on international standards.
Tau management has built its business model on the reality that decades of outsourcing and offshoring have reduced costs for leading corporations, but have also brought calamitous risks and inefficiencies. “In the ‘race to the bottom’, a garment factory collapse kills hundreds of workers and throws an entire industry into turmoil; toxins in Chinese baby formula, or oil spills in American waters, grossly undermine public trust in brands and result in harsh regulations,” says Oliver Niedermaier, CEO, Tau Investment. Though quality suffers, productivity stagnates, and workers and natural environments are degraded or even destroyed, to date, investors have not seized upon the opportunity to be the vehicle of change.
Taking a position, Tau Investment has initiated Tau Bangladesh. “We are investing to help build few companies to become stronger strategic suppliers, due to which incremental revenue is expected to be generated,” says Niedermaier. Announcing the initiative, Niedermaier expressed concern that in the near future the number of companies within the industry may fall if changes were not brought about. Replying to a question put forth by the BGMEA President, Atiqul Islam on what can be done to help the medium and small factory owners, Oliver said, “The fund is flexible and in future we may review the current strategy and make some investments in the medium size companies as well.”
The Bangladesh fund of US $ 200 million is a portion of a billion dollar fund committed in September 2013, named Tau Transformation Fund seeking to change the global supply chain over next three years as part of their Clinton Global Initiative (CGI) to upgrade the apparel and textile supply chain in promising garmenting destinations such as Bangladesh and the likes, hence the fund will target textile and apparel manufacturers in emerging markets. “We are ready to invest US $ 20 million to US $ 50 million in a few garment makers that will generate over US $ 100 million annual sales and make the companies avail world-class expertise along with access to low-cost financing sources in order to create increased profitability,” said Oliver.
Tau draws on partnerships with apparel industry leaders, NGOs, and policymakers to address the sector’s top issues, including unsafe workplaces, forced and child labour, and environmental degradation. The firm’s disruptive investment thesis transcends traditional financial metrics and includes social and environmental factors that materially impact shareholder value and stakeholder interests.
Tau’s investments will directly impact the lives of approximately 2,00,000 garment workers through skills training, improvements in compensation, safety and working conditions and other supportive programs such as healthcare and education. The transformations will result in a reduction of roughly 24 million metric tonnes of greenhouse gases and 2.5 billion kilowatt hours of energy through increased efficiencies – all of which also enhance financial performance.