Special Achievement Award

Committed to ‘Made in Bangladesh’

Kihak Sung Chairman of Youngone Group, Bangladesh

Think of one company that has single-handedly changed the RMG landscape of Bangladesh and has spent 26 long years selling the 'Made in Bangladesh' stamp across the world. The name that you would automatically think of is Youngone Group, Bangladesh, the largest foreign investor in Bangladesh's RMG sector and the recipient of this year's Special Achievement Award.

Even without its FDI injection of US$ 120 mln, Youngone's presence in Bangladesh is noteworthy because of several reasons. Youngone pioneered the employment of female workers in Bangladesh thereby redefining the composition of the country's workforce and sparking off a long-term socio-economic development process. The company was also instrumental in bringing other Korean and other foreign investors to this country - it demonstrated that Bangladesh can really deliver. The group has built up, from scratch, manufacturing facilities of international standards in the Export Processing Zones of Dhaka and Chittagong. Amidst the unacceptable level of working conditions prevailing in numerous other local factories, Youngone facilities are models of safety and compliance. Furthermore, Youngone has contributed significantly towards developing local skill and management talent. Over 100 Bangladeshis now work abroad in other Youngone companies as managers.

This scorecard of success and consistency obviously has not been created in a day. The globally renowned name of Youngone Corporation was originally created in 1974 in Korea by Kihak Sung, the current Chairman of the group. An economist by training, Sung has successfully expanded his modest operations to the present colossal status; Youngone today is a world-class and the largest supplier of outdoor clothing and sportswear, such as athletic, active and casual sports apparel including sports shoes, backpacks etc. Annual turnover of the group is to the tune of $600 mln.

Youngone's decision to enter Bangladesh was not a consciously planned one one of the partners, while visiting the country in 1979, inadvertently committed to investment here. The corporation later honored this commitment and established its first overseas operation in Chittagong in 1980 as a joint venture company. Through quick learning of local business environment and adoption of effective business approach, Youngone grew rapidly in Bangladesh. The company eventually did set up production bases in other emerging countries like China, Vietnam, and El-Salvador to diversify its country risks and reduce lead time. But Bangladesh remains its preferred country of investment due to its efficient labour force, effective management team, and preferential treatment in overseas markets of US and EU. Consequently, Youngone has invested heavily in Bangladesh; starting with only 250 local employees, today it employs a 36,000 strong local workforce in its 16 factories to generate a turnover of Tk 18 bln. World famous buyers like Nike, Eddie Bauer, LL Beans, Sears, The North Face, Intersports, Polo Ralph Lauren, and Puma source their products from Youngone in Bangladesh as approximately 50% of the group's sales is produced in Bangladesh.

Sung looks back over his nearly three decades long journey in Bangladesh with mixed feelings. His time here has definitely not been a smooth ride. In the first ten years of operation, production costs in Bangladesh were the same as in Korea because of numerous inefficiencies; the reason he could supply products from here was because of better market access. He has also faced his share of problems with the usual port, energy, labor, and corruption issues. The scale he has built up now allows him to absorb some of the inefficiencies on the ground though. From his global business perspective, Sung can easily compare the investment climate in Bangladesh to that of other emerging countries. “Decisions and implementation are much more accelerated in other countries,” Sung comments. The 2 mln sq ft factory space he has built in Bangladesh over 15 years has been replicated in Vietnam in 2 yrs and in China in 1.5 yrs.

But Sung never lets these obstacles dampen his enthusiasm about the potential of Bangladesh. All that is needed, in his opinion, is better government negotiation with EU for duty-free access of products, adequate backward linkage facilities, and an efficient port, utility, and transport infrastructure. Bangladesh has reasonable chance of excelling in the market as long as its business environment is improved. And increasing the competitiveness of Bangladeshi businesses is crucial as the implications of the post-MFA scenario are still not clear; the real picture will only emerge after 2008 when the added restrictions on China will expire.

Given the high volume of investment and satisfactory track record, Bangladesh government has allocated 2,493 acres of land at Anwara, Chittagong to the group to set up a private export processing zone. Sung is a believer in the benefits of zones; from his direct experience, he knows that separate zones allow much more conducive operating environments for businesses in Bangladesh. Youngone has started the development work in the new area and is expecting to get the commercial license soon. Once completed, this project has the potential to create just 20,000 additional jobs in only the Youngone facilities alone and will attract huge FDI for the country.

Youngone's story in Bangladesh has been one of long-standing endurance and beating expectations. But the man in charge, Kihak Sung, is far from turning complacent. Fuelled by his intention to deliver constant growth, he has grand plans to take both his company and Bangladesh to new heights in the near future.