Bangladesh Economic Zone Accelerates: A New Variable in ASEAN Manufacturing Competition Landscape

South Asia’s New Industrial Node: The Significance of Patuakhali EPZ

In July 2026, the Bangladesh Export Processing Zones Authority announced that 306 industrial plots in the Patuakhali Export Processing Zone (Patuakhali EPZ) were ready for investor occupancy. This announcement marks an important step on Bangladesh’s industrialization path. For observers long focused on regional economic development, this event not only concerns Bangladesh itself, but also has potential implications for the manufacturing landscape of the surrounding region—especially ASEAN.

Located in southern Bangladesh near the Bay of Bengal, Patuakhali EPZ enjoys a strategic geographical advantage. The processing zone covers a large planned area, with infrastructure gradually being improved, aiming to attract investors in textiles, garments, light industry, electronics, and other sectors. As the “China Plus One” strategy deepens and global supply chains shift from sole reliance on China toward diversified layouts, Bangladesh is emerging as a popular destination for manufacturing relocation, leveraging its low labor costs and trade preferences (such as the EU’s EBA initiative).

ASEAN Perspective: Competition and Coexistence

For ASEAN countries, what does the acceleration of Bangladesh’s EPZ mean? First, from a competitive standpoint, ASEAN has long been a major beneficiary of global manufacturing relocation, especially Viet Nam, Indonesia, Thailand, and Malaysia, which hold significant positions in electronics, textiles, and auto parts. With labor costs about half or even lower than China’s and steadily improving infrastructure, Bangladesh is diverting foreign direct investment that might otherwise have flowed to ASEAN. Particularly in textiles and garments—where Bangladesh is already the world’s second-largest garment exporter—the expansion of its EPZs will further entrench its competitiveness.

However, it is not all about competition. There is room for cooperation between ASEAN and Bangladesh. Bangladesh is a member of the South Asian Association for Regional Cooperation (SAARC), but its economic and trade ties with ASEAN are strengthening. For example, Bangladesh has signed bilateral trade agreements with ASEAN members such as Thailand and Viet Nam, and actively participates in sub-regional cooperation projects like the BCIM Economic Corridor. Although Bangladesh is not a member of the RCEP, its products can benefit indirectly through bilateral arrangements with ASEAN countries since the RCEP took effect. Moreover, some ASEAN companies have already begun investing and setting up factories in Bangladesh, leveraging its cost advantages to serve global markets.

Competition in Industrial Parks: ASEAN Needs to Upgrade

• The rapid progress of Patuakhali EPZ also reminds ASEAN countries that competition among industrial parks is intensifying. ASEAN nations boast many mature export processing zones and industrial parks, such as Viet Nam’s VSIP, Indonesia’s Batam Free Trade Zone, and Thailand’s Eastern Economic Corridor (EEC). But Bangladesh’s new EPZ offers an alternative: lower land prices, more flexible labor policies, and a steadily improving business environment (Bangladesh’s ranking in the World Bank’s Doing Business report has improved in recent years).If ASEAN wants to maintain its manufacturing attractiveness, it must continuously invest in both soft and hard infrastructure. Specifically:
• Infrastructure connectivity: ASEAN needs to strengthen ports, highways, railways, and digital infrastructure to reduce logistics costs. Although Bangladesh is improving, ASEAN’s port and shipping network (e.g., Singapore Port, Port Klang, Laem Chabang Port) still holds significant advantages.
• Workforce skill upgrading: ASEAN countries need to enhance workforce quality through vocational training and education systems, transitioning from low-cost to high-value-added operations. While Bangladesh has low labor costs, it still lags behind ASEAN in skills and technical levels.
• Industrial ecosystem development: Mature industrial clusters and supply chain networks are key to attracting investors. ASEAN’s electronics and automotive industries have formed complete ecosystems that Bangladesh cannot replicate in the short term.

Regional Dynamics in Supply Chain Restructuring

Against the backdrop of global supply chain restructuring, companies are seeking “China+1” or even “China+N” layouts, with Southeast Asia and South Asia becoming the main options. The expansion of Bangladesh’s EPZs shows that South Asia is becoming a more active participant. For ASEAN, this means the need to formulate supply chain strategies on a broader Asian scale, rather than only within ASEAN.

For example, some companies may place labor-intensive links in Bangladesh while retaining technology-intensive links in ASEAN, forming cross-regional vertical division of labor. This requires ASEAN countries to deepen trade and investment facilitation arrangements with South Asia, such as promoting ASEAN-South Asia free trade area negotiations or strengthening cooperation under the “ASEAN+6” framework.

Long-term Trend: External Challenges Facing the ASEAN Economic Community

The core objectives of the ASEAN Economic Community (AEC) include achieving free movement of goods, services, investment, and labor within the region. However, the rise of external competitors has reduced the relative attractiveness of the AEC. The case of Patuakhali EPZ reminds us that if ASEAN’s internal integration process stagnates or regresses—for example, slow progress in removing non-tariff barriers or overly complex rules of origin—investors may turn to South Asian zones with simpler policies and stronger incentives.

ASEAN needs to draw lessons from the development of Patuakhali EPZ: first, accelerate cross-border customs clearance and mutual recognition of standards to reduce intra-regional trade costs; second, coordinate investment incentive policies among member states to avoid internal competition; third, strengthen supply chain cooperation with South Asia and East Asia to turn competition into win-win outcomes.

Conclusion

The readiness of 306 industrial plots at Patuakhali EPZ is not only a milestone for Bangladesh’s development but also a footnote in the competitive landscape of regional manufacturing. For ASEAN, it is both a warning—competition from South Asia is intensifying—and an opportunity—by deepening regional cooperation and accelerating its own upgrading, ASEAN can maintain its core position in the new Asian supply chain network. The construction of the ASEAN Economic Community has entered its eleventh year; it is time to examine changes in “neighbors” with a broader perspective and make forward-looking adjustments.