Improve business climate, go for intense negotiation for more Japanese investment

The Daily Star November 17, 2020

Japanese Envoy ITO Naoki says in an exclusive interview

Japanese Ambassador to Bangladesh ITO Naoki believes Bangladesh should begin intense negotiations with his country so that the duo could sign a comprehensive economic partnership agreement.

The rich nation of the Far East has been turning into a major trading and economic partner of Bangladesh and such a deal will ensure duty-free access to Bangladeshi goods even after it makes its graduation in 2024.

The United Nations Centre for Development Policy is scheduled to evaluate certain least developed countries (LDC), including Bangladesh, in 2021 for promotion to the developing country category.

Currently, 98 per cent of goods originating in Bangladesh enjoy duty-free access to Japanese markets under the LDC category, said Naoki.

The exports to Japanese markets, including leather and leather goods, are growing. Some 80 per cent of the shipment is clothing items, but pharmaceuticals have a big potential too, he said.

 

 

 

 

 

 

 

 

“Bangladesh’s exports to Japan alongside Japanese investment in the country have tripled over the last 10 years,” said Naoki in an exclusive interview with The Daily Star at his residence in Dhaka last week.

Japan is the only country in Asia where Bangladesh’s exports crossed $1 billion over the past decade. Currently, the number of Japanese companies doing business in Bangladesh is 315, which have invested $730 million.

“Many Japanese companies are awaiting the scope to invest in Bangladesh’s energy and power, garment, sugar, processed food, construction and fertiliser sectors,” said the ambassador.

Achieving such a big success in the Japanese market has been possible because Bangladesh is a very important trading partner, he said.

A testament to this is an important meeting held in July last year among top officials of 70 Japanese companies which sought to know about the investment climate in Bangladesh, said Naoki.

“All of them are interested in the sectors which have gone through diversification,” said the ambassador.

“I am confident that both trade in services and goods will increase to Japan. The Japanese investment has increased a lot over the years,” he said.

There is a big room for improvement for Japanese investment and export from Bangladesh, he added.

Of the total $57 billion Japan invested in Asia, Bangladesh’s pie is only 0.1 per cent. Countries of the Association of Southeast Asian Nations (Asean) got most of the Japanese investment.

Naoki said Bangladesh needs to improve on its investment climate so that a change in perception comes about among the Japanese investors about the country.

Although Japanese companies are coming here, they are not gaining that much of confidence to make large investments, he said.

This is occurring despite government initiatives aimed at taking the country to a double-digit ranking from a three-digit one in the World Bank’s Ease of Doing Business index, he added.

“To attract more Japanese investment, the government should take care of Japanese companies which have already invested in Bangladesh, so that they become satisfied and can expand operations,” said Naoki.

“If they are satisfied here, other Japanese companies will feel encouraged to invest in Bangladesh,” he said.

Apart from improving the investment climate, Bangladesh should not discriminate in providing incentives to companies housed inside export processing zones (EPZs), be it owned by locals or foreigners, said the ambassador.

For example, although local garment factories in the EPZs are eligible for a 4 per cent cash incentive on export to emerging markets, those owned by foreigners are not, he said.

The envoy lamented that little has changed till date even though his office sent letters to the government several times about this discrimination.

Even the immediate past Japanese prime minister, Shinzo Abe talked about this with his Bangladeshi counterpart, Sheikh Hasina, in August this year for attracting more Japanese investment, he said.

There are some other small issues like long waits for customs clearances and problems centring telegraphic transfers of Japanese investment that need to address as soon as possible so that bilateral trade and investment grow at a faster rate, the ambassador also said.

“More improvements are needed. Some improvements took place recently due to the government’s efforts,” he said.

The foreign factories are being allowed to avail loans from the government’s stimulus package aimed at fighting the fallouts of the Covid-19 pandemic, he said.

Regarding Japanese companies seeking to relocate from China to Bangladesh, Naoki said there were two types of Japanese companies in China.

Many Japanese companies have invested targeting the Chinese domestic markets and many invested for making exports from there, he said.

The companies which have targeted the Chinese domestic markets will not relocate as they are doing fine in China, he said.

The Japanese export-oriented small companies may relocate to Bangladesh or other Asian countries from China, said Naoki.

Supply chain disruptions acted as the major reason for the relocation decision of Japanese companies to other Asian countries. Another factor is higher wage levels in China, he said.

PROGRESS OF JAPAN-FUNDED MEGA PROJECTS IN BANGLADESH

The construction work of some mega projects funded by the Japan government can be completed within the next five years as the works have been going on in full swing even during the time of Covid-19, said Naoki.

Naoki particularly spoke of the Dhaka metro rail project, Araihazar economic zone for Japanese investors, deep-sea port and power plants in Matarbari.

He said the Dhaka metro rail can be partially opened by the end of next year while that of the third terminal at Hazrat Shahjalal International Airport in Dhaka would be possible by 2023 and deep-sea port and power plants in Matarbari by 2024.

Japan International Cooperation Agency (Jica) has 30 ongoing projects, including large infrastructure projects like that of the Matarbari power plant in Maheshkhali, where a couple of billions of US dollars have been invested.

“These projects in Bangladesh will ensure the base of quality infrastructures for an industrial belt in the country,” the Japanese envoy said.

In 2014, both the Japanese and Bangladesh governments undertook some mega projects for infrastructure development under the Japanese concept of Big B plan (Bay of Bengal Industrial Growth Belt) for establishing an industrial corridor between Dhaka, Chattogram and Cox’s Bazar.

The Big B plan has been formulated under the model of Japan’s Tokyo and Osaka industrial hub that arose between the 1960s and the 1980s mainly aiming to develop many industrial hubs in Japan.

“Such a model worked wonders in Japan,” he said.

So, the Big B model is being replicated in Bangladesh for the creation of many industrial hubs between Dhaka, Chattogram and Cox’s Bazar, so that Bangladesh can become a developed nation in this region, Naoki also said.

Bangladesh has the opportunity to become a developed country if the Big B model starts working efficiently, he added.

Geographically, Matarbari is very important because the deep-sea port will work as the hub of connectivity with the Indian subcontinent, the Asean countries and East Asian nations, including Japan.

The landscape of infrastructures of this area will dramatically change within three or four years. This will lay the foundation for economic development in this area.

He also said Japan wants to see a Free and Open Indo Pacific (FOIP) for a common vision of peace, stability and prosperity in the Bay of Bengal region.

Last month, the foreign ministers of Japan, the US, Australia and India met in Tokyo to promote the FOIP for disaster management, freedom of navigation, quality infrastructures and for connectivity in the Indo-Pacific region, he said.

Naoki also said by the next two years the development of the economic zone for Japanese investors at Araihazar in Narayanganj would be completed.

It is expected that 100 Japanese companies will primarily invest more than $1 billion in this special economic zone.

There was no considerable delay in the construction work of Japan-funded projects. For instance, the Japanese engineers and experts did not leave the project sites of Matarbari even in the time of the Covid-19.

So, it is expected that the construction works of some mega projects would be completed within the next five years, he said.