From Japan, with love

I believe that the recently concluded state visit by the honourable prime minister of Bangladesh, Sheikh Hasina, to Japan is set to be a turning point in economic relations between the two countries. While I am not an economist, the agreement by the Japansese prime minister, Shinzo Abe, to commit Y600bn ($5.9bn) in economic assistance to Bangladesh over the next four to five years has the potential to catalyse growth in both countries.

The joint communiqué has emphasised that the funds, mainly in low-cost loans, will be used to build infrastructure projects in Bangladesh. Also exciting is Prime Minister Abe’s statement that “Bangladesh has great economic potential. In order to realise its potential and expedite further growth, Japan has come up with the concept of the Bay of Bengal industrial growth belt …” or what he termed “The BIG-B.”

Leveraging Bangladesh’s geographic position, right between Asia’s two economic giants China and India, is a clear opportunity for the country. The Japanese initiative can build on the recently announced BIMSTEC agreement for developing economic corridors via Bangladesh and Burma to link China and Japan.

Beyond that, it was reported that Hasina asked her counterpart to consider a range of specific projects like a Ganges barrage, building multi-modal tunnels under the Jamuna River, a railway bridge over the Jamuna River, a multi-modal Dhaka eastern bypass, and the ecological restoration of four rivers around Dhaka.

The two prime ministers also welcomed the memorandum of understanding signed between JETRO and Bangladesh Export Processing Zones Authority, which reserves important facilities in five EPZs in Bangladesh for Japanese investors. Abe also expressed his decision to instruct relevant ministries to start reviewing rules of origin of generalised system of preferences (GSP) for knitwear in order to boost Bangladesh’s exports.

Beyond economic ties, Hasina’s other cultural and diplomatic gestures were broadly appreciated by the Japanese people and the government. On the former, Hasina gifted a pair of Bengal tigers to Japan and she hoped it would help school children become more acquainted with the culture of Bangladesh. On the diplomatic side, Hasina reaffirmed Bangladesh’s support for Japan’s aspiration to become a permanent member of the United Nations Security Council while Abe expressed his intention to share Japan’s experience, including dispatching experts for the proposed project of establishing a Peace Building Centre in Bangladesh.

The Bangladesh support for Japan, amid heightened tensions between China and not only Japan but other countries such as Vietnam, Philippines, Korea, Malaysia, over Chinese territorial expansionism in the South China Sea, comes at a particularly welcome time, and something that the Japanese people and its government will not forget. Indeed, an article in the Financial Times several months back by Ifty Islam of AT Capital (“Senkaku – Accelerating the China Relocation Trade,” FT, Dec 9, 2013) suggested geopolitical tensions would have an increasing influence on Japan’s economic diplomacy. He wrote that “… it is becoming more apparent that political risk mitigation in the face of resurgent Chinese regional territorial ambitions and aggressiveness will reinforce the macroeconomic justification for diversifying away from China. Countries such as Indonesia, Vietnam, Bangladesh, Cambodia, and Sri Lanka are likely to see a more focused and aggressive push from corporate Japan to step up FDI in 2014. Indeed the intersection of geopolitics and China rebalancing is likely to be the dominant macro catalyst and opportunity for such countries for the coming decade.”

As a Bangladesh optimist, or “Bangla-phile,” as I tell my friends, I am particularly heartened and encouraged that Bangladesh is being recognised by my homeland, Japan, for its economic opportunity. This contrasts with a more typical impression of Bangladesh, amongst a majority of Japanese, as the country of poverty and natural disasters, and as the home of microfinance, Professor Yunus, and Brac.

Indeed, my first visit to Dhaka five years ago was, when I was a graduate student studying Agricultural Science at the University of Tokyo, I came and spent several weeks in the villages studying microfinance with Brac and was undoubtedly impressed by the innovative thinking behind improving access to credit amongst the extreme poor. A number of my friends had been to Bangladesh on the JICA volunteer program and had returned enthused about the opportunities to help the poor. But at the same time, I was convinced that the key to poverty alleviation was not microfinance, but rather catalysing economic growth and unlocking the self-evident and natural entrepreneurial spirit of the Bangladeshi people.

Even after I graduated and had joined L’Oreal, the French cosmetics company, in their Tokyo office, I continued to return to Bangladesh, to continue my relationship with this wonderful country and its optimistic and resilient people. Over time, I made a number of very good Bangladeshi friends who continued to keep me updated about developments in Dhaka.

Last year, I decided to leave L’Oreal and set up a cosmetics/healthcare business focusing on developing products for emerging markets using cutting edge Japanese technology and key ingredients developed by global market leaders in beauty products such as Shiseido and Kanebo, but with a goal of manufacturing them more cheaply in a low cost developing country. I travelled to a wide range of countries to find the best market to start my business including Morocco, Vietnam, Indonesia, Malaysia, and Thailand amongst others. But I ended up choosing Bangladesh as the country that offered the greatest opportunity for EM skincare products having the right balance between low labour costs and a large domestic market of 160 million people.

I am excited and encouraged by the recent deepening of Japanese-Bangladeshi economic ties. It offers major opportunities for Japanese companies to use Bangladesh as a low cost and competitive re-export and logistics hub for the region. For Bangladesh, Japanese FDI will help export diversification, technology transfer, and the rapid development of new industries. The key remains follow through by the Bangladeshi and Japanese governments and private sector companies to ensure the opportunity is not wasted. This “Bangla-phile” remains optimistic about a bright future for this great country.