Bangladesh as the next destination: Deepening economic ties with Japan

Japan has been a trustworthy and dependable friend since the birth of Bangladesh. It gives Bangladesh immense pride and confidence that Japan was one of the earliest countries to recognise our independence. Since then, we have had a strong bond with Japan. It has been the single largest development partner of Bangladesh. We are now looking into strengthening our economic relations, particularly business and investment relations, with Japan. We hope, in the near future, the relationship between Japan and Bangladesh will reach new heights, and as a newspaper, The Daily Star will support every effort that strengthens the bond between these two trusted friends.

Japan is now the ninth-largest export destination for Bangladesh. On the other hand, as per one estimate, 75 percent of Japanese companies see Bangladesh as a priority for investment. There are more than 250 Japanese companies in Bangladesh. Bangladesh has improved a lot in the Global Competitiveness Index. However, there are still issues such as poor infrastructure and weak regulatory environment that make Bangladesh a disincentive for many investors. We need to overcome these issues to attract more investments from Japan.

Japan has always been a major development partner of Bangladesh. As of 2019, Japan is Bangladesh’s ninth-largest export market. On the other hand, Japan stands fourth after China, India and Singapore, in terms of major importing countries. Although the trade gap between Japan and Bangladesh has been widening in dollar terms, the ratio of exports to imports has been increasing in recent years, which signifies that Bangladesh is gaining an export growth relative to the import growth.

The Bay of Bengal Industrial Growth Belt (BIG-B) intends to accelerate industrial agglomeration along the Dhaka-Chittagong-Cox’s Bazar belt area and beyond, and the primary emphasis is on improving connectivity. Along with this, the strategy also aims to include the construction of a major power hub in Matarbari and a new deep-sea port.

So, why Bangladesh? Bangladesh offers a number of opportunities and under-utilised potential which can be exploited for the mutual benefit of Bangladesh and Japan. These include a large pool of semi-skilled and skilled labour, as Japan faces a serious shortage of working-age population. Japan has a high level of accumulated savings which it needs to invest in countries outside Japan due to its ageing population and to get adequate return on investment. Another reason behind choosing Bangladesh is that Japan has decided to follow the China-plus policy, due to which it is trying to geographically diversify its production base across the region.

On the other hand, Bangladesh has great growth prospects in comparison to matured economies. It also has a geographical and geopolitical advantage, being located between Asia’s two largest economies, India and China.

However, Japan’s inflow of FDI remains quite low and it does not even fall under the top 10 FDI originating countries for Bangladesh, both in terms of flow and stock. Japanese investment in Bangladesh was USD 58.4 million in 2018 while that in Myanmar was USD 384 million. This unfortunate situation is mostly due to Bangladesh’s failure in attracting FDI and the negative perception about future potentials for foreign investment in Bangladeshi economy. It is most unfortunate because Bangladesh is a much bigger economy, has a larger and better production base, has a much larger and fast-growing domestic market of more than USD 300 billion and a population of 170 million, and also offers a much better mix of skilled workers when compared with countries like Myanmar or Cambodia. However, attracting FDI from Japan and other countries continues to remain a major challenge, given Bangladesh’s poor ranking in doing business, international productivity measures and numerous other indicators. Bangladesh should preach to the foreign investors that all foreign companies operating in Bangladesh are expanding and are likely to stay forever. If Japan can enhance its private investments and FDI in Bangladesh, it will be beneficial for both the countries. Bangladesh and Japan’s economic relations will be better with the inflow of investments, rather than just aid.