Japan Bangladesh FTA makes sense

The joint study on Economic Partnership Agreement (EPA) that Bangladesh hopes to conclude with Japan is due to be completed next month. The details of the agreement will be unveiled after final negotiations that are due to take place shortly at ministerial level between the two governments. It is good that due importance has been placed at the top policymaking levels for the fruition of a possible free trade agreement (FTA) as Bangladesh draws closer to LDC graduation in this decade. From what has been published in this newspaper it is understood that deliberations at the joint study group (JSG) are proceeding at speed and EPA should be inked by 2025.

There has been much talk about concluding FTAs with different countries as many of the benefits the country presently enjoys as an LDC will disappear when Bangladesh's transition to middle-income country status. That said, it is imperative to understand that FTAs should only be concluded with those countries with which Bangladesh enjoys some parity in import-export. For instance, doing an FTA with India would bring little benefit as Bangladesh imports more than five times the value of goods it exports to that country. As an FTA would abolish all duties, chances of the domestic industry being obliterated by more competitive products from that country is very high.

The case with Japan is completely different. The difference in trade between the two nations is not that big and manageable. Beyond the trade scenario, Japan is looking for suitable destinations where it may relocate many of its industries as it moves away from China. Several surveys have revealed a positive attitude by Japanese business interests that view Bangladesh positively and are interested in setting up their plants here. In that vein, the Bangladeshi government has also prioritised the setting up of a special economic zone (SEZ) in the country to cater to the needs of Japanese business and indeed a SEZ has been earmarked exclusively for Japanese firms.

This is reflected in a survey conducted in 2021 by the Japan-Bangladesh Chamber of Commerce and Industry (JBCCI) on 300 companies, local firms and those Japanese companies operating in Bangladesh. The findings all point to an overwhelming affirmative answer that there ought to be an FTA between the two countries to further strengthen economic and trade ties. Trade volume between the two countries has witnessed an increase in recent years. "Bangladeshi products presently enjoy duty-and quota-free market access in Japan as the former is still in the LDC group." That means, for Bangladesh to preserve these privileges beyond LDC-graduation, an FTA is a must. Trade data also states that the country's exports to Japan have been on the increase as Bangladesh exported goods worth US$1.35 billion in FY 2021-22, an increase of $170 million from the previous year.

Studies by Bangladesh Trade and Tariff Commission (BTTC) have found that concluding an FTA deal with Japan would be greatly beneficial for the economy, particularly in the post-LDC situation. Hence it is imperative that prior to concluding an FTA with any other country, the BTTC undertakes an exhaustive study to evaluate the pros andcons of what benefit would Bangladeshi producers and manufacturers get from such a deal. There can be shortcuts here because the country is already grappling with large-scale unemployment in the skilled area, and any misstep here would spell disaster for the fledging industrial base that is emerging in the country. Simply signing an FTA will not do. Ease of doing business in Bangladesh is something that is closely watched by foreign companies and necessary steps need to be taken to make the much-touted "one stop service" a reality for foreign investors in Bangladesh.