Creating the right ground for Japanese investment

As a development partner, Japan has for decades been a country Bangladesh relied on not only for development projects but also for facilitating a host of economic activities with the prospect of Japanese investment in the country in a big way. The recent visit of Japan's economy, trade and industry minister Yasutoshi Nishimura to Dhaka appears to have made some headway in the direction of investment from Japan in Bangladesh.
Speaking at a day-long meeting titled, "Bangladesh-Japan Economic Relations for the Next 50 Years: for the industry upgradation of Bangladesh" in the capital, the Japanese minister expressed strong optimism that investors from his country would soon find Bangladesh a place of their choice, and that the process has already started with relocation of some industrial units. He also said the economic relationship between Bangladesh and Japan for the next 50 years will be based on three pillars: Bangladesh's industrial upgrading, the relocation of Japanese companies, and the realistic energy transition. Mr. Nishimura focused on six areas as the potential fields of public-private cooperation: garment, heavy industries, logistics, circular economy, clean energy, and IT. Bangladesh commerce minister Tipu Munshi, Jetro President Kazushige Nobutani and Japanese Ambassador to Bangladesh Kiminori Iwama also spoke on the occasion.
Currently, nearly 350 Japanese companies are operating in Bangladesh, with more than $380 million in combined investment. In 2022, Bangladesh received more than $100 million in investment from Japan, a record, as the number of Japanese companies quadrupled in the country over the last one decade, said the Japanese minister.
There are moves already in place in Bangladesh to facilitate Japanese investors. Notable among them, is the Japanese Economic Zone, work on which is progressing. The idea of economic zone with broader implications to cater to both domestic and overseas needs seems to fit in with the objective of achieving multiplier gains from Japanese investment. The 1,000-acre economic zone to be exclusively used by Japanese firms is being developed in Araihazar upazila of Narayanganj, which is Bangladesh's first ever economic zone under the government-to-government initiative. Japan has allocated US$350 million in special loans to set up the US$1.0 billion economic zone, making it the largest such assistance for a SEZ in Asia. This indeed is a remarkable move to attract investment from an industrial economy like Japan.
The Araihazar Economic Zone, which is to be operational by next year, is seeking to draw investments from automakers, such as Suzuki Motor Corp and Mitsubishi Corp. Japan Tobacco Inc and Honda Motor Co. These are among the largest Japanese investors in Bangladesh.
Japan is incentivising its companies to shift manufacturing facilities out of China and adding Bangladesh to a list of preferred destinations for relocating the factories. For years, Japanese manufacturers have been seeking lower labour costs and supply-chain diversification by moving some production units out of China, as wages there rose and infrastructure in countries like Vietnam and Bangladesh improved.
In 2008, the Japanese government announced the "China Plus One" policy, focusing on relocating its sunset industries from China to other countries. The aim was to mainly reduce over-dependence on China because of the significant rise in cost of production there. Moreover, Japan wanted to diversify from its single-sourcing destination apprehending disruptions.
The shift, according to experts, was necessary as China was home to more than 80 per cent of all Japanese foreign investments, with most of these operating since the early 1980s. Aided by government incentives, 33,050 Japanese companies with more than $57 billion in investments started relocating to different Asian countries and elsewhere, according to the Japan External Trade Organisation (Jetro). The recipient Asian countries were mainly Vietnam, Cambodia, Myanmar and Thailand. The main factors that made these countries preferred destinations for relocation were their development strategies around foreign direct investment and integration in global value chains alongside considerable strides in the area of inclusive and sustainable development. It is here that Bangladesh lagged behind. Despite improvements in infrastructure and related logistics, Bangladesh is yet to take advantage of Japan's China Plus One policy. No sunset industrial plant from China was shifted to Bangladesh under the policy. Though investment of Japanese firms in Bangladesh now stands at $380 million, it is 0.1 per cent of what they invested in Asia, according to Japan External Trade Organisation (Jetro).
The visit of the Japanese minister is most likely to cause some positive ripples for the authorities towards creating a congenial environment for attracting Japanese investors. As mentioned, Bangladesh has missed on the China Plus One policy of Japan in the relocation of sunset industries, but now that the economic zone for Japanese investors is in place, efforts must be there to make sure that this time intending investors find adequate facilities to meet their requirements. Of the facilities, infrastructure and logistics are of the highest importance.

wasiahmed.bd@gmail.com