The Bangladeshis are very grateful to Japan for its generous and prompt support during all natural and humanitarian disasters they faced and its equally generous official grant and concessional financing support for economic and social development of their country. The retrofitting financing assistance offer for our apparels manufacturer-exporters immediately following last year's Rana Plaza disaster is just one recent example among numerous others. Growth of trade and investment relationships between businesses in Japan and Bangladesh have however remained sluggish and far below potential. Bilateral trade totalled under USD 2.0 billion in FY14; Bangladesh's bilateral trade growth with Japan lags its overall external trade growth.
Bangladesh remains in trade deficit with Japan unlike with most other advanced economies, although exports are lately showing some signs of picking up. Bangladesh exported apparels worth $ 572.27 million to Japan in fiscal year 2013-14 against a meagre $74.37 million in fiscal year 2008-09, an eight times growth in just over five years. Surely, Bangladesh can have a larger share of $35.0-billion Japanese apparel market if it can play its card well and remain compliant in labour and environmental standard. As of today, Japanese FDI (foreign direct investment) inflows into Bangladesh remain small - under USD 100 million in 2013 even after more than trebling from the preceding year's figure.
This minuscule engagement level between businesses in Japan and Bangladesh is surprising, given the outward-looking resurgence thrust in the Japanese economy imparted by Prime Minister Shinzo Abe and Bangladesh economy's growth dynamism evident in its ongoing sustained spell of six-plus per cent annual average real GDP (gross domestic product) growth for well over a decade now, stable macro financial environment with single-digit falling CPI (Consumer Price Index) inflation, fiscal deficits in lower single-digit GDP percentage and strong external sector position with positive BoP (balance of payment) current account balance, growing foreign exchange reserves, and stable domestic currency often under appreciation pressure. That the Bangladesh's financial sector is stable and resilient has been confirmed repeatedly by favourable ratings of top global rating agencies like S&P, Moody's and of late the Fitch. Its financial stability remained unimpaired during episodes of major external turbulences like the East Asian currency crisis and the subsequent global financial crisis. Bangladesh is continually strengthening its financial sector management and supervision practices and norms in line with global best practice standards. Risk-focused Basel II capital adequacy regime is already in place, and work is underway for adoption of Basel III with revised capital norms and new liquidity coverage and leverage criteria. As a WTO (World Trade Organisation) founder member Bangladesh is fully open in external trade, and as a low-income economy enjoys favoured access to most of the advanced economy markets.
Current global economic and geopolitical developments have led Bangladesh to focus more on Asia and the East for acquiring new trade and investment. Japan's eagerness in helping Bangladesh get into the Regional Comprehensive Economic Partnership (RCEP) is noted gratefully. Bangladesh's inclusion in this regional value chain will be to our mutual advantage - with Japanese businesses using Bangladesh as a cost-efficient manufacturing base for such items as automobile parts, electrical and electronic goods, apparels and various other consumer goods.
Bangladesh's policy stance on FDI and FPI (foreign portfolio investment) inflows are among the most liberal in South Asia region. The Bangladesh Bank is continually engaging with foreign investor communities in Bangladesh for facilitation of all kinds of business-related external transactions including inflows of equity and debt, and outflows of royalty/technical fees, profits/dividends and disinvestment proceeds including capital gains. Major recent new facilitations include enhancement of family remittance ceiling for expatriates to 75 per cent of salaries, and repatriability of sale proceeds of foreign equity in unlisted companies at fair value based on assets, income and earnings trends instead of solely at net asset value. Foreign-owned businesses can now access local and external financing on the same basis as for locally-owned businesses, and their interest-free short-term borrowings from their parent businesses at home require no prior approval of the central bank.
Countrywide chains of job-oriented vocational training in Bangladesh are continually adding into its large pool of semi-skilled manpower whose skills are further upgradable easily with some hands on training in actual job environment. Tech-savvy young science and technology graduates are also coming out from the universities in large numbers every year. Foreign investors in Bangladesh can hire from these manpower pool at much lower cost than elsewhere. Besides scope for cost-efficient labour-intensive manufacturing there are ample opportunities for big-ticket Japanese investments in Bangladesh in areas like energy, development of deep sea port, LNG storage terminals and other physical infrastructure, tourism, tertiary healthcare and so forth. It is heartening to find that Japan is willingly coming forward to invest in some of these mega projects. Bangladesh has a vibrant SME (small and medium enterprises) light engineering sector that Japanese automakers and machine builders can take advantage of with orders for parts and spares. Manufacture of solar PV panels, energy-efficient LED lamps, TVs, computer monitors and other electrical and electronic appliances are also likely to be cost-efficient. Japanese businesses would also find Bangladesh attractive as an outsourcing destination for software development and other IT-enabled back office services. Relocation of export manufacturing units in Bangladesh will give Japanese businesses the advantage of favoured access to many advanced economy markets, besides cost-efficiency. Manufacturing for Bangladesh's own large domestic market with a large and growing middle to higher income population segments would also be attractive for Japanese entrepreneurs. Both wholly foreign ownership and joint venture options with the private and public sector are open for Japanese and other foreign investors.
The Bangladesh government has already promised a sizable new SEZ (special economic zone) in Chittagong specifically for Japanese investors, and is further considering a generous set of incentives for investors in SEZs including time-bound full and partial waivers on tax/vat/stamp duty etc. As Japanese businesses are looking towards new investment destinations and as Bangladesh authorities are eager and willing to facilitate Japanese investments as part of its Look East re-orientation of trade and investment promotion, the Japanese and Bangladeshi business leaders should work together in taking full advantage of all the existing and new facilities and bring about a major new upturn in our bilateral trade and investment relationships. Bangladesh looks forward to Japan, which is its time-tested friend, to remain its important partner and help attain its development vision of higher middle income country status by 2030 and advanced economy status by another decade or so.
The article is adapted from a speech Dr. Atiur Rahman, Governor of Bangladesh Bank, delivered at the Japan-Bangladesh Business Forum, held on September 07, 2014 at a hotel in Dhaka. afm.asad@bb.org.bd
Economic collaboration with Japan poised for a big boost
Atiur Rahman | Published: September 09, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
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