Home ›› 12 Dec 2022 ›› Front
Policymakers should prioritise extending the market access in Japan for at least five years and retain the existing trade benefits after Bangladesh graduates from the Least Developed Country (LDC) status, experts have said.
Along with that, Bangladesh should continue to take low-interest loan assistance from Japan, the country’s largest single development partner, they added.
Analysts said initiatives should also be taken to bring the Japanese companies that are withdrawing investment from China to Bangladesh and increase skilled manpower in the private sector and boost the manmade fibre manufacturing industry by bringing in more Japanese investment.
Moreover, the government projects that are being implemented with Japan’s financing should be completed as quickly as possible to bring in more investment and benefit, experts and analysts told The Business Post.
Centre for Policy Dialogue’s (CPD) Distinguished Fellow Professor Mustafizur Rahman said, “We have many ongoing infrastructure development projects that are funded by Japan.
“Using these projects, especially the Matarbari deep sea port, we need to figure out how to bring more investment from Japan.”
LDC graduation and market access
Bangladesh was supposed to graduate from LDC status in 2024 but it got delayed by two years due to the Covid-19 pandemic. The final transition is now set to happen in 2026. After that, as a developing country, Bangladesh will not be eligible for trade benefits as an LDC. However, the European Union (EU) has already said that it will give Bangladesh trade benefits till 2029.
Experts believe that Bangladesh should put the most emphasis on taking similar benefits from Japan.
Mustafizur said, “After LDC graduation, we have to take strong steps to get market access extended in Japan for at least five more years like the EU has decided to give us.”
RAPID Chairman and trade economics specialist Abdur Razzak said the UK government has also pledged that Bangladesh will get the trade benefits there as before even after LDC graduation.
“We can say this to Japan. If the trade facilities are extended, then the free trade agreement (FTA) should be extended within that period,” he said.
According to the Export Promotion Bureau, Bangladesh earned $1.35 billion from exports to Japan in FY2021-22. The main export item was readymade garments. On the other hand, imports from Japan amounted to $2.43 billion in the last fiscal year. The main imported items were ships, boats, floating structures, iron, steel and vehicles. Japan was the seventh-largest country in terms of imports in FY22.
Experts said instead of focusing on diversifying products, Bangladesh should try to get Japanese investors to come here, produce or manufacture their preferred products and export them home.
“They can produce goods here with their culture, sense of taste and choice and then export them to Japan. This could be the best way to increase exports,” said Razzak.
Bangladesh Special Economic Zone, also known as the Japanese economic zone, established at Araihazar Upazila in Narayanganj is already eying $1.5 billion in investment. Some 40 foreign companies, 30 of which are Japanese, have so far expressed interest to invest here, according to Bangladesh Economic Zones Authority.
Attracting investment
Japanese investors are reducing investments in China due to geopolitical tensions and if Bangladesh can take this opportunity to bring that money here as part of its medium-term policy, the country’s investment situation will change, experts opined.
Mustafizur said 70 per cent of the goods exported from China to Japan are the results of Japanese investments. “Now they want to move out with them.
“Foreign investment will increase a lot if Bangladesh can use this opportunity. It’ll be great for Bangladesh in the medium term. We have to emphasise a lot on this.”
Echoing his remarks, Razzak added, “Yes, there is a separate economic zone for Japan. But more arrangements have to be made beyond that. Only then, more investments will come.”
He emphasised bringing Japanese investment in Bangladesh to create more skilled manpower and boost the manmade fibre manufacturing industry.
“Our RMG sector is doing very well in cotton but the demand for manmade fibres is increasing globally. If we can bring Japanese investment, our industry will do much better with their technology,” he stressed.
Besides, Japanese investment can also be brought in to manufacture electronics equipment, Razzak added.
In addition, Mustafizur believes that by using Japan’s Bay of Bengal Industrial Growth Belt (Big-B) Initiative, Bangladesh can bring in a large amount of investment. According to Bangladesh Bank data, Japan’s investment here was $91.05 million in 2021 and the total foreign direct investment stock position was $487.37 million.
Concessional loan
With LDC graduation scheduled for 2026, Bangladesh has already graduated to become a lower middle-income country as defined by the World Bank. Under the circumstances, experts said, the country should look at taking low-interest loans from Japan.
Mustafizur said, “The number of concessional loans from Japan will decrease once we move to the middle-income group. But we have to make sure that we can continue to get this loan.”
According to the Economic Relation Division (ERD), Japan has committed to providing financial support of more than $28.78 billion from 1972 to 2022, such as project assistance, food assistance, commodity assistance, technical assistance and budget support to Bangladesh in the form of loans and grants.
The country has disbursed $18.40 billion to Bangladesh until FY22.
In FY22, Japan had disbursed $2.208 billion while the commitment was $1.73 billion, showed ERD data.
Besides, the private sector’s long-term external debt composition with Japan was $179.52 million as of December last year. A total of 88 projects funded by Japan are currently underway in Bangladesh.
