Feasibility study launched to tap trade potential with Japan

As there is huge scope to draw Japanese investment and harness bilateral trade potential along with exports, we have launched a feasibility study, said Commerce Minister Tipu Munshi.

The minister made the remarks during a meeting at his ministry on Monday where Japanese Ambassador to Bangladesh Ito Naoki and Senior Commerce Secretary Tapan Kanti Ghosh were also present.

Tipu Munshi said Japan and Bangladesh can open negotiations on signing of an FTA/EPA on the basis of the feasibility study report after it is completed.

The government took step ahead as Bangladesh and Japan have primarily agreed to sign a free trade agreement (FTA) or economic partnership agreement (EPA) to boost bilateral trade and investment, he added.

“There has a huge potential in service and investment sectors excluding goods to strengthen bilateral relations, and now Japan is the third largest economy in the globe, which is also a key trade partner of Bangladesh.”

Stressing the need for addressing the upcoming challenges and headwinds after the country’s graduation from LDC status, the minister added that the commerce ministry took initiative to join hands through regional trade agreements with key partner countries and trade blocs to continue duty-free access to different countries and expand exports.

Tipu Munshi also expressed the hope that the bilateral FTA or EPA will inked before 2026, the timeline of the country’s graduation from LDC category, so that Bangladesh does not face any difficulties in exporting goods after achieving the status.

Bangladesh will soon enter into negotiations with Japan to complete the agreement based on the feasibility study report, he added.

“During the graduation level, the country may face some difficulties due to cuts in the quota and duty-free access. We want to enjoy the GSP facilities until 2029, although it will be tough.”

Retaining the trade benefits is important because Bangladesh exported more than 73 per cent of the total country’s exports worth over $52 billion last year under the Generalised System of Preferences (GSP) facility as least developed country (LDC).

Putting emphasis on the feasibility study and further agreement, Japanese Ambassador to Bangladesh Ito Naoki said, “Bangladesh has already developed notably and it will need more investments after its graduation from LDC status.”

“If required investment continues the supply of essential products and goods will remain uninterrupted after graduation,” said Naoki, adding that the bilateral relations between Bangladesh and Japan have recently been strengthened.

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.

Bangladesh Special Economic Zone, also known as the Japanese Economic Zone, established at Araihazar upazila in Narayanganj, is eyeing $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.

Experts said that 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 Relations 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.

Japan has disbursed $18.40 billion to Bangladesh until FY22.  

In FY22, Japan had disbursed $2.208 billion while the commitment was $1.73 billion, the ERD data showed.