Japan and Bangladesh have maintained friendly relations since February 10th, 1972, through economic and technical cooperation, cultural exchanges, and mutual visits. Japan has been a major development partner for Bangladesh, extending support to the efforts of Bangladesh for its economic and social development. Mutual support and cooperation in the international arena have also produced excellent results and deepened the trust between both governments. In the private economic sector, bilateral relations are increasingly strengthened and diversified. Recently team Textile Focus met H.E. ITO Naoki, Ambassador Extraordinary and Plenipotentiary of Japan to the People’s Republic of Bangladesh. They discussed different issues on Bangladesh-Japan bilateral relations, current business scenario, development activities, etc. Key points of the discussion have been mentioned below for our readers-
Textile Focus: How do you see the economic growth of Bangladesh, especially in the Textile and Apparel Sector?
H.E. ITO Naoki: Bangladesh has been achieving remarkable economic growth. So now, Bangladesh has become the model of economic development in this region. Without a doubt, Bangladesh will be the fastest growing economy in Asia in this decade, making the most of its geographical location, connecting India and ASEAN countries. This country has tremendous economic growth potentials.
The textile and RMG industry has been the mainstay of economic growth. 80% of foreign export comes from this sector. Yes, it is crucial to see the manufacturing industries diversify. Still, the textile and RMG sector will need to continue to play a vital role in the economic growth of this country. As you may know, Japan is Bangladesh’s largest export market in Asia. Japan imports more than India or China from Bangladesh. Two years back, Japan imported $ 1.3 billion. Compared to the figure in 2012, that more than doubled. I think textile export from Bangladesh to Japan has been in the right direction on the increasing trajectory. I am delighted to see the current export trend from here to Japan and the business partnership in the textile sector between Japan and Bangladesh going forward.
Textile Focus: What is your observation during the pandemic in terms of the economic perspective of Bangladesh and Japan?
H.E. ITO Naoki: Covid 19 is a global pandemic, and naturally, the pandemic affected both Japan and Bangladesh. Nevertheless, Bangladesh has been showing positive growth in the current fiscal year. There was a period of negative growth in Japan. Now both Bangladesh and Japan are seeing better prospects of economic recovery in the very near future. But the two countries need to continue to join hands to fight against the global pandemic because the situation is still worrisome. We don’t know yet in which direction the pandemic situation goes here in Bangladesh and Japan.
Last year, Japan provided 35 billion yen as the first budget support to this country. Also, through the international organizations or directly to the Ministry of Health, we provided assistance to Bangladesh to curb the corona pandemic. I know that this pandemic affected women more severely. One analysis showed that 90% of women from SME industries lost their income. On a global basis, those sectors where women have relatively large employment opportunities like retail, tourism, and hotels had negative impacts. So, women’s employment was most affected. We must think about how we can find some way out, some help to women at work. I understand that the majority of those working in the Bangladeshi RMG sector are women, and they are the ones who have suffered. We need to come up with some measures or tools for support.
Textile Focus: Many Japanese buyers are importing apparel from Bangladesh. How can Bangladesh boost more markets in Japan?
H.E. ITO Naoki: The textile export from Bangladesh is steadily growing. Still, I am sure that there is room for further growth. As you know, some of the well-known brands of Japan such as Uniqlo, Motherhouse, and YKK are already in the market and actively doing operations here in Bangladesh. Even in Japan, we have the opportunity to see more products ‘Made In Bangladesh.’ Bangladeshi products are getting more common in the Japanese market in recent years. And what I would like to emphasize here is the importance of value addition to the Made in Bangladesh products. You can increase productivity here, you can improve quality, and importantly you need to establish a brand image of Made in Bangladesh. That’s a very significant effort.
Also, the possible involvement of Japanese companies in Bangladesh for backward linkage industries is worth pursuing. A challenge for the Bangladeshi textile industry is creating and strengthening backward linkage industries like spinning, fabrics making, and so forth. If you do so, you can boost the entire sector. Then, you can have a more competitive edge compared to neighboring countries, including Vietnam, China, Myanmar, and Cambodia. My hope is that more Japanese companies will participate in the backward linkage industries. Recently, I was pleased to note that Matsuoka Corporation, one of the Japanese companies in Ishwardi EPZ, decided to invest 25 million dollars in expanding their business.
Also, an agenda for the future is to start a dialogue between Japan and Bangladesh Governments for free trade agreement because Bangladesh is to graduate from LDC to DC in 2026. So, Bangladesh needs a new framework for enhancing trade and investment with Japan. I want to raise one issue related to export promotion. If any joint venture or Bangladeshi company export textile products to a new market, they can get cash incentives of 4%. Somehow, foreign companies do not qualify for these incentives. This policy does not make sense. That is intended to increase export products from here to a new market such as Japan, China, Korea, and Australia. But if the companies from those countries own the manufacturers here, they are not eligible for the cash incentives. Some people say this is discriminatory, but my emphasis is that the policy objective doesn’t match the policy implementation. I have been advocating that the 4% cash incentives for RMG exporters to new markets should also be available to foreign companies, so-called type A companies. I do hope that we will see the new policy soon.
Textile Focus: Could you please share Japanese development projects in Bangladesh that are related to the Textile Industry?
H.E. ITO Naoki: As you will know, JICA has been doing many quality infrastructures development projects, such as Dhaka Metro, Terminal 3 extension of the International Airport, Matarbari deep seaport, and Bangabandhu Railway Bridge. JICA’s program and projects are very comprehensive.
In this sector, JICA has schemes of providing two-step loans that have benefited the textile and RMG industry. There are two schemes. One is through Bangladesh Bank to strengthen earthquake resistance and fireproof facilities for the RMG factories. Six of them have received two-step loans to improve design, planning, and construction work. Another two-step loan scheme is for the introduction of energy-saving equipment in RMG factories. The amount of loans stands at more than 8 billion takas to 20 companies.
Moreover, the Araihazar Special Economic Zone is also part of JICA’s development program. JICA is giving financial and technical support. I believe that the more Japanese companies invest, the more trade flow will take place. So the success of Araihazar is critical for our future economic ties. We intend to provide the best possible facilities and environment for Japanese companies in Asia. Then, they will be more attracted to come to Bangladesh by investing in manufacturing. I sincerely hope that the Araihazar SEZ will provide investment opportunities also for textiles companies of Japan.
Textile Focus: What are the challenges between Bangladesh Japan Bilateral trade relation and how you will overcome?
H.E. ITO Naoki: There are some challenges and issues Bangladesh can resolve to provide a better business environment and more favorable investment climate. The important thing is that Bangladesh needs to address Japanese companies already running operations here in Bangladesh. Unless you resolve issues held by existing companies, new companies will not follow soon. Those prospective investors are looking carefully at the situation what existing companies are facing. I appreciate the fact that despite the corona pandemic, our interlocutors in the government have done good jobs. They have resolved some of those claimed challenges. They have shown progress in regulatory reform on some of the restrictions and red tapes that existed. I have indeed witnessed some positive approaches.
However, there remain some issues like the delay in opening and processing the Letter of Credit (L/C) when you settle the import account. There are restrictions on Telegraphic Transfer (T/T). In Asia, there are only two countries where T/T is not the primary way of trade financing. One is Bangladesh, and another in Pakistan. It’s rather ironic that after 50 years of independence, Bangladesh is still placing similar restrictions. So I hope that the government will induce Telegraphic Transfer to the standard method in settling trade transactions. That is one of the common complaints by Japanese Companies, together with customs clearance, which takes time and cost. I would also like to point out the grafting culture, such as the request for speed money. That has to change for a better image of the country. Bangladesh deserves better than these, but in a way, for persisting culture, they are lagging.
We all should stand for a better brand image of Bangladesh. Bangladesh can reduce costs and bring ease for doing business.
Textile Focus: Thank you.