Tuesday, June 25, 2024
HomeNews & ViewsShaping bilateral economic ties: Expectations of Bangladesh from Japan

Shaping bilateral economic ties: Expectations of Bangladesh from Japan

AKM Asaduzzaman Patwary

Sr. Economic & Policy Analysis Researcher, DCCI.

Japan BD Flag

Bangladesh has emerged as of the fastest-growing economies and role models development for LDCs, with significant progress on many socioeconomic fronts and exemplary achievement over other economies in recent years. During the last decades, Bangladesh witnessed a remarkable paradigm shift in our overall socioeconomic context, with 6% plus average growth reaching 8.13% maximum growth, especially in the last decade until the pandemic hit. However, we revived immensely with 7.10% growth in FY2022 containing the pandemic effects due to resilient, recovery-friendly progressive economic policy and steadfast private sector. With the trend of growing economic competitiveness, Bangladesh is poised to graduate into a developing economy by 2026, followed by a developed nation by 2041, the transformation of Bangladesh into a knowledge-based “Smart Bangladesh.” Throughout this unprecedented journey, many countries and development agencies extended firm support and cooperation to heighten our economy up to this stage. Witnessing our remarkable economic trend and leading global Think tanks, MNCs have made ambitious forecasts about Bangladesh. In this regard, HSBC projected Bangladesh to be the 26th largest economy by 2030, PWC launched the 28th largest by 2030, and the 23rd largest economy by 2050. CEBR, UK, projected that Bangladesh will become the 24th largest economy by 2036. These exclusive ambitions demonstrate our economic readiness and steadiness. Our growing global orientation and economic integration have positioned Bangladesh as one of the proven financial partners in the world. Meanwhile, many developed economies like the USA, Japan, the UK, and China have deepened economic ties with Bangladesh and recognized our emergence. We acknowledge the cordial trade and economic relations between Japan and Bangladesh. Japan is of its significant and longstanding development partners in Bangladesh due to a five-decade-long diplomatic tie. According to our trade information, Japan is Bangladesh’s 8th largest export destination and the 7th largest import source. This evolving relation is reflected in the growing bilateral trade of USD 3.79 billion in FY2022, of which Bangladesh exported USD1.35 billion whereas imported from Japan USD 2.44 billion. We import mainly electronic, automobile, and machinery items and export RMG, leather, and frozen food. The traders in forefront industries steered and made the bilateral trade relation stronger. 

Japan is one of the longstanding and most significant development partners of Bangladesh. Growing trade, friendly diplomatic relations, and a strong foundation of shared commitments and values led to the flourishing of deep-rooted bilateral relations between Bangladesh and Japan on a new scale.

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Japan, no doubt, has become a trusted friend of Bangladesh and extended manifold support. Incremental Japanese assistance to Bangladesh encompasses a wide range of cooperation in energy, transportation, telecommunication, agriculture, infrastructure, water and sanitation, environment, health, education, human resource development, and other sectors of the economy in the form of loan, grant, technical assistance and dispatching of volunteers and experts. JICA provided budget support of a loan of $10 billion as the COVID-19 crisis response emergency support. Bangladesh highly appreciated the vaccine provisions by Japan to manage the pandemic situation. Currently, there are 80 Japanese projects up and running, backed by ODA and fiscal and technical assistance. The Bay of Bengal Industrial Growth Belt (BIG-B) initiative led by Japan has been playing a key role in transforming Bangladesh into the heart of the regional economy by creating a gateway between South Asia and Southeast Asia. The significant projects, including the deep-sea port at Matarbari, the Power hub, and 3rd terminal of the Dhaka airport, will massively improve our logistic state with huge competitiveness and economical premium.

Considering our deep economic ties and the importance of the mutual interests of the two nations, our previous head of state also made several visits to Japan. The visit of the H.E. Prime Minister of Bangladesh is due to widen the horizon of our cooperation. Many extraordinary inferences and business outcomes are expected to happen, marked by many investment and cooperation deals. However, since Japan is our tested and valued well-wisher, we can reach a towering height if shared efforts and strategies are deployed about economic avenues. In this connection, we seek and put forward some suggestions for more significant consideration: 

In Asia, Japan is the 2nd largest export destination of Bangladesh. Export from Bangladesh to Japan is heavily dependent on RMG, leather, and textile articles through the expansion of the export basket. On the other hand, import from Japan to Bangladesh includes vehicles, aircraft, transport equipment, metals, machinery and mechanical appliances, optical, photographic, medical instruments, plastics, mineral products, etc., and low-cost import or assisting the import-substitute industry development with Japanese investment.

Japan provides DFQF access to 97.9% of products of tariff line to Bangladesh except for rice, sugar, fishery products, and articles of leather, and these facilities can be enhanced to 2029, addressing graduation-related challenges of Bangladesh as well as a practical move for FTA for greater market access and the win-win bilateral relationship. It is worth mentioning that meanwhile DFQF facility has been extended by China, the UK, Australia, UAE, and Turkiye.    

The bilateral trade may be enhanced to USD 20 billion by 2030 by rationalizing the trade gap through cooperation, exchange of business delegation, addressing trade barriers, and supporting technology transfer and exchange of 4IR technology in varied local industries for efficiency and productivity enhancement—industrial investment in designated economic zone and Hi-tech parks for Japan.

Our investment climate, featured by wide-ranging fiscal, policy incentives and demographic dividends, provides outstanding investment premiums, unlike other regional peers. Currently, around 320 Japanese companies are operational with great interest in the ecosystem of Bangladesh. JETRO reported that 68% of Japanese companies in Bangladesh plan to expand their business, which justifies Bangladesh as a competitive business hub. Alongside, Japan, the third largest developed economy and partner of many global FTAs, can make a business synergy for Japanese investors to harness our investment dividends and add value to local industrial and supply chain development by leveraging our economy.

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It is worth mentioning that Bangladesh has been consistently prioritizing regulatory reforms to improve our FDI environment. Considering the synergy of technology and innovation strength of Japan and our smooth investment ambiance, Japanese investment can be tied as joint ventures and technology transfer in various promising sectors, including Agro-processing, Shipbuilding, Electronics, Jute, Automobile, Light-engineering industries, ICT in Hi-tech parks and 4IR technologies and SME development to improve our production efficiency, position in the global value chain and cater the global market demands. 

Bilateral trade is getting stronger and enriched due to the diverse contributions of the private sector. Reciprocal cooperation has also achieved excellent outcomes and increased confidence between the two countries to retain mutual interests. Bangladesh is one of Japan’s most prominent export destinations and a trusted investment destination in the world. With this spree, our forefront industries swept across and steered Japan- Bangladesh trade relation has become stronger and better. To scale up the Japanese trade intensity in Bangladesh, frequent exchange of trade delegations and visits are remarkable to fuel and speed up the shared journey of the two nations. BIDA can set up a dedicated Japanese business desk to support Japanese business plans, conduct joint research for determining new business avenues, engage local central chambers and trade associations, and activate Japan and Bangladesh economic cooperation council.

The strategic plans supported by the acumen of the private sector and aggressive investment desire, along with thriving momentum, enable personal sector-driven inclusive growth. However, the positive role, timely and diverse support, and focused initiatives can make a unique relationship between Japan and Bangladesh, exploring new avenues and taking our bilateral relationship to a new height. There are still substantial untapped business opportunities in Bangladesh that Japan can consider through joint ventures and technology transfer or, in other ways, towards a more excellent trajectory to support our regional and global economics with trade benefits in the long run.

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