Utilising the full economic potential of Japan-Bangladesh ties
To reach the full potential of their bilateral commerce and diplomatic ties, both nations must sign a Free Commerce Agreement and support one another on the international stage
The start of Bangladesh and Japan's 51st year of friendship and cooperation will be celebrated in 2023. The two nations have maintained diplomatic relations since 1972, when Japan acknowledged Bangladesh's independence.
Japan has developed into one of Bangladesh's most important bilateral donors and investors over this period of time. The political alliance and economic and investment ties between the two nations have also grown dramatically in recent years. Therefore, it is the ideal time for both nations to take advantage of new opportunities to strengthen their current connections.
Japan has been Bangladesh's top development partner, helping the nation advance in fields including infrastructure, manufacturing technology and human resources. In addition, the number of Japanese companies operating in Bangladesh is growing.
For instance, the Japan International Cooperation Agency has operated in Dhaka since 1972. Bangladesh has received $24.72 billion in projects, food and commodities from JICA since 1974 in the form of loans, grants and technical assistance.
In 2022, Bangladesh created a special economic zone with a surface area of 1,000 acres with assistance from the Japan International Cooperation Agency. This economic zone has served as a launchpad for increased private-sector investment in Bangladesh.
The economic zone will also enable Japanese corporate endeavours in a variety of industries, including agribusiness, ICT, manufacturing, chemicals, automobiles, textiles and apparel, and pharmaceuticals, among others.
Over the past ten years, the number of Japanese businesses operating in Bangladesh has tripled to over 315. According to the Japan External Trade Organization, 71% of the companies are eager to grow their operations over the next two years because they see Bangladesh as a promising place to invest.
With Japan ranking as the fifth-largest supplier nation, Bangladesh imports more than $2 billion worth of goods each year. Japan, on the other hand, is a significant purchaser of Bangladeshi textiles and apparel. Bangladesh's exports of RMG products to Japan have virtually doubled during the past ten years.
Japan may increase its imports of these products from Bangladesh as it works to diversify its supply chains. Bangladesh earned $1.09 billion in export income from Japan in Fiscal Year 2022, with a target of tripling that amount by Fiscal Year 2023. Both nations can trade agricultural items, jute products, fishery products, sugar and pharmaceuticals in addition to textiles and apparel.
One of the factors attracting Japanese companies to Bangladesh for investment is its location. Bangladesh is a member of the Indo-Pacific region, and due to its taxation, open and free trade system, infrastructure development, seaports and business environment, it serves as a centre for foreign investment.
Japan may also profit from Bangladesh's plentiful resources by funding the nation's mineral and natural gas extraction. Bangladesh plans to switch to renewable energy for 40% of its energy needs by 2041. Japan can also invest in Bangladesh's attempt to reduce its carbon footprint. The areas where Japan has investment prospects in Bangladesh are ocean thermal, tidal, offshore wind and solar power. All these have the potential to boost the nation's electricity generation considerably.
By 2030, Bangladesh is anticipated to rank as the ninth-largest consumer market in the world. It is also expected to be one of South Asia's most open and trade-focused countries.
Japanese companies can benefit from the country's expanding middle-class population by increasing their involvement in Bangladesh's rising consumer goods, healthcare and education sectors. Bangladesh has a substantial population of recent graduates, which makes it a suitable location for companies looking for trained labour and inexpensive manufacturing costs.
Another area of potential cooperation between the two countries is infrastructure development, particularly in areas of energy and transportation. The Matarbari deep seaport, the Matarbari coal-fired power plant, the third terminal of the Hazrat Shahjalal International Airport in Dhaka, the Bangabandhu Rail Bridge across the Jamuna River and the Dhaka Metro Rail are just a few of the massive infrastructure projects with which Japan is assisting Bangladesh.
Japan has already provided Bangladesh an estimated $9.2 billion in overseas development assistance (ODA). The country will require additional infrastructure as it advances and grows economically, and Japan can help Bangladesh with it.
Additionally, there are significant chances for investing in Bangladesh's digital economy. Bangladesh aims to modernise its economy to become more innovative, effective and knowledge-based as part of its "2041 Smart Bangladesh Vision." The second-largest provider of internet-based employment possibilities worldwide is now Bangladesh.
Due to its sizable population, growing middle class and rising internet consumer rates, the nation is ideally situated to play a significant role in the global digital economy. Bangladesh offers prospective investment opportunities for Japan in e-commerce, digital payment systems, mobile banking, microfinance and digital marketing.
Bangladesh would benefit from having a strong connection with Japan if it wanted to realise its full economic potential, overcome obstacles in its path to graduate from its status as the Least Developed Country in 2026 and expand its network of diplomatic ties with other important powers.
To reach the full potential of their bilateral commerce and diplomatic ties, both nations must sign a Free Commerce Agreement and support one another on the international stage.
Fumiko Yamada works as a Research Associate at the University of Melbourne, Australia. She received her degree in South Asian Studies from the University of Toronto in Canada.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.