Japan closely watching how Bangladesh restores macroeconomic stability: Ambassador

Japanese Ambassador to Bangladesh IWAMA Kiminori has said Bangladesh's foreign exchange reserves are decreasing and the country is facing so many challenges.

"Businesses around the world, including Japan, are closely watching how Bangladesh overcomes this difficult situation in order to restore the country's macroeconomic stability," he said at a seminar on the proposed budget focusing on "Investment Prospects and Key Tax Proposals Highlighted with Business Impacts."

The Japan-Bangladesh Chamber of Commerce and Industry (JBCCI) organised the event with the support of the JETRO (Japan External Trade Organization) in the capital on Wednesday.

The Japanese envoy said that, in order to attract more investments from foreign countries, including Japan, Bangladesh has to pay close attention to the management of its macroeconomics, especially since the 2022 invasion of Russia in Ukraine.

"Amid the various challenging situations, including achieving the IMF's budget support condition, as a government official, I understand how hard it might be to formulate this year's budget plan. There are some positive initiatives in the proposed budget, but some ideas for improvement remain to be addressed," he added.

IWAMA Kiminori said, "We will continue to monitor progress in the remaining areas, especially tax reform for improving revenue collection, breaking away from dependence on indirect taxes, rebuilding foreign reserves, and suppressing inflation."

He said Bangladesh has a number of challenges, as recognised by all of us here, such as cumbersome approval procedures, delays in customs clearance, restrictions on customs duties, and relaxation of restrictions on overseas remittances from Bangladesh. In particular, delays in L/C payments are often encountered in Bangladesh, which increases the financial and time burden on companies and thus requires immediate action.

The discussion on the overall tax reform, especially reducing the reliance on customs duties in the tax revenue, is extremely essential not only from the viewpoint of formulation of a sound budget but also decreasing the burden on the business community, he added.

The Japanese ambassador said, "I reiterate the efforts of the Bangladesh government for designing the budget in the challenging circumstances, but once again I would also like to emphasise that its implementation is important."

"We hope that the budget is going to be properly implemented in a way that the country overcomes the economic crisis, recovers its economic vibrancy, and addresses various social challenges, including poverty reduction and social safety, in cooperation with the IMF and other partners," he added. 

He said the government of Japan is ready to work together with the government of Bangladesh and all stakeholders.

The proposed budget for the fiscal year 2023-24 will not cause any problem in the flow of foreign direct investments, said several speakers at the event.

But the high cost of doing business compared to peer countries is hindering our foreign investment, said the speakers.

In a keynote presentation, JBCCI Director Maria Howlader said the proposed finance bill and budget have no special incentive for foreign direct investment.

"However, 20% will be deducted as tax deducted at source (TDS) on foreign loan interest payments. This will increase the cost of private entrepreneurs taking foreign loans," she added.

She said, due to the increase in tax rates in some sectors in the proposed budget, expenditures in the tobacco, cement, software, and mobile sectors will increase.

Another keynote speaker, Selim Raihan, executive director of Sanem, said, "The cost of doing business in our country is much higher than in other countries, which is a major cause of concern for foreign investors. And that is why we are lagging far behind in foreign direct investment."

"We have to reduce high inflation and make the foreign exchange market stable," he added.

Abdul Mazid, former chairman of the National Board of Revenue, said, "Only a simplified tax policy can attract foreign investments. But our tax calculation here is very complicated. Because tax rates are imposed differently in different sectors."

In the panel discussion at the seminar, the speakers highlighted the importance of economic zones. They think that if it is possible to provide all kinds of logistical support in the economic zones, foreign investment will increase.