Bangladesh-Japan EPA success hinges on removing barriers to business: Economists

The success of the Bangladesh-Japan Economic Partnership Agreement (EPA) will depend largely on the country's ability to reduce regulatory barriers, and foster a more efficient, investor-friendly business environment, according to leading economists and industry stakeholders.

Speaking at a seminar organised by the Centre for Policy Dialogue (CPD) at the Japanese Embassy in Dhaka yesterday, CPD Executive Director Fahmida Khatun highlighted the significant regulatory hurdles currently facing investors.

She noted that establishing a business in Bangladesh often requires more than 20 separate licences and approvals from various government agencies.

"These bureaucratic hurdles significantly discourage foreign investors and reduce Bangladesh's competitiveness," Fahmida remarked.

She urged the government to prioritise the simplification of registration and licensing procedures to attract Japanese capital once the EPA – signed on 6 February 2024 – is fully implemented.

Beyond regulation, the seminar addressed critical physical constraints. Infrastructure deficits, including electricity shortages and port inefficiencies, continue to drive up production costs.

The CPD executive director also emphasised the necessity of upgrading national inspection systems to meet Japan's stringent quality and safety standards, which is vital for expanding exports beyond traditional levels.

"Prioritise simplifying registration and licensing procedures to attract Japanese capital once the EPA is fully implemented."

Fahmida Khatun, Executive Director, CPD

Saida Shinichi, ambassador extraordinary and plenipotentiary of Japan to Bangladesh, urged Bangladesh to strengthen institutional capacity, pursue industrial diversification and ensure effective implementation of the Bangladesh-Japan Economic Partnership Agreement to fully utilise the opportunities created by the landmark trade deal.

Speaking as a special guest at the seminar, the envoy said the EPA marks a historic milestone in bilateral relations and could accelerate Bangladesh's transition towards an advanced industrial economy.

"EPA itself is not just about tariff reductions," he said, stressing that the agreement also covers broader rules related to customs procedures, trade regulations and services. Effective implementation of these rules will be essential to realise the full benefits of the deal.

Masrur Reaz, chairman of Policy Exchange Bangladesh, said the proposed Bangladesh-Japan Economic Partnership Agreement could help both countries manage emerging risks and seize new opportunities amid major global and regional economic transitions.

"Bangladesh will enter a much more competitive global trade environment where market access may become more expensive," he said. "This creates risks not only for Bangladesh's exports but also for Japanese companies operating in the country."

Reaz noted that surveys among Japanese businesses show many companies could shift part of their production elsewhere if duty-free access is not replaced by mechanisms such as an EPA or free trade agreement.

He suggested that future reviews of the EPA should consider including sectors such as leather and footwear, one of Bangladesh's major export industries.

Syed Nasim Manzur, president of the Bangladesh Footwear and Leather Goods and Accessories Exporters' Association, expressed hope that the agreement would create opportunities for multiple sectors to export to Japan, not just the ready-made garment industry.

Highlighting policy challenges, Manzur said Bangladesh still faces an "anti-export bias," where businesses often find it more profitable to sell in the domestic market than to export.

Leading knitwear exporter Fazlul Hoque said the proposed Bangladesh-Japan EPA could provide a strong foundation for trade growth beyond Bangladesh's graduation from the United Nations list of Least Developed Countries.

However, he cautioned that entering the Japanese market requires patience and sustained engagement from both exporters and policymakers.