Grappled with irregularities, Bangladesh fails to exploit Japanese market

For Bangladesh, export to Japan is a multifaceted affair.

The good things are: the island nation holds a $1.28 billion export potential and offers duty- and quota-free market access. The bad aspect is Bangladesh cannot seize it, because of a lack of external trading skill, local bureaucratic tangles, corruption and Bangladesh's higher cost of doing business, according to economists and businessmen at a dialogue in Dhaka Wednesday.

Take the example of Bangladesh's T-shirt and cotton vest export to Japan. The annual export now hovers around only $127 million though the segment is potentially as big as $357 million. In other words, 64% of the export opportunities remain unused.

On the eve of the golden jubilee of Dhaka-Tokyo diplomatic ties, the Centre for Policy Dialogue (CPD) noted Bangladesh can earn $526 million more from the current top ten exporting items if the irregularities are sorted out.

The ten items are now fetching the country $754 million as 77% of the export potentials are untapped.

Meanwhile, Japanese Ambassador to Bangladesh ITO Naoki reminded of the challenges stemming from Bangladesh's official graduation to a developing country in 2026. After graduation, most Bangladeshi products will have to enter the Japanese market with a 7.4% to 12.8% tariff.

The CPD requested for signing a free trade agreement and effective GSP Plus agreements by Japan so that Bangladeshi products can enjoy different market facilities to the island nation. In reply, the ambassador emphasised removing the trade barriers immediately.

ITO Naoki said, "The rapidly developing economy of Bangladesh is attracting Japanese investments, as the investment to Bangladesh has almost tripled in the last decade."

The ambassador noted that the local industry must be diversified, new technologies need to be introduced and a skilled workforce should be developed.

"I believe the expansion of the FDI [foreign direct investment] particularly from the Japanese private sector will help Bangladesh to address those challenges. Increasing the ratio of the FDI with the GDP is very crucial," he said, adding "We expect further progress in ease of doing business and coordinated and focused effort on the field."

"We hope the government will take up the issues seriously that the Japanese companies are now facing such as delay in the customs clearance, various taxations, restriction on the telegraphic transfer for import payment and discrimination in the export incentives among the domestic and foreign companies," added ITO Naoki.

CPD Chairman Prof Rehman Sobhan said some of the major infrastructural development projects have been implemented in the country with the support of Japan, when other donors were hesitating to come to Bangladesh.

He also said that Japan has become the largest bilateral donor for Bangladesh and is now implementing some major infrastructures including the port and power sector.

He asked the Japanese counterparts how far Japan would remain with Bangladesh, especially in the energy sector, as Bangladesh is moving away from coal-fired power projects responding to the climate change agenda.

CPD Research Fellow Syed Yusuf Saadat presented the keynote at the programme.

He said although Japan has been able to utilise more than 71% of its export potential in Bangladesh, Bangladesh has been able to utilise only 58% of its export potential in Japan so far. If the existing problems can be solved, Bangladesh will be able to increase its export earning to $526 million annually from current top ten exporting items.

He said trade with Japan would become more difficult after the transition from the least developed country (LDC), adding that about 98% of the country's products are now entering the Japanese market with duty and quota-free facilities.

Syed Yusuf Saadat also said the demand for caregivers in Japan has been increasing over the years due to the unprecedented increase in Japan's ageing population and life expectancy. The growing young population of Bangladesh can be placed in the Japanese health sector to alleviate the deficit of caregivers in the country.

Planning Minister MA Mannan praised the government of Japan and their investors as they implemented some quality infrastructure projects.

The minister said corruption is like cancer in Bangladesh. Though the government has a firm anti-corruption stance, corruption trials often take a longer time to be disposed of.

With increasing development projects, Mannan said the scope for corruption widened too.

Asif A Chowdhury, president of the Japan Chamber of Commerce & Industry (JBCCI), said the major obstacle behind the lower investment from Japan and fewer trade with the country lies with the revenue board.

"If you go to customs or ports, you would find that graft is very rampant there," he claimed.

CPD Research Director Khondeker Golam Moazzem said, "Japan-Bangladesh partnership should be developed even beyond trade. It should be extended to investment, service, labour market and human resource development."

CPD Executive Director Fahmida Khatun moderated the event.