Eyeing $1bn investment, Japanese economic zone revs up for 2022 opening

The Japanese Economic Zone in Araihazar upazila of Narayanganj will go into production in late 2022, with the potential of a $1 billion Japanese investment and creation of one lakh jobs, the authorities have said.

Japanese factories in the economic zone, which is now being built under a government-to-government (G2G) basis, will be manufacturing cars, motorcycles, mobile phones, electronic equipment and motor parts, according to the Bangladesh Economic Zones Authority (Beza).

The Tk2,582-crore economic zone sprawls on 1,000 acres of land in Japaneseupazila, 32 kilometres away from Dhaka.

Beza Executive Chairman Yusuf Harun told The Business Standard that the government has already provided the authority with 620 acres of land as the remaining 380 acres are under acquisition process.

With the "China plus one strategy", Japanese manufacturers have already been seeking competitive labour costs and supply-chain diversification by moving some production units out of China for years as wages rose and infrastructure in countries like Vietnam and Bangladesh improved.

According to the Japanese embassy in Dhaka, the number of Japanese companies operating in Bangladesh has tripled to about 300 over the last one decade.

Naoki Ito, the Japanese ambassador to Bangladesh, recently said in Dhaka that the island nation's plan is to have 100 companies in the economic zone with $1 billion investment.

Beza Executive Chairman Yusuf Harun said Bangladesh has a 30% share while Japan holds the remaining 70% share of the economic zone.

Japan has appointed Sumitomo Corporation as the land developer of the zone as the land development is approaching fast, said the executive chairman, adding they have handed over some 160 acres of land to the corporation recently.

"We were told by Japanese authorities that some 22 Japanese companies have been listed for setting up factories on that land," he added.

Beza will hand over another 160 acres to Sumitomo within the next three-four months. Then, the corporation will start constructing the internal road network.

According to Beza sources, the economic zone has drawn the attention of a number of renowned Japanese companies such as Toyota, Mitsubishi, Sumitomo and Sujit Limited.

The Timeline

Initial talks about the Japanese economic zone began in 2013, while it was finalised during Prime Minister Sheikh Hasina's official tour to Japan in 2014.

Land acquisition for the economic zone, however, took a couple of years. Besides, a terror attack on foreigners in a Dhaka café in 2016 also delayed the economic zone.

In 2019, Beza and Sumitomo Corporation signed a deal for the economic zone. Sumitomo is responsible for land development and maintenance while Beza is to allocate the plots.

Then came the Covid-19 outbreak last year, delaying construction of the zone further.

The Bangladesh government and Japan International Cooperation Agency (Jica) are jointly funding the project.

Araihazar 'a test case'

If the Japanese economic zone in Araihazar yields the desired outputs, Japanese investors would take a second economic zone in Chattogram's Mirsarai and third one in Cox's Bazar's Moheshkhali, according to the Japanese ambassador in Dhaka.

At a programme last month in Dhaka, Ambassador Naoki Ito said, "Once Japanese becomes a success story, another economic zone will be developed by Japan, maybe in Mirsarai, and if that venture becomes successful, then there will be another – in Moheshkhali".

Data obtained from the Japanese embassy in Dhaka say the cumulative direct investment from Japan in Bangladesh amounted to $390.18 million until September 2020.

Furthermore, as of April 2021, some 321 Japanese companies were operating in the country. The number quadrupled from 83 in 2010.

The amount of investment in FY20, even amid the Covid-19 pandemic, was $60 million – about three times higher compared to FY10.