They say that low labour costs and quota free access to the European Union are some of the good reasons why Japanese investors can move in to Bangladesh. A good number of Japanese investors who have focused in China with billions of dollars are now looking for alternatives because of China's recent anti-Japan stance. Japanese investors are moving out to Vietnam and India and Bangladesh can be an ideal location.

In the past, the governments consistently protected contracts with Japandespite their merits or demerits (like the Kafco deal), which gave them confidence to work in Bangladesh. But intensified confrontational politics are scaring them away in recent years.

The investors and some Japanese government officials say they were completely taken aback when the BNP government, upon coming to power in 2001, cancelled the DAP 2 fertilizer project that was signed between Japan and Bangladesh during the Awami League regime.

"Japan did not sign a contract (DAP-2) with the Awami League or any party, but with the state. Regime change does not cancel a contract. If Hasina comes next in power and cancels all contracts signed under the present government, why would we invest?" said an investor who did not want to be quoted.

Such cancellation not only insulted Japan, but also shook the investors' confidence in doing any venture in Bangladesh, they said.

"The DAP-2 had posed as a stumbling block in the relationship between the two countries between 2001 and 2003," said a Japanese government official. "But now we are happy that things are moving in a positive direction."

The Daily Star correspondent raised these issues with Koji Nojima, chief of the Japan- Bangladesh Joint Committee for Commerce and Economic Cooperation. He noted that hartal is also a big hurdle. "It's a major concern for investors because a hartal brings in enormous loss for them."

Japanese business leaders have discussed the hartal issue with both Prime Minister Khaleda Zia and leader of the opposition Sheikh Hasina. But whoever is in the opposition takes the side of enforcing hartals, making the investors nervous.

They are also unnerved about the way the government deals with tenders which are specially funded by Japanese Official Development Assistance (ODA). "Its Japanese taxpayers money. But for some unknown reasons, we get to see that Japanese companies do not win any tender despite their merits. All contracts go to Chinese or Korean contractors. This is certainly another hurdle," quips Nojima.

A recent example of such bid manipulation is the sixth tendering of the Japan funded 90 megawatt Fenchuganj project. A disqualified Chinese company, Harbin, was awarded this contract while a Japanese bidder withdrew from the tender complaining that the government is clearly siding with Harbin for unknown reasons. Sources in the tendering process said that lobbying and undue benefits actually decided who gets the contract.

"I believe major contracts under Japanese ODA should go to Japanese companies," Nojima added.

"I also believe that yen loans should be dedicated for infrastructure developmentconstruction of bridges, development of export processing zones (EPZs), power plants for the EPZsthings which will benefit among others, the Japanese investors," Nojima pointed out.

The veteran businessman pointed out to stimulate Japanese investment in Bangladesh, the country must have a clear idea about its economic goals.

"I don't see any clear policy focus of Bangladesh in industrial development. Whereas, after the second world war, Japan took 5 billion dollars loan from the USA to reconstruct the country till 1952. In the following 14 years, Japan took another 850 million dollars from the USA to build its infrastructure. In 1990, we paid back our loans and we grew because our government had a clear centralized focus," Nojima said, "but tell me what is the focus (of using loans and investment) of Bangladesh?"

"You need to develop major export products other than garments and textiles. Bangladesh must also emphasise on setting up infrastructures within the EPZs. We have some Japanese companies in the EPZs. For an example, a Japanese company is polishing camera and golf parts, a sudden power breakdown or water shortage will lead to his big loss. I request Bangladesh government to divert its yen loans to the EPZ to make sure such matters do not hurt the investors," Nojima pointed out.

"The world is changing. Anti-Japanese demonstrations in China are holding many Japanese investors from pumping in more money in China (which has been a major investment recipient in recent times). They are moving to India, Vietnam and Thailand. Bangladesh can be an ideal location too."

"Now is the right time for Bangladesh to do right things and give right signals to attract Japanese investment," he pointed out.

Bangladesh Ambassador to Japan, M Serajul Islam, also believes that this is the right time for Bangladesh to draw Japan's attention. "For Japan, getting into the UN Security Council is a major issue and Bangladesh is giving support to Japan. This also gives Bangladesh a position to negotiate good deals," he pointed out.

"Japanese investment in China is now sagging and the investment is now diverting to other Asian countries," Islam added.

"Frankly, investors will come to Bangladesh when they will see profits. Our investment package is good. They can get duty free access in some exports. So there is no doubt that this is the time when Bangladesh should ask Japanese investors to come in," he pointed out.