Confidence among the Japanese investors doing business in Bangladesh has improved remarkably as they think the country is a lucrative destination for their investment, according to a new survey by Japan External Trade Organisation (Jetro).
In particular, the 2018 diffusion indices of Bangladesh, India, Sri Lanka and Pakistan, plus Vietnam and Laos, exceeded 50 points, indicating a remarkable improvement of business confidence, the survey said.
Among reasons for the improvement “increased sales in local markets” ranked first, followed by “improvement of productivity” and “increased sales due to expansion of exports”.
The survey ran on the business condition of Japanese companies in 20 countries and regions in Northeast Asia, Southeast Asia, Southwest Asia, and Oceania from October to November 2017.
The questionnaire included operating profit forecast, future business plan, management matters, rising cost of production and services, procurement of raw materials and parts, export and import, efforts at local market development and wages.
“The survey result has the reflection in reality as I have been noticing an influx of Japanese investors in Bangladesh over the last six months,” said Tareq Rafi Bhuiyan, secretary general of the Japan Bangladesh Chamber of Commerce and Industry (JBCCI).
Japanese investors are looking for an alternative destination, pulling back their investment from China for the Japanese government's “China Plus One” policy, adopted in 2008, he told The Daily Star over phone.
Moreover, Japanese investors see Bangladesh as a good destination for production and sales of goods for having a strong consumer base with rising income, said Bhuiyan.
Bhuiyan said nearly 50 Japanese companies inquired to the JBCCI, apart from Jetro, over the last six months on the business potential in Bangladesh. Japanese businesses are interested in investing in textile and garment and consumer goods.
Another reason for the high turnout of Japanese investors is the implementation of some mega infrastructure projects involving Japanese experts, he said.
Asked, Bhuiyan said the killing of seven Japanese in the Holey Artisan Café attack in July 2016 was an isolated incident.
“Still the Japanese people believe that the nature of Bangladeshis is not like this. Japanese people love Bangladesh very much,” he said.
Japan has been providing Bangladesh with nearly $2 billion in soft loans every year since fiscal 2012-13.
In a report published on December 8, Japanese financial newspaper Nikkei Asian Review said Tokyo reached an understanding with Dhaka to build highways and other structures in Bangladesh under an exclusive arrangement.
Under the Matarbari Ultra Super Critical Coal-Fired Power Project, two 600MW power plants will be built to generate 7,865GWh of electricity per year by 2026, said Japan's Foreign Minister Taro Kono in an interview with The Daily Star in November last year.
The Dhaka Mass Rapid Transit Development Project will establish an urban rail network aiming to eliminate traffic congestion by providing transportation to over 570,000 people every day by 2024. Japanese corporations took the contracts for both projects and are using high-quality technology, Kono said.
Bangladeshi garment manufacturers have been enjoying zero-duty benefit on apparel exports to Japan even in cases where the raw materials have been imported.
The number of Japanese companies operating in Bangladesh has more than tripled since 2008, reaching 253 as of May 2017, according to Jetro.
Availing the zero-duty benefit, Bangladesh's apparel export to Japan has been increasing rapidly, making it the largest export destination in Asia.
Export of garment products to the far-eastern nation, whose apparel market is worth about $40 billion a year, raked in $744.47 million last fiscal year, according to data from the Export Promotion Bureau.
Overall exports to Japan had declined 5.6 percent to $1.01 billion in fiscal 2016-17.
Japan is the only destination in Asia where Bangladesh's overall exports crossed the $1 billion mark in each of the previous two years. In first six months of the current fiscal year, Bangladesh exported garment items worth $363.231 million to Japan.
Bangladesh accounts for 2.3 percent of Japan's annual garment import, growing by around 20-30 percent every year, according to Japan Textiles Importers Association.