Bangladesh a lucrative destination for investors
The entry of Japan Tobacco International (JTI) into Bangladesh through its $1.47 billion acquisition of Akij Group’s tobacco business would attract more international investors to the country, said a top official of JTI.
“The acquisition should give a strong signal to international investors that Bangladesh is a place to do business and make investment,” said Jorge Da Motta, regional president of JTI for the Asia-Pacific.
In November last year, Japan Tobacco, the third largest publicly traded tobacco company in the world, completed the acquisition, which is the biggest-ever single foreign direct investment in Bangladesh.
Bangladesh has been referred to lately as a new Asian tiger, as the economy is growing consistently at a pretty high rate, said Da Motta.
“The government is certainly very pro-business. The way Bangladesh’s economy has been managed has been appreciated by different global stakeholders. It is looking very, very positive.”
According to Da Motta, the Bangladesh government is already doing a lot of work to attract FDI and it seems that things are heading in the right direction.
“I think we need to move beyond the perception of Bangladesh only as a home of readymade garments. The diversification of the economy is going to be a key thing to play for. We need to sell this country’s biggest asset: it’s people.”
“Obviously, mobilising the population has got to be the answer to Bangladesh’s growth,” he told The Daily Star in an interview in Dhaka on Thursday.
He said making it easier to do business is a big thing. In the global ranking of Ease of Doing Business, Bangladesh is quite a long way down the list.
“We need to look at what is possible in terms of reforms and what could be changed in order to encourage and speed up and make it easier for FDI. I believe Bangladesh can move quite a few notches up with quick-win initiatives.”
Da Motta was appointed in his current position in October last year and is responsible for all marketing, people and sales operations in the region.
Before he began his career with JTI more than 14 years back, the South African-Belgian national held a series of senior positions within several multinationals, including Kimberly Clark, SAB Miller and Frito-Lay.
He started his career in 1982, when he joined Cadbury in South Africa as a marketing trainee.
The acquisition outright makes JTI the second-largest company in the Tk 33,000-crore cigarette market in Bangladesh.
The government is set to receive more than Tk 25,000 crore as revenue from the sector in the current fiscal year.
Bangladesh is the eighth largest cigarette market in the world with annual consumption of nearly 8,000 crore units and the market had about 2 percent compound annual growth rate in the last five years.
The country has been of interest for quite a long time for JTI and the seed was sown when Akij Group began manufacturing and marketing one of JTI’s brands.
“Akij has got some good brands. The business is profitable. All of this offers us a good ground to tap into and take the business further. In summary, it really fits with our global strategy on growth and expansion of our footprint,” Da Motta said.
He said he has no doubt that the people would be the biggest asset for JTI Bangladesh as well. JTI is upbeat about its business potential in Bangladesh as the country has a large market, the economy is growing, and the government is pro-business.
“We are very excited to be here,” he said.
JTI has been the fastest growing tobacco company for the last 20 years in the world whereas its footprint was relatively small two decades ago.
“Expanding our footprint across the world and starting benchmarking against our bigger competitors was a key part of our growth plan. In this respect, Bangladesh ticks the box,” he said. “It’s a developing country with a large population. The tobacco market has historically been quite large.”
He said the JTI business in Bangladesh has started off really well.
There is no job cut and the total headcount in terms of people at JTI Bangladesh is around 15,000, directly and indirectly.
When asked what the company is going to do to improve the market situation, he said investing and focusing on quality in people and brands are the cornerstone of JTI’s success. “We have a big workforce. I think investing in the workforce, skills and training will deliver some great results.”
JTI looks to improve the processes to make them more efficient and will invest in brands, factories and in the whole supply chain to deliver Japanese quality in this market.
About export potential from Bangladesh, Da Motta said right now the company’s focus is very much on making sure that the domestic business is well-supplied and looked after.
“Going forward, there is no reason to believe that JTI Bangladesh can’t actually play a role in a global sourcing footprint, both from a leaf and a finished goods point of view. This will come in time.”
Long before the acquisition took place, the JTI Foundation was already involved in Bangladesh in a few projects such as improving sanitation in Dhaka and positively impacting the livelihoods of 3,600 families – or around 16,200 individuals – living in the Bhashantek’s low-income community.
It is also undertaking other projects which focus on improving disaster resilience in disadvantaged communities in four urban slums in Dhaka and Khulna, which includes 5,250 households comprising about 26,000 people.
Another project under implementation is to improve sanitation for low-income communities in Dhaka and Chittagong, where an estimated 21,000 inhabitants will benefit from the project upon completion.
“It is a good thing for us to invest and to make a positive impact in societies in which we operate. And Bangladesh is no exception,” Da Motta said.
“We are reviewing the community investment portfolio and will be looking at some other needs around us that make sense to get involved in.”
JTI, a member of the Japan Tobacco Group of Companies, is recognised as a top employer in more than 50 countries and employs close to 45,000 people.
Speaking about further investment plans in Bangladesh, Da Motta said it is constant.
“We will invest in our people and quality and that can be a significant investment.”
There are many challenges in the market. Illegal trading of cigarettes is a big challenge for the sector because of which the government losses a lot of revenue.
JTI, as a legitimate industry player, strongly supports the government in its effort to fight against illicit trade in tobacco. This phenomenon if not addressed properly can become very big, like in some other countries, Da Motta said.
“In order to ensure a steady flow of government revenue from the sector, understanding how much can be tolerated in terms of tax, pricing and relative consumer affordability is critically important.”