The pandemic is showing no signs of abating but still 41.8 per cent of Japanese companies in Bangladesh during 2020 wanted to expand business in the next two years, according to a survey by Japan External Trade Organization (Jetro).
However, 70.3 per cent had sought to do so in 2019.
In 2020, another 49.3 per cent believed that their operations will remain the same while 6 per cent pondered over going for retrenching.
Besides, 3 per cent wanted to shift to another country withdrawing investments, failing to bear the difficulties of the ongoing Covid-19 fallouts.
The "2019 JETRO Survey on Business Condition of Japanese Companies in Asia and Oceania" was released on March 2021.
Over 300 companies are doing business in Bangladesh and the number has been rising in recent years due to continuous economic growth in the last decade.
Those expressing intent to expand business in Bangladesh cite growth potential and sales increases enabled through exports and the domestic market.
According to the Jetro report, 9 per cent of the companies in Bangladesh have already recovered from the pandemic's effects, 31.3 per cent expect to return to normalcy in the first half of 2021 and 34.3 per cent in the second half.
The report said a change in the trading environments in Vietnam, Bangladesh and India had a positive impact on business performance.
Many investors stated that the shift of production to Vietnam and Bangladesh, caused by the US-China trade friction, had a positive impact.
Jetro said further improvement of the business environment in Bangladesh was needed for more competitiveness and future investment.
Some 66.7 per cent of Japanese companies stated that their major challenges were in local procurement of raw materials and components while 56.1 per cent in customs procedures.
The report found that 48.9 per cent expected to generate an operating profit in 2020, down 16.7 percentage points from 65.6 per cent in 2019.
In contrast, 32.4 per cent expect to incur an operating loss, up 14.7 percentage points from 17.7 per cent in 2019.
With respect to operating profit forecast, Bangladesh stands in the lowest position while South Korea the highest with 71.8 per cent, exceeding 60 per cent in Taiwan, Australia, and China.
For 2020, 16 per cent expect an increase in operating profit over 2019, down 17.1 percentage points from 33.1 per cent in 2019.
The proportion of companies expecting a decrease in operating profit was 65.6 per cent, up 26.8 percentage points from 29.8 per cent in 2019.
A total of 52.8 per cent expect an increase in operating profit in 2021, up 10.7 percentage points from the 2020 forecast (42.1 per cent) in 2019. Bangladesh will expect an increase by 38.3 per cent in 2021.
Yuji Ando, country representative of Jetro, said Bangladesh has the potential to develop businesses but needs to improve environment bottlenecks.
He said investors face different hassles like time consuming customs procedures, difficulty in local procurement of raw materials and components, power shortages and wage hikes.
According to him, in recent years the wages of workers and employees have increased in Bangladesh.
Besides, Japanese companies have no opportunity to borrow from local banks in Bangladesh, for which they sometimes have to face a shortage of working capital.
The survey took comments of 13,399 Japanese firms engaged in manufacturing and non-manufacturing sectors in 20 Asia and Oceania countries between August and September last year.
The report said business confidence had fallen to its lowest level due to the Covid-19 pandemic whereas the deterioration was mild in China.
Even the intentions towards business expansions in the next one or two years hit a new record low.
The impact of changes in trading environments such as the US-China conflict and a decline in demand due to the Covid-19 pandemic have had a negative impact on the companies' motivation to expand their business.
Even under such a harsh environment, 50.9 per cent of the companies in India and 53.5 per cent in Pakistan are still motivated towards expanding business in the next one to two years.