The relationship between Japan and Bangladesh is a trusted and time tested one. Bangladesh became Japan's biggest recipient of Official Development Assistance in 2020. Since the Covid-19 pandemic started more than a year ago, there has been a lot of talk and anticipation about Japanese businesses moving base to Bangladesh.
In a series of high-profile interviews, The Daily Star (DS) tries to understand the increasing interest of Japanese investment in Bangladesh, its growth prospects, barriers to its growth, ground realities and on how to attract more Japanese investment.
As part of series, today, we are running the interview of Neil Coupland, managing director of Japan Tobacco International (JTI) Bangladesh. He joined JTI Bangladesh in February 2020, bringing with him 27 plus years of experience in various leadership and senior management roles.
DS: How long have you been in Bangladesh and what has been your experience so far?
Coupland: My family and I arrived at the end of February 2020. One month later, the country was in full lockdown due to the Covid-19 pandemic. Our start in Bangladesh was challenging given this was a new country and a new job. That said, my colleagues and everyone we met here in our first few weeks went out of their way to make us feel very welcome and this greatly helped our settling-in period.
I was last in Bangladesh 25 years ago and I am very impressed to see how the country has progressed in this time. I find Dhaka unrecognisable today compared to then.
DS: How has the pandemic affected your life and business in Bangladesh?
Coupland: The pandemic has been extremely challenging for everyone in Bangladesh. It is a credit to the people and government of Bangladesh to see just how resourcefully everyone has navigated these troubling waters. One year later, we find ourselves in a similar situation, but it is clear that hard lessons have been learned and new approaches have been applied in typically pragmatic Bangladeshi style. My experience of the pandemic is probably no different from anyone else's in our position. We try to stay safe, sane, and sensible.
Our business too has suffered in line with other businesses as far as the pandemic is concerned. We are a consumer goods business and rely on an efficient supply chain, route to market and retail to get our brands to consumers. Given that all of these elements have faced severe disruption over the last year, so too has our business. I am deeply grateful to our employees for their dedication, support and resilience in the face of these challenges. They have gone above and beyond their normal duties to support local communities, their customers and their colleagues.
DS: JTI made headlines with the single largest foreign direct investment (FDI) in Bangladesh. What has happened in the last two years since then?
Coupland: At end of 2018, Japan Tobacco acquired Akij Group's tobacco business for nearly $1.47 billion (Tk 12,480 crore) making it the single largest private sector FDI in the history of Bangladesh.
Since the acquisition, we have devoted our efforts to the integration of the organisation into the JTI global organisation. Our priority was to bring in global systems, processes, infrastructural improvements and most importantly, the culture of this very global group.
In addition, we recruited local talents for the future of the organisation. We have focused on understanding the need of the consumer and the channel partners. So, you can say we have been busy.
In this process, we have made further significant investments in our infrastructure, technology and human resource development while contributing to several deserving causes and communities.
JTI Bangladesh soon became one of the top revenue contributors to the national exchequer, having contributed to excise and other duty deposits to the National Board of Revenue (NBR) exceeding Tk 8,500 crore ($1 billion) in the first two years of operation.
Also, we are very proud of the fact that we have been able to place Bangladeshi talents in our foreign markets in multiple functions within this short period of time.
DS: What challenges are you facing in Bangladesh as a foreign investor?
Coupland: Bangladesh's economic growth story is being recognised all over the world. Any developing economy poses certain structural challenges. However, Bangladesh can address a few key areas to improve the ease of doing business and ultimately increase the flow of FDIs. We have faced policy inconsistency and an unpredictable tax regime since entering the country. These are barriers to mid and long-term planning for any investor and business.
We also require continued regulatory simplification, policy reforms where needed and evolution of the taxation and governance reflecting with the changing landscape of global trade, commerce, and investment.
Right now, there's a lot of focus on getting investors into the country. I think continued digitalisation of processes and "investor after-care" services can help investors once they set up shop. We may only be two years old in Bangladesh, but we are here for the long run and we want to contribute to the development in these areas.
Since inception, we have continuously made engagements to table thoughts that can ultimately generate higher government revenue and/or lead to better governance. Our objective is to see improvement in innovation and quality for consumers, seek fairness in competition and a level playing field for investors.
DS: In recent years, many foreign investors and leaders of compliant local businesses have voiced their concerns about policy inconsistency and tax policy unpredictability. Can you share your views?
Coupland: When we made the investment at the end of 2018, we assessed the tax model and the trend of movement. Taxation is extremely critical for our business as the total tax burden is the largest value component of our value chain.
Within six months of our entry, during the June 2019 budget, there was a substantial tax hike leading to 40 per cent price increase at the consumer end in one of the market segments. This was going completely against past trends. This is an example of unpredictable taxation. This led to a crash of that segment and consumers started moving to cheaper alternatives in the market, ultimately leading to lower government revenue per unit sold.
In another recent incident, we were restricted after introducing an innovative product for a certain segment of the market. Even though this type of product has been available in the market in higher price segments for more than 10 years; but only after we launched the product, new regulation was introduced barring us from operating in the segment. This is anti-competitive, anti-innovation and in turn, anti-investment.
We would continue to engage our stakeholders in a fair and transparent way to share global best practices and seek evidence-based, research-based, and objective policymaking.
DS: Do you see potential in the consumer goods industry for Japanese companies in Bangladesh?
Coupland: Yes, I do believe things can be better, provided certain conditions improve fast. As the economy grows, more and more Bangladeshis would demand quality products and Japanese products deliver on that promise. Many Japanese brands are already present through dealer or distributor-based networks and only recently have we seen acquisitions and joint ventures looking at more localised operations.
Organisations need to evaluate different routes to market models to serve the potential market segments. I think only a few Japanese consumer goods companies have just tested the waters here. This market is highly price sensitive and premium segments is a niche with promise to grow. Route to market strategies, portfolio, pricing, and regulatory management are critical to tap this market and cater to the rising demand of high-quality products.
Japanese consumer goods companies are operating strongly in neighbouring countries like India, Thailand, Vietnam and Myanmar. I believe the time is turning ripe for them to enter the Bangladesh market. Perhaps the success of a flagship investment like JTI's can also help attract such companies.
DS: How is the JTI coping with Covid-19 challenges? Are you supporting the underserved community in any shape or form?
Coupland: As the Covid-19 crisis escalated in Bangladesh last year, the JTI provided support that directly benefitted approximately 60,000 people across the country. A special Covid-19 fund was mobilised to provide essential food and hygiene commodities to the underserved communities as well as protective equipment to the high-risk frontline workers.
JTI has been positively impacting lives in Bangladesh since 2015, through the launch of community investment initiatives to improve access to water sanitation & hygiene (WASH) and disaster management. These initiatives are designed to uplift close to 90,000 beneficiaries in underserved communities across Bangladesh, through partnership with various local and international non-governmental organisations.
Giving back to the society is a key part of who we are at JTI and we want to stand by the distressed and support the most vulnerable by building more inclusive, resilient, and sustainable communities.
The JTI has been very impressed with the increasingly rapid development of Bangladesh. As the country celebrates 50 years of history, it is fair to say that this story is what attracted our company to come here. However, we have invested in Bangladesh for the long run, the next 50 years and beyond.