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Japan: a growing source of trade, investment
Top minister arrives in Dhaka today to discuss partnership deal
REFAYET ULLAH MIRDHA and JAGARAN CHAKMA
It all started in early 2008 when the Japanese government announced the “China Plus One Strategy” to cut its over-reliance on the manufacturing behemoth by setting up business operations in other countries.
The move came as the cost of production in China has climbed and there has been a dearth of skilled workforce in a country known as “the world’s factory”, which sent the profit margin for Japanese investors in China lower.
The China Plus One Strategy worked so well that the shipment of merchandise from Bangladesh, especially garments, has continued to grow at a faster rate.
Apparels, the country’s main export item, posted more than 175 per cent shipment growth between 2008 and 2010, data from the Export Promotion Bureau (EPB) showed.
In 2008, Japan’s retail giant Fast Retailing opened an office in Dhaka to source clothing items for its consumers.
Among the Asian nations, Japan was the first export destination for Bangladesh where earnings crossed the $1-billion mark in 2015-16. The shipment stood at $1.32 billion in the year.
The higher export growth to the Japanese market, where consumers have long tended to prefer quality consumption, is a testament to the improving standards of goods made in Bangladesh.
The Japanese markets did not disappoint even during the peak of the Covid-19 pandemic in 2019-20 when Bangladesh shipped goods worth $1.20 billion despite serious disruptions to the global supply chain.
Local exporters registered a 40.74 per cent year-on-year growth to $1.90 billion in 2022-23. It was $1.35 billion in 2021-22.
Garment shipment grew even higher: earnings surged 45.62 per cent to $1.59 billion from $1.09 billion in FY22.
Manufacturers have targeted to generate $10 billion in garment export earnings from Japan by 2030.
Apparel shipment to Japan received a major boost when Tokyo relaxed the Rules of Origin and started allowing zero-duty benefits to the import of knitwear items from the least-developed countries (LDCs) in 2011.
This was a major respite for local suppliers as Japan had maintained a 17 per cent duty on knitwear items for many years to protect its domestic industry. Woven items have been enjoying duty preference for a long time.
Another important milestone for the bilateral ties came when former Japanese Prime Minister Shinzo Abe, during his visit to Dhaka in 2014, unveiled the Bay of Bengal Industrial Growth Belt initiative for Bangladesh.
A MAJOR SOURCE OF INVESTMENT
Over the years, Japan has also emerged as a major investment source for Bangladesh.
The inflow accelerated between 2019 and 2022 when foreign direct investment (FDI) from Japan grew 7.61 per cent annually to take the total FDI in the country to $380 million.
The FDI came mainly in the garment, engineering, construction, healthcare, and motorcycle sectors.
The amount, however, is just 0.1 per cent of what Japanese companies have invested in Asia, according to data from the Japan External Trade Organisation (Jetro).
Currently, around 350 Japanese companies are doing business in Bangladesh, up from 245 in 2015.
The investment is expected to rise after the government established a dedicated Japanese Economic Zone at Araihazar in Narayanganj.
The zone, owned jointly by the Bangladesh Economic Zones Authority (Beza), the Japan International Cooperation Agency, and Sumitomo Corporation, opened in December last year.