70% of Japanese firms cite legal, tax hurdles in Bangladesh

More than 70% of Japanese businesses consider underdeveloped legal systems, time-consuming tax and administrative procedures, social and political instability and unclear policy management by the government as major risks to investing in Bangladesh. 

Furthermore, while most Japanese businesses view the business environments in Australia, Singapore, Thailand, Vietnam and Malaysia as very positive, 70.8% of them are either "dissatisfied" or "slightly dissatisfied" with the business atmosphere in Bangladesh. 

"Approximately 77.1% of Japanese businesses cite underdeveloped legal systems and unclear legal system operations as significant risks to investing in Bangladesh," said Yuji Ando, country representative of the Japan External Trade Organisation (Jetro) Bangladesh, during his keynote presentation at an event today (26 Novemeber). 

 "74.7% of businesses identify time-consuming tax and administrative procedures as major challenges."

 The programme, "Japan-Bangladesh Collaboration: Enhancing FDI and Economic Partnership," was held at a city hotel and featured several keynote presentations.

 The Foreign Investors' Chamber of Commerce and Industry (Ficci) organised the programme in collaboration with Jetro, Japanese Commerce and Industry Association in Dhaka (JCIAD), HSBC, Japan International Cooperation Agency (Jica), Japan-Bangladesh Chamber of Commerce and Industry (JBCCI), and Embassy of Japan. 

 Yuji Ando further said 69.9% of Japanese businesses identified unclear government policies as a major risk, while 66.3% pointed to political or social instability. 

 Despite these concerns, Bangladesh remains the top business destination for 61.2% of Japanese companies. Currently, 350 Japanese enterprises operate in the country. 

 The presentations included a series of recommendations to improve the business environment in Bangladesh and attract more Japanese foreign direct investment (FDI).

These suggestions included reviewing and simplifying the complex tax system, streamlining and increasing transparency in administrative procedures, particularly customs clearance and business registration. 

Simplifying the visa and work permit criteria and processes for expatriates, relaxing financial and foreign exchange regulations, ensuring policy consistency, eliminating corruption and restructuring government agencies to enhance efficiency and functionality are the other recommendations. 

Yuji Ando's keynote presentation, "Business Opportunities and Challenges of Doing Business in Bangladesh," highlighted the growing interest of Japanese SMEs in expanding their operations in Bangladesh.

He said 45.5% of companies in the region plan to expand within the next 1-2 years, with Bangladesh emerging as a top destination for 61.2% of them.

Lutfey Siddique, the chief adviser's special envoy on international affairs, emphasised that Bangladesh does not aspire to be merely a country of cheap labour or one with challenging investment conditions.

He also assured stakeholders that the government is committed to simplifying regulations within the framework of the law to attract more investments.

The Japanese Ambassador to Bangladesh, Iwama Kiminori, acknowledged that public expectations from the interim government are high, despite its limited timeframe.  Bangladesh is expected to graduate from LDC status in 2026, and the country must address all the issues discussed at today's event, he said.

The ambassador also noted the significant improvement in the business environments of ASEAN countries, warning that if Bangladesh lags behind, investments could shift elsewhere. "Bangladesh must prioritise enhancing its business ecosystem. We share a strong relationship with Bangladesh and are willing to assist the country in improving its business environment if needed," he added.

Ashik Chowdhury, executive chairman of the Bangladesh Investment Development Authority (Bida), said initiatives have been taken to remove import taxes on capital equipment for investments in economic zones.

"We have also initiated increased communication with the NBR (National Board of Revenue) and the Bangladesh Bank. Gradually, we aim to eliminate all obstacles to foreign investment," he said.

"Bida is the primary point of trust for investors to resolve any crises. I encourage everyone to approach Bida directly, rather than through a third party, for investment-related issues." 

Tareq Rafi Bhuiyan, president of the JBCCI, highlighted the fact that Japanese private sector investment in Bangladesh is currently less than $2 billion, compared to around $42 billion in competing countries like Vietnam. "This is largely due to the Economic Partnership Agreement (EPA) between Japan and Vietnam, while Bangladesh has yet to establish similar agreements with Japan," he added.

Ficci President Zaved Akhtar described the seminar as a landmark event, underscoring the strong economic ties and potential between the two nations. "I would like to thank Jetro, JCIAD, and HSBC Bangladesh for their collaboration with Ficci, as well as the Embassy of Japan, Jica, and JBCCI for their support," he said.  "This partnership is crucial for promoting greater foreign direct investment and economic growth. By working together, we can develop a robust and forward-looking economic cooperation model that benefits both Japan and Bangladesh."

Atsushi Hirakuru, president of JCIAD, emphasised that the collaborative efforts reflect a shared commitment to sustainable economic growth.  "I am confident that the insights and discussions from this seminar will pave the way for increased foreign direct investment and a mutually beneficial economic partnership," he added.

The seminar provided an essential platform for fostering dialogue among key stakeholders, including the private sector, government officials and international organisations, in strengthening economic cooperation between Japan and Bangladesh.