Still a tall task to woo Japanese investors 

A dedicated immigration counter for foreign investors at the country's main airport and allowing telegraphic transfer of import bills — these are some of the simple expectations of Japanese investors in Bangladesh.

None of the issues required a billion-dollar infrastructure project, rather just some paperwork of a few departments was enough to address those.

But little happened since a high-level meeting at the Prime Minister's Office took note of the Japanese concerns and instructed the government's relevant authorities to act upon those in August 2020.

After 16 months, the PMO has convened government high-ups to a meeting today to take stock of the list of issues identified by Japanese businesses and how much of the commitments made to address those were implemented by the government offices concerned.

The reality is, most of the issues are yet to be addressed, except reducing fees for motorcycle registration, arrangements for dumping old machinery brought in under a bond facility and allowing empty export containers to carry bonded goods.

Meanwhile, cash incentives for foreign investors, equivalent wages both in and outside of the export processing zones (EPZs) and waiving of value-added tax (VAT) for EPZ investors remain high on the unaddressed issues.

According to the PMO meeting agenda, Japanese investors identified 16 issues related to tax and foreign exchange, and 11 issues related to investment climate in doing business in Bangladesh. Most of those were discussed last year, but are not addressed yet.   

Asked why the government is too slow to respond to Japanese investors' concerns at a time when Bida is trying all-out to woo foreign investment, Bangladesh Investment Development Authority (Bida) Executive Chairman Sirazul Islam said the expected actions are being delayed since the issues involve a number of ministries and agencies such as the commerce ministry, the National Board of Revenue and the Bangladesh Bank.

"You better ask them why they are delaying. Maybe, there are pros and cons which are to be looked into," he told The Business Standard yesterday.

At the August meeting last year, all ministries and agencies concerned were given time-bound targets to take steps to resolve issues within their jurisdictions. 

Today's meeting is expected to hear explanations from secretaries to as many as 14 ministries apart from the central bank governor and chief executives of investment promotional agencies–- Bida, Bepza, Beza and PPP Authority.    

Citing the issue of telegraphic transfer of import bills, the Bida chief said the commerce ministry might be in a dilemma over the issue as it is feared that the offer might widen the scope for money-laundering.

Telegraphic transfers are allowed from all countries except Bangladesh and Pakistan, the Bida chief pointed out, citing Japanese investors' observations. 

The privilege, if given, would not be limited to Japanese investors alone and investors from countries with lax law enforcement might misuse it, he noted, referring to commerce ministry's concern.

He, however, said Bida has progressed on solving two specific issues under its jurisdiction, including the one for allowing operation of local offices.

Royalty remittance has already been lowered to 6% in response to Japanese investors' demand, but they want complete abolition, which might not be practical for the government, the Bida chief explained.

Affirming the government's commitment to extend all possible policy support for Japanese investors, Sirazul Islam pinned hopes on the Japanese Economic Zone, which is in progress in Narayanganj's Araihazar and will be a focus of Japanese investment once completed.

Are the yen hopes fizzling out?

Money grows on the tree of persistence: this Japanese proverb on consistency points at what the Japanese business communities believe and what Bangladesh could have done better to attract more Japanese yen to Bangladesh.

With Covid ravaging China around one and a half years ago, Japan announced incentives to its companies to shift manufacturing facilities out of China and added Bangladesh to a list of preferred destinations for relocating the factories.

Following the Island nation's factory relocation bid, Bangladesh's top policymaking level bolstered its efforts to lure Japanese investments as well as to settle the issues Japanese investors had already been facing in Bangladesh.    

After talking to Japanese entrepreneurs who already had businesses in Bangladesh, several committees were formed to settle the business issues but not much has been achieved.    

The PMO on 16 August last year had given relevant ministries "a week or two" to quickly resolve the issues faced by Japanese firms in Bangladesh, who complained of being treated with "inequalities" in terms of export support between local and foreign business entities.

The finance ministry was asked to provide foreign companies in Bangladesh with incentives at the same rate as enjoyed by local businesses from the current fiscal year.

One of the committees was formed with top officials of the Bangladesh Bank, National Board of Revenue and Ministry of Finance to look into the issues of banking transactions, taxation issues and customs delays.

Another one incorporated officials from the revenue board, Bangladesh Export Processing Zones Authority (Bepza) and other investment related offices to find ways to incentivise foreign investors and report back to the PMO.

But no official circular has so far been made by relevant offices in this regard.

Since Japan's adoption of the "China plus one" policy, the country did not get a single factory relocation offer as the existing Japanese firms are still not happy.

Reminders   

The lazy response has prompted Japanese officials and diplomats to repeat their concerns at various occasions, including the international investment summit held by Bangladesh Investment Development Authority (Bida) in November this year.

At a recent programme in Chattogram, Japanese ambassador Ito Naoki, while expressing his country's interest in more investment in Bangladesh, reminded the authorities of the worries of existing Japanese companies about their problems in doing business here.

"Delays in customs clearance, various taxations, restrictions on telegraphic transfer of import payments, discrimination in export incentives, better environment in EPZs and SEZs [special economic zones] are still among their concerns," the ambassador said, referring to message of Japanese vice minister for foreign affairs sent to the Bida investment summit.  

Use it, or lose it

Shafiul Islam Mohiuddin, a member of the commerce ministry task force to attract Japanese investors and also a former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said the pandemic slowed down potential Japanese investments in Bangladesh.

The commerce ministry task force member agrees to a number of proposals by the Japanese investors including export incentive for EPZ factories and access to Covid stimulus fund.

The former business leader believes logical and feasible proposals by the Japanese investors should be implemented expeditiously. Besides, those that are not possible to work on should be made clear too.

"If the problems are left unsolved for a long time, Japanese investors may lose interest in Bangladesh and go away," he noted.

Oft-repeated worries

The Japanese side, in proposals to be presented at today's meeting, said security deposit for power connection has been imposed on companies in EPZ abruptly and without explanation. The deposit amount is as high as more than Tk1 crore, while some firms are getting a new electricity connection without the payment.

EPZ companies can import machinery duty free. But the firms cannot bring in spare parts for those machines without paying tax, said Japanese investors.   

The delays for immigration clearance at Hazrat Shahjalal International Airport in Dhaka were also raised by Japan External Trade Organisation (Jetro) in an inter-ministerial meeting.

"Sometimes, it even takes 3-4 hours to complete the immigration process," Yuji Ando, Jetro country representative, told the event.

Civil aviation and airport officials claim the situation would improve once the third terminal is completed.

The work on the terminal has seen 22% progress so far and is expected to be completed by the 2023 deadline, meaning that having additional immigration facilities will have to wait until then.

The same issue will be presented again in today's meeting.

The meeting agenda includes Japan's previous request to improve immigration process at the airport and getting visa-on-arrival, which now takes 3-4 hours. Getting customs clearance at both seaport and airport is also a problem for the investors as it now takes 16 days at the seaport and 8 days at the airport.

Japanese investors want the existing law for mandatory wage hike in EPZ be removed as minimum wage differs widely between factories in and outside EPZs.

Though local companies get export incentives, foreign-owned companies and joint ventures in EPZ are not getting the support. The Japan side points out that those EPZ companies also should qualify for the cash incentive.       

According to documents of the PMO meeting to be held today, Japanese investors have sought long-term foreign loans from parent companies as working capital, low-cost short-term foreign loans and allowing regional project offices to send remittances to Japan.        

Japanese investors have also proposed to abolish the royalty and technical fees, and simplify the procedure for royalty remittance.