Japanese firms in China yet to propose factory relocation to Bangladesh

Several committees of different levels of the government have been working for more than six months, but Bangladesh has not yet received a proposal from any Japanese company to move its factory from China to Bangladesh.

Although the government has been assured of factory relocation in several meetings with Japanese investors, the assurance has not been implemented yet. 

Bangladesh Investment Development Authority (Bida) has no idea whether Japanese investment will come or not. 

In March-April, China implemented several measures, including lockdowns, as novel coronavirus infections soared. Its supply chain with trading partners collapsed as factory production came to a halt.

As a result, Japan, the United States and several countries of the European Union took initiative to move their factories from China to reduce their sole reliance on the East Asian country for their supply chains. 

Japan took the greatest initiative as it announced funds of $2.2 billion in early April for factory relocation. Of the amount, $2 billion was set aside for companies interested in relocating factories from China to Japan. The remaining $200 million was for companies eager to move factories to other countries.

At the time, Indonesia, Vietnam, India, the Philippines, and other countries announced various facilities to attract investment from Japanese companies interested in moving out of China. Bangladesh also took measures to this end. 

In May, the commerce ministry formed a taskforce chaired by Minister Tipu Munshi and comprising: the foreign minister, the industries minister, the private industry and investment adviser to the prime minister, and business representatives. 

A high-level committee headed by Principal Secretary to the prime minister Dr Ahmad Kaikaus was also formed to finalise the type of incentives that could be offered to Japanese investors. 

However, no incentive has been announced so far. 

Meanwhile, the Japanese government announced a list of companies that will benefit from the first round of its subsidies, with 57 firms receiving a total of $535 million to open factories in Japan and 30 others to be  paid to expand production in other Southeast Asian countries.

Of the 30 companies that announced they would relocate their factories from China to Southeast Asian countries: 15 are moving to Vietnam, six to Indonesia, four to Malaysia, three to the Philippines, and two to India.

But no Japanese company gave any specific proposal about relocating its factory to Bangladesh, said Bida Executive Chairman Md Sirazul Islam. 

"No company contacted us for registration either," he said. 

Japanese investors invested in China after doing cost analysis, said Sirazul. 

"No matter what is said, the opportunities that China offers investors are available in very few countries. Companies will not hurriedly move to other countries to get one-time payments from the Japanese government's incentives," he explained.  

The Bida official added, "Companies may get enough workers when it comes to relocating factories to Bangladesh. But they will not make the move unless they are sure that Bangladesh has the kind of skilled labour they need."

Shafiul Islam Mohiuddin, a member of the task force formed by the commerce ministry and former president of the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI), thinks it is highly unlikely that any Japanese company will set up a factory in Bangladesh after withdrawing investment from China. 

He does not think many companies will move out of China despite incentives offered by the Japanese government. 

Sirazul said it is unfortunate that Bangladesh does not receive that much Japanese investment.  

Japan's total foreign direct investment in Bangladesh, since independence, amounts to a mere $3 billion, he added. 

However, the Bida executive chairman believes Bangladesh will receive Japanese investment in the future. He thinks Japanese investment will come once the economic zone in Araihazar of Narayanganj is built.  

Asked when incentives to attract Japanese investment from China may be announced, he said the Prime Minister's Office was working on it, and the matter needs to be analysed in depth.