71.6% of Japanese firms eye expansion in Bangladesh

Japanese enterprises maintain a positive outlook on Bangladesh's burgeoning economic prospects, with an impressive 71.6% of companies currently active in the country expressing a strong inclination to expand their operations over the next one to two years.

According to a survey conducted by the Japan External Trade Organization (Jetro), in terms of business expansion, Bangladesh ranks second after India at 72.5% among the countries in the Asia and Oceania regions where Japanese companies have operations.

The survey unveiled on Wednesday at a programme in Dhaka said 44.4% of the companies think expansion is their approach to future business activities in the next one or two years.

Jetro conducted the survey from 22 August to 21 September 2022, and responses from nearly 4,392 companies (almost 31% of Japanese firms in this region) were considered, said Yuji Ando, country representative of Jetro.

Some 214 Japanese companies that are present in Bangladesh also took part in the survey.

Also, 61.8% of Japanese companies in Bangladesh expect their profits to increase in 2023.

"Business sentiment for Japanese companies in Bangladesh is rather high in the Asia and Oceania region. Especially, domestic market size and growth potential are high," finds the survey.

The report also says for competitive labour costs, Bangladesh has the second-highest ratio of export volume to total sales in the region. Local procurement is the key factor for reducing production costs, it says.

Like before, Japanese firms find the business environment a bottleneck in Bangladesh.

"From a comparative perspective (especially with ASEAN countries), it would be necessary for the business environment in Bangladesh to be improved by addressing the issues for Japanese companies in Bangladesh, especially in customs clearance procedures," it says.

The survey also mentions that as the utilisation rate of GSP facilities for Japanese companies in Bangladesh is high, trade agreements like the Economic Partnership Agreement (EPA) would be expected.

"By realising the competitive investment climate through EPA, Bangladesh would be the next investment destination for Japanese companies," said Yuji Ando.

Some 69.1% of the companies involved in trading in the whole region use a Free Trade Agreement (FTA), EPA, or Generalised System of Preferences (GSP). The actual utilisation ratio of GSP in Bangladesh is 72.7%, says the report.

"Trade agreements, like EPA, are significant for Bangladesh since Bangladesh is not eligible for GSP after LDC graduation," says the Jetro country representative in Dhaka.

Regarding the operating forecast for 2023 in the whole region, 43.3% of the companies expected an increase, while 12.3% expected a decrease.

In the ASEAN region, 44.9% of the companies forecast a profit increase, and 44.1% expect it to remain the same as the previous year.

Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry (MCCI), Lokman Hossain Miah, executive chairman of the Bangladesh Investment Development Authority, and IWAMA Kiminori, Japanese ambassador to Bangladesh, also spoke on the occasion.

Tetsuro Kano, president of the Japanese Commerce and Industries Association in Dhaka; Nihad Kabir, of the MCCI; Abdus Samad Al Azad, joint secretary (FTA-1), Ministry of Commerce; and Manabu Sugawara, vice president of the Japan Bangladesh Chamber of Commerce and Industries, were panellists during a panel discussion.