Japanese businesses eye $13b trade, investment in BD

Japanese private sector eyes trade and investment worth US$13 billion in Bangladesh under bilateral economic partnership agreement (EPA) in the making through high-level exchanges between the two governments.

Official sources say halal meat, deep-sea fishing, logistics and infrastructure, synthetic manufacturing and agri-business are among priority potential sectors identified by the Japanese private sector for trade and investment here.

The EPA, now under negotiation after the completion of a joint survey, is likely to help make up for trade of $ 8.72 billion with phased tariff reduction for Japan. This wide trade gap against Dhaka is seen as untapped trade potential for Bangladesh.

Conducted by the private sectors of Japan and Bangladesh, the joint study showed current two-way trade worth $ 4.28 billion with bigger basket of Japan.

It found fruits, frozen and live fishes, skilled-manpower exports, ICT outsourcing, capital machinery, automobile, and spare parts and consumer electronics as other potential sectors for exploring to maximise potential trade.

Officials said the government representatives completed fifth-round negotiations last April to come into agreement on issues related to free-trade regime after the handover of the study report in November last year.

They view that the EPA negotiation at government level is necessary to address various issues like sector-wise tariff elimination, rules of origin, timeframe, intellectual property, competition policy, and customs for a "win-win deal".

Chief Adviser of the interim government Prof Muhammad Yunus is now in Japan on an official visit with a wide agenda that include trade and investment. However, they say, EPA signing is unlikely as more negotiations are needed and final approval will have to come from the parliaments of the two countries.

"There is no scope of development of EPA during the visit of Chief Adviser Mohammad Yunus to Japan," also said an insider, preferring not to be quoted by name.

But he told the FE that EPA implementation hinges on foreign direct investment, official development assistance (ODA) etc which are among important bilateral discussions between the two heads of government.

The latest study report says the country's benefit will be lesser and there will be higher-quality imports from Japan, lower-cost quality products, import of high-quality raw materials for Bangladeshi firms, transfer of technology and capital machinery.

The EPA, which is different from FTA and be more compatible after Bangladesh's LDC graduation, can serve a catalyst, creating environment as a gateway to substantial Japanese investment in Bangladesh for its burgeoning market, it observed.

Robust development and large market, growing middle-income population, geographic position and high demographic dividend are among attractive factors for the country. The survey also identified $973 million worth of unrealized export potential in apparel sector-Bangladesh's 80-percent-export-earning industry of readymade garments.

"Japan's experience in navigating global markets and its commitment to quality and innovation can be leveraged to enhance Bangladesh's competitiveness," says the report in its summary.

But the study report shows Japanese companies are more interested in investing in agri-business and halal meat due to Bangladesh's top positions in various products as well as synthetic manufacturing, deep- sea fishing for venturing untapped potential

Sourcing BSTI, Islamic Foundation, IMARC-market data, the report states that Bangladesh could tap halal food of $1.0 billion and its domestic market size $107 billion against estimated global $3.9 trillion market in 2027.

It says though Bangladesh is self-sufficient in red-meat production and in a position to export, there are issues like treatment of animals, how they are slaughtered etc to get global share.

Japan-Bangladesh Chamber of Commerce and Industry handed over the joint survey report, titled 'accelerating Japan-Bangladesh Economic Partnership Agreement: Key Priorities and Strategies Ahead', to the government in November last.

The business leaders consider the EPA as more beneficial to Bangladesh than traditional free-trade agreement (FTA) as it will help the country overcome post-LDC challenges following withdrawal of different free- trade regimes with major export and import countries after graduation to middle-income country.

The study shows that Bangladesh's zero-tariff benefits from the European Union, Canada, China, India and Japan are likely to increase to 9.5 per cent, 17 per cent, 16.2 per cent, 8.6 per cent and 8.7 per cent respectively after its graduation from the least-developed country (LDC) status.

According to the report, Bangladesh is likely to benefit from import of cheaper and higher-quality products from Japan for Bangladeshi consumers, high-quality raw materials, machinery for smaller Bangladeshi firms as well as leveraging Japan's technological expertise and upgrading quality by introducing hybrid and electronic models aligned with global sustainability trends.

The study also examined Bangladesh's export potential and opportunities for diversification through the tools of International Trade Centre (ITC) including methodology on export-potential indicator and product-diversification indicator (PDI) and said Bangladesh possessed unrealized value of $25 billion for exports into more potential markets in Germany, the United States and France. The country's similar export potential to Japan is said to be $ 1.1 billion. According to ITC-export-potential map, unrealized export potential of Bangladesh to Japan is $973 million in apparel sector, $ 33 million in footwear, 17 million in home textiles, $ 24 million in fish-shellfish and $14 million in other textile products.

Besides, the joint study finds digital economy, skilled and semi-skilled manpower exports as potential sectors for Bangladesh.

smunima@yahoo.com