Japanese cos bid for business in diverse BD sectors

Japanese companies bid big to  do business with Bangladesh in diverse sectors to seize emergent prospects, with many seeking information daily about the country's latest investment climate.

Affordable labour, local and global marketing prospects amid rising domestic consumer clientele act as the beckon for investors, according to business leaders and Japan External Trade Organisation officials.

So far, about 330 Japanese companies have invested in Bangladesh, while others are in wait for a more stable political environment-particularly those looking to engage in business-to-government (B2G) projects.

However, those are already in the process of doing business with government are in a hurry to complete their spadework within the set timeline.

Following the July uprising in Bangladesh, private-sector investment has begun to rise again, supported by growing export opportunities to Japan and other countries, an expanding local consumer market, and the availability of skilled and affordable labour, JETRO and industry-insiders have observed.

Building confidence to boost Japanese investment in Bangladesh: JBCCI president

"Japanese investment in Bangladesh has not slowed down. In fact, inquiries from Japanese companies about business opportunities here have increased," says Kazuiki Kataoka, Country Representative of the Japan External Trade Organization (JETRO), Bangladesh.

He notes that most Japanese firms operating in Bangladesh are in business-to-business (B2B) sectors such as manufacturing, trading and manpower export, which are less influenced by government policies.

"In the B2G sector, the situation is different.  Some companies are trying to finalise government-related projects quickly, while others are waiting for the right time," he says.

Rising popularity of Bangladesh among Japanese firms comes  out as a special spur in respect of economic cooperation.

As such, Bangladesh's appeal as an investment destination is  growing rapidly. During a JBCCI delegation's visit to Japan earlier this month (October), seminars held in Tokyo and Osaka drew overwhelming responses from entrepreneurs.

"The Tokyo seminar venue could host only 60 people, but we had over 80 participants within hours," recalls Kataoka. "In Osaka, the capacity was 50 but we accepted over 70. It clearly shows Bangladesh's rising popularity."

A recent JETRO-JICA online seminar on Bangladesh's investment potential also attracted more than 400 registrations, with over 330 participants joining live.

Manufacturing and domestic market lead interest: Japanese companies are now focusing on three key areas - investment manufacturing, food processing and manpower import from Bangladesh .

Traditionally, Japanese firms have established factories in Bangladesh to produce goods for export. Now, the country's domestic market of 170 million people is also drawing attention. Several companies are conducting feasibility studies or seeking to form joint ventures.

‘Transparency, consistency can unlock greater Japanese investment in Bangladesh’

One Japanese-Bangladeshi joint venture is scheduled to begin factory operations in December, while others are preparing to launch original equipment manufacturing (OEM) projects for local and export markets.

Automobile assembly has also emerged as a promising sector. Mitsubishi already started assembling cars locally with Rancon Group, importing parts from other South Asian countries. Honda continues manufacturing two-wheelers in Bangladesh, and two Japanese firms are producing car seats for Honda and Suzuki, exporting the products back to Japan.

"Bangladesh's abundant and disciplined labour force is a major attraction," Kataoka says. "While Japan is facing labour shortages, Bangladeshi workers are known for its focus and dedication."

Growing cooperation in skilled manpower emerges as a big trade venture.

Japan's increasing need for skilled workers has opened another area of cooperation. Several Japanese organisations are exploring partnerships in Bangladesh to train and recruit manpower.

Many Japanese companies already have experience supporting worker import from Indonesia, the Philippines and Myanmar, and now plan to import from Bangladesh through collaborations with Japanese-language-training schools in Bangladesh.

Language proficiency is the key, Kataoka explains. "Basic Japanese communication skills are essential to communicate with Japanese coworkers."

As of now, it all is not an unmixed blessing, though, as challenges persist alongside progress.

Despite optimism, investors still face challenges involving work permits, customs procedures and policy consistency.

"Obtaining a work permit can take a year and six months due to delays and a lack of transparency in the security-clearance process," Kataoka mentions. "Even sometimes we don't know which official to approach."

He welcomes the government's introduction of a digital security-clearance system, calling it a "great step," but urges faster expansion to all approval processes to improve transparency and efficiency.

In customs, frequent changes of officers and inconsistent interpretations of rules continue to trouble foreign businesses.

"One official says a document is required; another says it's not. Such inconsistency slows trade," Kataoka notes.

Maria Howlader, FCA, Secretary- General of the Japan-Bangladesh Chamber of Commerce and Industry (JBCCI), has emphasized the need for greater consistency in customs classifications and reduced bureaucratic discretion in decision-making.

"We must minimise the room for subjective interpretation and move toward a system-based approach rather than individual-based decisions," she notes.

She also highlighted that policy predictability-particularly regarding tax incentives and refund mechanisms-remains one of the foremost concerns for Japanese investors.

"Foreign investors plan their operations based on declared tax exemptions. When these incentives are suddenly withdrawn after a year or two, it severely disrupts their business models," Ms. Howlader explains the matter of disservice.

‘Bangladesh-Japan ties evolving from aid to strategic investment partnership’

While she appreciates the government decision to fix corporate-tax rates for two years and to introduce the National Single Window for customs, she urges policymakers to go further and establish a fully integrated digital tax platform-covering registration, compliance, and refund processing-to ensure transparency and efficiency.

JETRO officials acknowledge the active role of BIDA Executive Chairman Ashik Chowdhury and other interim government leaders in improving the investment environment. They are working sincerely to attract more Japanese investment, Kataoka says.

"With consistent policies, simplified regulations and full digitisation of government services, Bangladesh can become one of the most attractive investment destinations for Japan," says the Japanese trade expert, on an upbeat note.

Japan-Bangladesh Chamber of Commerce and Industry (JBCCI) President Tareq Rafi Bhuiyan (Jun) told the FE writer that Japanese companies that have already established operations here continue to face hurdles - from inconsistent regulations to difficulties in maintaining high standards of corporate governance with local partners.

When potential investors consult existing Japanese businesses in Bangladesh, they often hear mixed feedback.

Japanese companies, which plan, take time as they prefer policy predictability for at least 10 years which is a condition for sustainable investment.

"Equally important is corporate governance. Japanese investors are rigorous in their due diligence and compliance processes, which takes time because they focus on long-term engagement rather than short-term profit."

He notes that the relationship is gradually evolving from "aid to trade," with bilateral trade expected to rise from the current US$3.0 billion to between $5.0 and $10 billion in the coming years.

Alongside this, investment inflows are likely to grow - provided there is a clear, long-term roadmap and consistent policy framework, he predicts.