With Japanese companies discouraged by the wage hike in China, it is working in favour of Bangladesh.
Japanese companies are now in the lookout for cheaper production bases in Asia and has started landing in Bangladesh due to the country’s low labour costs, reports the Bloomberg.
According to Japan External Trade Organisation, the number of Japanese companies working in Bangladesh has more than tripled since 2008, reaching 253 as of May 2017.
Among the 253 companies operating in Bangladesh, about 30 are in the clothing or leather industries, 15 or so are in clothing parts and inspection, 10 in logistics and about 15 in the IT services industry.
However, the number is still less than that in China or Thailand but the presence of Japanese companies in Bangladesh is increasing at a much faster pace because the country offers the lowest labour costs in the Asia-Pacific region.
Mari Tanaka, an official at Japan External Trade Organisation’s Overseas Research Department, said: “Bangladesh has been traditionally known as Asia’s poorest country.
“Labour costs there are lower compared to Japan and other East Asian countries, while it’s possible to hire a large number of young labourers.”
A Jetro survey states that among the 19 countries in Asia Pacific, Bangladeshi workers received the lowest average monthly wage from Japanese companies, below their counterparts in Sri Lanka, Laos and Myanmar.
The report said some firms are establishing a presence in Bangladesh with an eye on its promising domestic market and major companies like Honda Motor Co, Rohto Pharmaceutical Co and Ajinomoto Co are also betting on growth there.
With a population of 158 million and a median age of 26.3 years, Bangladesh’s gross domestic product has more than doubled over the past five years.
“Larger companies are expanding with the expectation that the domestic market will grow,” Tanaka said.
He said Uniqlo operator Fast Retailing Co played a role in Japanese companies starting to move to Bangladesh a decade ago.
She said: “Their decision to outsource production there in 2008 triggered a jump in Japanese arrivals, while rising labour costs in China and worsening relations between China and Japan in 2010 and 2012 drove another burst.”