The year 2023 commemorates the beginning of the 51st year of friendship and partnership between Japan and Bangladesh. Japan and Bangladesh have had diplomatic ties since 1972, when Japan recognized Bangladesh's independence and since then, interactions between the two countries have continued to be positive, leading to cooperation in a wide range of endeavors.
Over time, Japan has become one of Bangladesh's time-tested friends, major bilateral donors and investors. However, in recent years, the two countries' business and investment partnership and diplomatic alliance have increased significantly. So, it is the perfect time for both countries to capitalize on fresh chances to deepen existing relations.
Japan has evolved as Bangladesh's single largest development partner, contributing to the country's progress in sectors like infrastructure, manufacturing technology, and human resources; as well as a number of Japanese corporations' operations in Bangladesh are on the rise. For example, Japan International Cooperation Agency (JICA) has had a footprint in Dhaka since 1974. Since 1974, JICA has granted Bangladesh $24.72 billion as project aid, food aid, and commodity aid in the form of loans, grants, and technical assistance.
Bangladesh, with the help of the JICA, has established a special economic zone with a surface of 1,000 acres in 2022. This economic zone has offered a springboard for expanded investment from the private sector in Bangladesh. This would additionally offer fully prepared facilities, enabling Japanese ventures in a wide range of sectors, including agribusiness, ICT, manufacturing, chemicals, automobile, textiles and apparels, and pharmaceuticals, among many other industries.
Currently, more than 315 Japanese companies are operating in Bangladesh, and the size has tripled over the last decade. As reported by JETRO, 71% of the firms are keen on expanding their operations in the following couple of years, as they consider Bangladesh as a promising location for investment.
Japan is the fifth-largest source country for Bangladesh's merchandise imports, which amount to more than $2bn. Whereas, Bangladesh has witnessed Japan to be a major consumer of Bangladeshi textiles and garments. For RMG products, Bangladesh's exports to Japan have nearly doubled in the last decade.
As Japan looks to diversify their supply chains, it may boost its imports of these goods from Bangladesh. Bangladesh raked in export revenues of $1.09bn from Japan in FY22 while setting a goal of doubling that amount by FY23. Other than textile and apparels, both countries can also trade agricultural products, jute and jute products, fishery products, sugar, and pharmaceuticals.
Its geographical location is one of the reasons why Japanese firms are interested to invest in Bangladesh. Bangladesh is a stakeholder of the Indo-Pacific region, and its foreign investor protection policies, taxation, open and free trade apparatus, infrastructure development, seaports, and business environment make it an investment hub.
In addition to that, Japan may benefit from Bangladesh's abundant resources by investing in the country's minerals and natural gas extraction. While Bangladesh aimed to transfer 40% of its energy into renewable energy within 2041, Japan can invest in Bangladesh's shifting carbon footprint. Ocean thermal, tidal, and offshore wind and solar power all have the potential to significantly contribute to the country's electricity production -- where Japan has investment opportunities.
Bangladesh ranks among South Asia's most open and trade-focused economies and is expected to become the ninth largest consumer market in the world by 2030. Japanese businesses may take advantage of Bangladesh's burgeoning population and middle class by expanding their participation in the country's booming consumer products, healthcare, and education sector. There is a sizable population of young graduates across the country, making it a potential destination for businesses that require skilled labour and low production cost.
Infrastructure development is another area where the two nations might work together, especially in Japan's strong domains of transportation and energy. Japan is helping Bangladesh build several mega-infrastructure projects, including the Matarbari deep seaport, the Matarbari coal-fired power plant, the third terminal at Dhaka's Hazrat Shahjalal International Airport, the Bangabandhu Rail Bridge across the Jamuna River, and the Dhaka Metro Rail project.
Japan has already invested an estimated $9.2bn as Overseas Development Assistance (ODA) to Bangladesh. As Bangladesh is moving ahead while strengthening its economy, it will need more infrastructure -- and Japan can assist.
Moreover, opportunities for investment in Bangladesh's digital economy range from numerous branches. As part of its “2041 Smart Bangladesh Vision,” Bangladesh has established the goal of transforming its economy to become more creative, efficient, and knowledge-based. Bangladesh is now the world's second-largest provider of internet-based employment opportunities.
The country is well positioned to become a big factor inside the global digital economy because of its vast population, expanding middle class, and rising internet penetration rates. E-commerce, digital payment systems, mobile banking, microfinance, and digital marketing all provide potential investment prospects for Japan in Bangladesh.
From the very birth of our nation, both Japan and Bangladesh share their peaceful values through trade, commerce, and investments. While they both have suffered from natural disasters, these experiences can be shared for adaptation and mitigation.
As a long-standing partner, Japan should make a smart move in order to settle the Rohingya crisis and lessen the burden on Bangladesh. Therefore, Japan can get support from Bangladesh for attaining their desirable permanent membership in the Security Council.
Consequently, a strong relationship with Japan would help Bangladesh achieve its full financial potential, meet the challenges it faces in achieving Least Developed Country status in 2026, and strengthen its network of diplomatic relationships to other major powers. Indeed, the Japan-Bangladesh bilateral trade and diplomatic relationship would not be able to fulfill its full potential until both countries sign a Free Trade Agreement and support each other on the world stage.
Sauid Ahmed Khan is a freelance contributor.
