Japanese firms plan to expand in Bangladesh over next two years
MOST Japanese companies operating in Bangladesh plan to expand their business over the coming two years thanks to cheap labour and the potential to attain high profitability, according to the findings of a survey by the Japan External Trade Organization (Jetro).
Some 73.2 per cent of the 57 companies interviewed said Bangladesh is their top priority for business expansion; 61 per cent said the country has high growth potential.
The poll, which interviewed 5,073 Japanese firms in 20 Asia and Oceania countries, revealed that out of the 20 countries Bangladesh ranked in second place in terms of profitability for Japanese companies, reported The Daily Star, Bangladesh.
Some 62.2 per cent of the Japanese companies operating in Bangladesh expect an increase in profit in 2019 compared to a year earlier. The survey also showed that 56.6 per cent of Japanese firms planned to boost the number of local employees within one year.
"Labour cost is the cheapest in Bangladesh in manufacturing sector," the survey said.
Last year the total number of Japanese companies in Bangladesh rose to 278, up from 260 in 2017 and 245 in 2016.
As of November 2018, the amount of Japanese investment in Bangladesh by private firms stood at US$326 million. However, the amount is much higher if the investments made by Japanese automobile giant Honda and Japan Tobacco are factored into the results.
Last August, Japan Tobacco Inc agreed to purchase local Akij Group's tobacco business for $1.5 billion, which is the single largest foreign direct investment in Bangladesh's private sector to date.
Also last November, Honda inaugurated its sole manufacturing plant at Munshiganj, which it established with state-owned Bangladesh Steel and Engineering Corporation.
Furthermore, the Japanese government has so far committed $12 billion as sponsored investment through the Overseas Development Assistance (ODA) programme, of which $7 billion has already been released.
With regards to the barriers to doing business in Bangladesh, Japanese businesses cited inadequate logistics and infrastructure, difficulty in quality control and a shortage of skilled manpower.
Bangladesh has the second longest clearance time at air and sea ports compared to other Asian nations. At present, it takes 15.6 days to get clearance for ocean freight and 7.9 days for air freight. By comparison, Taiwan is the quickest with 5.2 days clearance for ocean shipping, and Hong Kong and Macau take 2.2 days to clear air cargo, the survey showed.