Dr. Atiur Rahman
Governor, Bangladesh Bank :
Growth of trade and investment relationships between businesses in Japan and Bangladesh have however remained sluggish and far below potential. Bilateral trade totaled under USD 2 billion in FY14, Bangladesh’s bilateral trade growth with Japan lagging her overall external trade growth. Bangladesh remains in trade deficit with Japan unlike with most other advanced economies, although exports are lately showing some signs of pick up. Japanese FDI inflows into Bangladesh remain small, under USD 100 million in 2013 even after more than trebling from the preceding year’s figure.
This minuscule engagement level between businesses in Japan and Bangladesh is surprising, given the outward looking resurgence thrust in the Japanese economy imparted by honorable Prime Minister H.E. Mr. Shinzo Abe; and given Bangladesh economy’s growth dynamism evident in our ongoing sustained spell of six-plus percent annual average real GDP growth for well over a decade now, in stable macro financial environment with single digit CPI inflation, fiscal deficits in lower single digit GDP percentages, and strong external sector position with positive BOP current account balance, growing foreign exchange reserves, and domestic currency under appreciation pressure. That the Bangladesh’s financial sector is stable and resilient has been cofirmed repeatedly by favourable ratings of top global rating agencies like S&P, Moody’s and the Fitch; its stability remained unimpaired during episodes of major external turbulences like the East Asian currency crisis and the subsequent global financial crisis. Bangladesh is continually strengthening her financial sector management and supervision practices and norms in line with global best practice standards. Risk focused Basel II capital adequacy regime is already in place, and work is underway for adoption of its Basel III version with revised capital norms and new liquidity coverage and leverage criteria. As a WTO founder member Bangladesh is fully open in external trade, and as a low income economy enjoys favored access to most of the advanced economy markets. Current global economic and geopolitical developments have led Bangladesh to focus more on Asia and the East for acquiring new trade and investment; and we are deeply grateful for Japan’s eagerness in helping Bangladesh get into the RCEP. Bangladesh’s inclusion in this regional value chain will be to our mutual advantage; with Japanese businesses using Bangladesh as a cost efficient manufacturing base for such items as automobile parts, electrical and electronic goods, apparels and various other consumer goods.
Bangladesh’s policy stance on FDI and FPI inflows are among the most liberal in South Asia region; and we at the central bank are continually engaging with local foreign investor communities in Bangladesh for facilitation of all kinds of business related external transactions including inflows of equity and debt, and outflows of royalty/technical fee, profits/dividends and disinvestment proceeds including capital gains. Major recent new facilitations include enhancement of family remittance ceiling for expatriates to 75% of salaries, and repatriability of sale proceeds of foreign equity in unlisted companies at fair value based on assets, income and earnings trends instead of solely at net asset value. Foreign owned businesses can now access local and external financing on the same basis as for locally owned businesses, and their interest free short term borrowings from their parent businesses at home require no prior approval.
Countrywide chains of job oriented vocational training in Bangladesh are continually adding into her large pool of semiskilled manpower whose skills are further upgradable easily with some hands on training in actual job environment. Tech savvy young science and technology graduates are also coming out of our universities in large numbers every year. Foreign investors in Bangladesh can hire from these manpower pools at much lower cost than elsewhere. Besides scope for cost efficient labor intensive manufacturing there are ample opportunities for big ticket Japanese investments in Bangladesh in areas like energy, development of deep sea port, LNG storage terminals and other physical infrastructure, tourism, tertiary healthcare and so forth. Bangladesh has a vibrant SME light engineering sector that Japanese automakers and machine builders can take advantage of with orders for parts and spares. Manufacture of solar PV panels, energy efficient LED lamps, TVs, computer monitors and other electrical and electronic appliances are also likely to be cost efficient. Japanese businesses would also find Bangladesh attractive as an outsourcing destination for software development and other IT enabled back office services. Relocation of export manufacturing units in Bangladesh will give Japanese businesses the advantage of favored access to many advanced economy markets, besides cost efficiency. Manufacturing for Bangladesh’s own large domestic market with a large and growing middle to higher income population segments would also be attractive for Japanese entrepreneurs. Both wholly foreign ownership and joint venture options with the private and public sector are open for Japanese and other foreign investors.
Our government has already promised a sizable new SEZ in Chittagong specifically for Japanese investors, and is further considering a generous set of incentives for investors in SEZs including time bound full and partial waivers on tax/vat/stamp duty etc. As Japanese businesses are looking towards new investment destinations and as Bangladesh authorities are eager and willing to facilitate Japanese investments as part of the look East re-orientation of trade and investment promotion, I would earnestly welcome and urge the Japanese and Bangladeshi business leaders present here today to work together in taking full advantage of all the existing and new facilities and bring about a major new upturn in our bilateral trade and investment relationships. We look forward to Japan which is our time-tested friend, always remaining Bangladesh’s important partner in helping attain her development vision of higher middle income country status by 2030 and advanced economy status by another decade or so.
