Major Japanese companies operating in Bangladesh are planning to go for expansion of their businesses here over the next two years. Availability of cheap labour and profitability are the key reasons for such a move.
According to a recent survey conducted by the Japan External Trade Organisation (Jetro), most Bangladeshi entrepreneurs pay very low salary and wages to the workers, engineers and managers. Understandably, this low wage factor is potentially encouraging to stimulate business expansion.
The findings of the survey, which was conducted among 5,073 Japanese firms in 20 Asia and Oceania countries, were unveiled this week by the Japan-Bangladesh Chamber of Commerce and Industry (JBCCI) in the city. Out of the 20 countries, Bangladesh secured the second spot in terms of profitability for Japanese companies.
It was found that some 56.6 per cent of the Japanese firms are planning to increase the number of local employees in the next one year in Bangladesh. The percentage is the fifth largest recruitment plan among the surveyed countries.
Labour cost is the cheapest in Bangladesh in the manufacturing sector. The strong presence of Japanese companies in Bangladesh indicates that more Japanese companies are expected to land here. Last year, the total number of Japanese companies in Bangladesh was 278, up from 260 in 2017.
As of November last year, the amount of Japanese investment in Bangladesh by private companies was $326 million. However, the amount would be much higher if investments made by Japanese automobile giant Honda and Japan Tobacco are included. If the amount of Japan-sponsored investment through Overseas Development Assistance (ODA) in different projects is included, the amount would be even bigger. So far, Japanese government has committed $12 billion as ODA and has already released $7 billion.
Many Japanese companies, especially the consumer and food processing companies, have been conducting feasibility studies in Bangladesh to grab the local consumer market of $170 million. For example, Bangladesh is a very big market for diapers as the demand for the product is growing with urbanisation. Although some local companies are manufacturing diapers, 60 per cent of the demand is still met through imports.
However, the problems listed by the Japanese companies in Bangladesh include inadequate logistics and infrastructure, difficulty in quality control and shortage of skilled manpower.
It is true, Bangladesh is witnessing a robust economic growth despite natural calamities, lack of good governance, corruption etc. Some quarters term the success of the economy a 'miracle'. But the people here are industrious, full of energy and hope. They are keeping the country's economy vibrant despite various setbacks.
Yet the overall condition of the country in terms of infrastructural facilities is not good compared to global standards. Bangladesh is ranked 176 among 189 countries in the World Bank's Ease of Going Business Index of 2019. All South Asian countries, even war-torn Afghanistan is in a better position than Bangladesh. It seriously lacks in fulfilling the requirements of investment environment sought by foreign investors.
Gearing up the economy requires efficient and fast port facilities which Bangladesh seriously lacks. On an average, unloading of goods in the country's main sea port Chattogram takes 15 days compared to only 4.4 days in South Korea. Bangladesh takes the second longest air cargo clearance time compared to other Asian countries. Currently, it takes 7.9 days for air cargo clearance. Our positions in different economic indicators are also poor.
If the country's cheap labour is the main reason of high earnings and subsequent growth by the local industrialists and overseas companies, then questions may arise about the sustainability of such growth. The disparity created by such trend has negative impacts.
Bangladesh needs to create a congenial environment to attract foreign investors. Doable initiatives should be taken up to raise efficiency, ensure good governance and strengthen institutional capacity to make a giant stride in global economic indicators.