71% Japanese firms dissatisfied with business climate in Bangladesh

Although Japanese companies operating in Bangladesh are upbeat about the growth potential in the country, 71 percent of them are dissatisfied with the general business environment, a new survey showed.

Of them, 26.2 percent were highly dissatisfied and 44.6 percent slightly dissatisfied, according to the survey of the Japan External Trade Organisation (Jetro).

The survey report on the business conditions of Japanese companies operating in Asia and Oceania was unveiled at an event at the Gulshan office of the Metropolitan Chamber of Commerce and Industry (MCCI) yesterday.

Overall, the responses from nearly 4,400 companies in the countries in Asia and Oceania were considered. Some 214 Japanese firms in Bangladesh also took part in the study, which was carried out from August 22 to September 21 last year.

The survey finds that three-fourths of Japanese companies with a presence in Bangladesh termed complicated customs clearance procedures as the biggest challenge for business operations.

"From the comparative perspective especially with Asean countries, it would be necessary for the business environment in Bangladesh to be improved by addressing the issues facing Japanese companies, especially in custom clearance procedures," said Yuji Ando, country representative of the Jetro, while presenting the findings of the survey.

Some 72.6 percent of companies termed volatility in the exchange rate and 64 percent described difficulties in local procurement of raw materials and parts as other major challenges.

Sixty-five percent of respondents called the shortage of electricity, or power cuts, as another major challenge.

Despite the challenges, Japanese companies say Bangladesh has growth potential.

"The business sentiment among the Japanese companies is rather high in Asia and Oceania."

Bangladesh also performed well when it comes to the ease of recruiting human resources such as general workers and staff and hiring engineers and specialists, the survey said.

In terms of labour cost, Bangladesh is the most competitive among the countries in Asia and Oceania, it said.

Speaking about the risk factors confronting the business climate, Japanese firms cited the lack of efficiency in administrative procedures in issuing permits and licences, problems in the legal system related to preferential treatment or foreign capital, lack of an efficient tax system, and the delay in obtaining visas and work permits.

Still, nearly 72 percent of Japanese companies want to expand their business in one or two years, said the survey. With this, Bangladesh takes the second spot among the countries in Asia and Oceania.

Nihad Kabir, a former president of the MCCI, said there are too many regulatory requirements in the country for doing business. "They are time-consuming and costly."

She said the cost of doing business has reduced but it is still high in terms of international standards.

According to the business leader, businesses want three things, including predictability and transparency. "We have a long way to go in these areas."

Nihad suggested disruptive changes in the legal and regulatory requirements that foreign investors had to comply with and updating the redundant laws.

She cited that the repatriation of profits and payments has been an issue for foreign investors.

Tetsuro Kano, president of the Japanese Commerce and Industry Association in Dhaka, described the survey findings as both "sweet and bitter".

He said Japanese working in Bangladesh face problems in sending money to their families while firms witness difficulties in opening and settling letters of credit.

"I hope the situation will improve. If it happens, investment and trade will rise."

Manabu Sugawara, vice-president of the Japan-Bangladesh Chamber of Commerce and Industry, said there are opportunities for Bangladesh to attract foreign investment.

"But opportunity itself does not guarantee any foreign direct investment."

Iwama Kiminori, ambassador of Japan to Bangladesh, said a conducive environment for Japanese companies is needed.

He said there is an increasing demand for Japanese visas, so they will speed up procedures, especially for business people.

Lokman Hossain Miah, executive chairman of the Bangladesh Investment Development Authority, said his office has streamlined the process of visa and work permit issuance so that foreigners can avail them within three days.

MCCI President Md Saiful Islam said despite the impacts of the coronavirus pandemic and the Russia-Ukraine war, Bangladesh has become an attractive destination for Japanese companies.

Nearly 350 of them have collectively invested more than $380 million, he said.

"By enhancing business conditions in Bangladesh, bilateral trade and investment could be increased, which would ultimately accelerate the economic growth in both countries."