Bangladesh-Japan Partnership: The Next Development Journey [1st ed. 2023] 9819925673, 9789819925674

Table of contents :
Preface
Acknowledgements
Contents
About the Authors
Abbreviations
List of Figures
List of Boxes
List of Tables
Chapter 1: Introduction
Organisation of the Book
References
Chapter 2: Bangladesh’s Trade Relations with Japan
Major Trends in Export and Import Between Bangladesh and Japan
Analysis of Trade Flow
Overview of Trade Policies
References
Chapter 3: Japanese Development Assistance to Bangladesh
Overview of Japanese Foreign Aid to Bangladesh in the Twentieth Century
Overview of Japanese Foreign Aid to Bangladesh in the Twenty-First Century
Japanese Official Development Assistance to Bangladesh
Bay of Bengal Industrial Growth-Belt (BIG-B)
References
Chapter 4: Japanese Foreign Direct Investment in Bangladesh
Overview of Japanese Foreign Direct Investment in Bangladesh
Japanese Economic Zone (JEZ)
Challenges for the Japanese Economic Zone (JEZ)
Projections for the Japanese Economic Zone (JEZ)
Proposed Recommendations for the Challenges for the Japanese Economic Zone (JEZ)
Doing Business in Bangladesh
References
Chapter 5: Bangladesh-Japan Cooperation for Leveraging the Fourth Industrial Revolution
Brief Historical Review of Technological Progress in Japan
Major Trends of Technology Adoption in Bangladesh
Opportunities of the Fourth Industrial Revolution
Challenges of The Fourth Industrial Revolution
References
Chapter 6: The Way Forward
Bangladesh-Japan Trade After Bangladesh’s Graduation from the LDC Group
Japanese Development Assistance and Foreign Direct Investment in Bangladesh in the Context of Bangladesh’s Aspirations of Becoming an Upper Middle-Income Country
Importance of FDI from Japan to Bangladesh
Methods to Attract Greater Foreign Direct Investment from Japan
Japan’s Support to Bangladesh During the Fourth Industrial Revolution
Lessons from the Japanese Education System for Bangladesh
Methods to Improve the Education System of Bangladesh to Facilitate the Fourth Industrial Revolution
Complementarity Between Bangladesh and Japan as the Basis for the Partnership in the Next Development Journey
References
Chapter 7: Conclusions and Recommendations
Conclusions
Recommendations
Annex
Reference
Index

Citation preview

Bangladesh-Japan Partnership The Next Development Journey Fahmida Khatun Syed Yusuf Saadat Kashfia Ashraf Afrin Mahbub

Bangladesh-Japan Partnership

Fahmida Khatun • Syed Yusuf Saadat Kashfia Ashraf • Afrin Mahbub

Bangladesh-Japan Partnership The Next Development Journey

Fahmida Khatun Centre for Policy Dialogue (CPD) Dhaka, Bangladesh

Syed Yusuf Saadat Centre for Policy Dialogue (CPD) Dhaka, Bangladesh

Kashfia Ashraf Lakehead University Thunder Bay, Canada

Afrin Mahbub Centre for Policy Dialogue (CPD) Dhaka, Bangladesh

ISBN 978-981-99-2567-4    ISBN 978-981-99-2568-1 (eBook) https://doi.org/10.1007/978-981-99-2568-1 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Singapore Pte Ltd. 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Preface

This book is intended to commemorate the 50-year anniversary of the diplomatic ties shared between Bangladesh and Japan, addressing the ways in which Japan may assist Bangladesh in its next stage of development during the Fourth Industrial Revolution (4IR) and when it graduates from its least developed country (LDC) status. Bangladesh and Japan formally established diplomatic ties in 1972 and, as Bangladesh’s largest bilateral development partner, Japan has worked extensively with Bangladesh to enhance infrastructure, encourage industrialisation, improve health and education, and minimise risks related to natural disasters. Thus, this book provides a comprehensive evaluation of Bangladesh’s economic relationship with Japan, including how it has evolved over the preceding 50 years, as well as its possibilities and implications for the future. Bangladesh is undergoing a dual graduation which involves its graduation from a low-­ income country (LIC) to a lower middle-income country (LMIC) and from a least developed country (LDC) to a developing country. The LDC graduation is expected to have significant effects on Bangladesh’s major exports to Japan as Bangladesh will lose several LDC-specific international support measures. In this light, this book highlights the importance of taking the bilateral relationship between Bangladesh and Japan forward by exploring the possibility of a Free Trade Agreement (FTA) which may be beneficial for both economies. Bangladesh is also facing an uncertain future as a result of its lack of readiness to deal with disruptions caused by the 4IR. The 4IR provides both challenges and opportunities and, as one of the pioneers of v

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technology, Japan may be useful in assisting Bangladesh in successfully leveraging technology to fulfil its development goals during the 4IR. Against this backdrop, the book also delves into the prospects and constraints that may be experienced by Bangladesh in the era of 4IR by drawing attention to the importance of increased economic diversification for Bangladesh in terms of building skills and increasing productivity in order to accelerate technological adoption from Japan and to be on par with international competition following LDC graduation. It is imperative to mediate a successful transfer of knowledge through Japanese investments made in Bangladesh, not only to enhance socio-economic development of Bangladesh but also to make progress towards achieving several Sustainable Development Goals (SDGs). Thus, the book presents a thorough examination of Bangladesh’s prospects to access the Japanese market, as well as Japan’s assistance in the development of human capital and infrastructure in Bangladesh. It also discusses how to attract additional FDI to Bangladesh from Japan, as well as how Bangladesh might improve its technical skills by utilising expertise obtained through Japanese investments. This book is designed for academics, researchers, policymakers, and private sector representatives, enabling them to design and influence relevant policies such as planning for an FTA and add value to current and related research in the field and inspire future research on the concerned issues. However, in a broader sense the book will be useful for existing Japanese multinational businesses in Bangladesh, potential Japanese investors who are interested to invest in Bangladesh, and potential Bangladeshi businesses seeking opportunities to collaborate with Japanese firms and policymakers hoping to attract additional FDI from Japan. Dhaka, Bangladesh Dhaka, Bangladesh  Thunder Bay, ON, Canada  Dhaka, Bangladesh  March 2023

Fahmida Khatun Syed Yusuf Saadat Kashfia Ashraf Afrin Mahbub

Acknowledgements

This study has been carried out by Dr Fahmida Khatun, Executive Director, Centre for Policy Dialogue (CPD); Mr Syed Yusuf Saadat, Research Fellow, Centre for Policy Dialogue (CPD); Ms Kashfia Ashraf, Graduate student, Lakehead University, and former Programme Associate (Research), Centre for Policy Dialogue; and Ms Afrin Mahbub, Programme Associate (Research), Centre for Policy Dialogue (CPD). Concerned officials belonging to a number of institutions have extended valuable support to the authors, for which the authors would like to register their sincere thanks. The research team would like to express its gratitude to Mr Ito Naoki, former Ambassador Extraordinary and Plenipotentiary of Japan in Bangladesh. The study team would also like to extend its appreciation to Professor Mustafizur Rahman, Distinguished Fellow, CPD; Dr Khondokar Golam Moazzem, Research Director, CPD; Dr Yamagata Tatsufumi, Professor, College of Asia Pacific Studies, Ritsumeikan Asia Pacific University, Japan; Mr Asif A Chowdhury, President, Japan-Bangladesh Chamber of Commerce and Industry (JBCCI); Ms Uchiyama Tomoko, Country Director, Shapla Neer (Citizen’s Committee in Japan for Overseas Support); Dr Jahangir Alam, Associate Professor, Department of Japanese Studies, University of Dhaka; Mr Hayakawa Yuho, Chief Representative, Japan International Cooperation Agency (JICA); Dr A.F.M Saiful Amin, Director, BUET-­ Japanese Institute of Disaster Prevention and Urban Safety (BUET-­ JIDPUS); Professor Yasuyuki Sawada, Professor, Faculty of Economics,

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Acknowledgements

University of Tokyo; Ms Kathy Matsui, General Partner, MPower Partners, Board Member, Asian University for Women; Dr Kenta Goto, Professor, Faculty of Economics, Kansai University, Japan; and Mr Yuji Ando, Country Representative, Japan External Trade Organisation (JETRO), Dhaka.

Contents

1 Introduction  1 2 Bangladesh’s Trade Relations with Japan  7 3 Japanese Development Assistance to Bangladesh 27 4 Japanese Foreign Direct Investment in Bangladesh 45 5 Bangladesh-Japan  Cooperation for Leveraging the Fourth Industrial Revolution 63 6 The Way Forward 79 7 Conclusions and Recommendations105 Annex109 Index117

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About the Authors

Fahmida  Khatun  is the Executive Director of the Centre for Policy Dialogue (CPD), a leading think tank in South Asia. Khatun has demonstrated her research capacity by way of successfully leading several research projects at CPD. Her areas of interest include macroeconomic policy and management, aid effectiveness, international trade and World Trade Organisation (WTO) issues, youth employment, social inclusion and poverty eradication, climate change, gender issues, interests of least developed countries (LDCs), and Sustainable Development Goals (SDGs). She has co-authored the book titled Youth Employment in Bangladesh—Creating Opportunities, Reaping Dividends published by Palgrave Macmillan, has written widely in professional journals at home and abroad, and has authored books, book chapters, monographs, and policy briefs in areas of her interest and expertise. She has completed BSc and MSc in Economics from Jahangirnagar University, Bangladesh, as well as MSc in Environmental and Natural Resource Economics and a PhD in Economics from the University College London (UCL), UK. She did her postdoctoral research at the Earth Institute, Columbia University, USA, as a Fulbright Scholar in 2015. She also participated in a Leadership Decision Making course in 2019 at Harvard University, USA. Syed Yusuf Saadat  is a research fellow at the Centre for Policy Dialogue (CPD), a civil society think tank which promotes inclusive policymaking in Bangladesh. Saadat has undertaken research for organisations such as Friedrich-Ebert-Stiftung (FES), Deutsche Gesellschaft für Internationale

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ABOUT THE AUTHORS

Zusammenarbeit (GIZ), International Development Research Centre (IDRC), UK Aid, British Council, Embassy of Denmark, Netherlands Embassy, Embassy of Japan, Swiss Agency for Development and Cooperation (SDC), United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), United Nations Department of Economic and Social Affairs (UNDESA), United Nations Democracy Fund (UNDEF), United Nations Entity for Gender Equality and the Empowerment of Women (UN Women), and United Nations Development Programme (UNDP) in collaboration with eminent scholars. His research interests include income, wealth, and gender inequality, as well as labour economics, financial economics, international economics, and climate change. He has co-authored the book titled Youth Employment in Bangladesh—Creating Opportunities, Reaping Dividends published by Palgrave Macmillan. Prior to joining CPD, Saadat was an Economics and English Language Teacher at Mastermind School, Dhaka. Saadat holds an MSc in Economics and a BSc in Economics from North South University, Dhaka, Bangladesh. Kashfia Ashraf  worked as a Programme Associate (Research) at Centre for Policy Dialogue (CPD), and has undertaken research for organisations such as Friedrich-­Ebert-­Stiftung (FES), KIVU International, Swedish International Development Cooperation (SIDA), Embassy of Japan, and Embassy of Sweden in Bangladesh. She is currently  pursuing her Master’s Degree in Economics from Lakehead University, Canada. She has completed her BSc in Economics from BRAC University, with highest distinction. Kashfia has received BRAC University Merit Scholarship, Daily Star Award, and Edexcel Award for outstanding academic results. At CPD, she has worked on various projects including Skills Gap and Youth Employment in Bangladesh, Independent Review of Bangladesh’s Development (IRBD), CPD Green Cities Initiative, and Securing Green Transition of the Textile and Readymade Garments Sector in Bangladesh. Afrin Mahbub  is working as a Programme Associate (Research) at the Centre for Policy Dialogue (CPD) and is currently pursuing her MSc in Economics from North South University (NSU), Bangladesh. She has completed her Bachelor of Social Science in Economics from American International University Bangladesh (AIUB) with an Academic Scholarship for consistently maintaining a CGPA of 4.00. At CPD she has undertaken research for organisations such as Friedrich-­Ebert-­Stiftung (FES), KIVU

  About the Authors 

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International, and Embassy of Japan in Bangladesh. She has gained experience of working on projects such as Independent Review of Bangladesh’s Development (IRBD) and Expectations Mismatch and Youth Employment in Bangladesh. Currently, she is working on a project titled CPD Green Cities Initiative. Her key interests lie in areas related to trade, climate change, and human capital development. Prior to joining CPD, Mahbub worked as an Undergraduate Research Assistant under the supervision of the Research Director of the Bangladesh Institute of Development Studies (BIDS). She also received the Daily Star Award, the Edexcel Award, and the AIUB Vice-Chancellor’s Award for outstanding academic results.

Abbreviations

3D 4IR AC AI BCC BDT BFTI BGD BHL BIDA BIG-B B-JET BOESL CDP CEPA CEPII CGPA CIF CIRT CPS CRTA DESCO DFQF DLRS DMTCL DPDT ECI

Three Dimensional Fourth Industrial Revolution Assistant Commissioner Artificial Intelligence Bangladesh Computer Council Bangladeshi Taka Bangladesh Foreign Trade Institute Bangladesh Bangladesh Honda Private Limited Bangladesh Investment Development Authority Bay of Bengal Industrial Growth-Belt Bangladesh-Japan ICT Engineers’ Training Bangladesh Overseas Employment and Services Limited UN Committee for Development Policy Comprehensive Economic Partnership Agreement Centre d’Etudes Prospectives et d’Informations Cumulative Grade Point Average Cost, Insurance, and Freight Computer Incident Response Team Cyber-Physical System Committee on Regional Trade Agreement Dhaka Electricity Supply Company Duty-Free Quota-Free Directorate of Land Records and Survey Dhaka Mass Transit Company Limited Department of Patents, Designs and Trademark Economic Complexity Index xv

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ABBREVIATIONS

e-GOV EPA EPB EPI EPM e-TIN EU EZ FDI FIED FOB FTA G2G GATS GATT GDP GNI GSP HS HYV ICT IMF IoT IT ITC JBCCI JDS JETRO JEZ JICA JPY JSPS LDC LIC LMIC M2M MEXT MFN MITI MoU MRT NTMs

e-Government Economic Partnership Agreement Export Promotion Bureau Export Potential Indicator Export Potential Map Electronic Tax Identification Number European Union Economic Zone Foreign Direct Investment Foreign Investment & External Debt Division Free on Board Free Trade Agreement Government-to-Government General Agreement for Trade in Services General Agreement on Tariffs and Trade Gross Domestic Product Gross National Income Generalised System of Preferences Harmonised System High-Yielding seed Varieties Information and Communication Technology International Monetary Fund Internet of Things Information Technology International Trade Centre Japan-Bangladesh Chamber of Commerce and Industry Japanese Grant Aid for Human Resource Development Scholarship Japan External Trade Organization Japanese Economic Zone Japan International Corporation Agency Japanese Yen Japan Society for the Promotion of Science Least Developed Country Low-Income Country Lower Middle-Income Country Machine-to-Machine Ministry of Education, Culture, Sports, Science and Technology Most Favoured Nation Ministry of International Trade and Industry Memorandum of Understanding Mass Rapid Transit Non-Tariff Measures

 ABBREVIATIONS 

ODA Official Development Assistance OECD Organisation for Economic Co-operation and Development PPP Public-Private Partnership PTA Preferential Trade Agreement PwC PricewaterhouseCoopers RAJUK Rajdhani Unnayan Kartripakkha RCA Revealed Comparative Advantage REER Real Effective Exchange Rate R&D Research and Development RMG Ready Made Garment SDG Sustainable Development Goal SEZ Special Economic Zone SME Small and Medium Enterprise SPA Specialty store retailer of Private label Apparel SPS Sanitary and Phytosanitary STEM Science, Technology, Engineering, and Mathematics TBT Technical Barriers to Trade TOT Terms of Trade TPS Toyota Production System TQM Total Quality Management TVET Technical and Vocational Education and Training UN United Nations UNCTAD United Nations Conference on Trade and Development UNDESA United Nations Department of Economic and Social Affairs US United States USA United States of America USD United States Dollar VAT Value-Added Tax WITS World Integrated Trade Solutions WTO World Trade Organization YLP Young Leader’s Program

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List of Figures

Fig. 2.1 Fig. 2.2 Fig. 3.1

Fig. 3.2

Fig. 4.1

Fig. 5.1 Fig. 6.1

Bangladesh’s exports to Japan, actual versus potential (in million USD). (Source: Authors’ illustration based on data from ITC Export Potential Map (ITC EPM, 2022)) 17 Japan’s exports to Bangladesh, actual versus potential (in million USD). (Source: Authors’ illustration based on data from ITC Export Potential Map (ITC EPM, 2022)) 18 Foreign aid from Japan to Bangladesh, in million USD (1971–2021). (Source: Author’s illustration based on data from Flow of External Resources into Bangladesh (Economic Relations Division, 2021)) 32 Japan’s ODA to Bangladesh as a share of Japan’s ODA to the rest of the world. (Source: Author’s illustration based on data from Organisation for Economic Co-operation and Development [OECD] (OECD stats, n.d.)) 38 FDI inflows from Japan to Bangladesh in million USD (1997–2021). (Source: Author’s illustration based on data from Foreign Direct Investment and External Debt (Bangladesh Bank, 2021)) 48 Number of new patent applications in Bangladesh. (Source: Authors’ illustration based on data from Department of Patents, Designs and Trademarks (DPDT) (DPDT, 2022)) 70 Complementarity between Bangladesh and Japan. (Source: Authors’ illustration based on overall findings and analysis of the present study) 101

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List of Boxes

Box 2.1 Box 4.1 Box 4.2

Prospects of sending Bangladeshi caregivers to Japan Grameen Uniqlo Honda Motor Company Limited

10 46 47

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List of Tables

Table 2.1 Table 2.2 Table 2.3 Table 3.1 Table 3.2 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Table 4.7 Table 4.8

Bangladesh’s top 10 exports (goods) to Japan in million USD (HS 2-digit level) 13 Bangladesh’s top 10 imports (goods) from Japan in million USD (HS 2-digit level) 14 MFN tariff imposed on top 10 Bangladeshi goods exported to Japan in 2020 23 Top 10 active loans of Bangladesh from Japan 34 Top 10 active grants in terms of allocation to Bangladesh by Japan36 Net FDI inflows from Japan to Bangladesh in order of major sectors in million USD 49 FDI stock in Bangladesh from Japan in order of major sectors at end of June, in million USD 50 Time and cost involved in starting a business in Bangladesh 55 Time and cost involved in dealing with constructing permits in Bangladesh 56 Time and cost involved in getting electricity in Bangladesh 57 Time and cost involved in registering property in Bangladesh 59 Time and cost involved in trading across borders in Bangladesh 59 Time and cost involved in enforcing contracts in Bangladesh 60

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CHAPTER 1

Introduction

Abstract  This chapter introduces the economic relationship between Bangladesh and Japan. It briefly mentions the role played by Japan during the independence of Bangladesh. It then describes how the economic ties between the two countries have evolved over the years, and how such ties may be strengthened in the coming days through trade, aid, investment, and technological cooperation. Finally, it concludes with an outline of the plan of the book. Keywords  Bangladesh • Japan • Trade • Aid • Investment • Technology Bangladesh and Japan formally established diplomatic ties on 10 February 1972 (Embassy of Japan in Bangladesh, 2021), although friendly relations between the countries existed even prior to Bangladesh’s independence. Japan played an important role during the independence of Bangladesh in several ways (Jalal, 2002). The Japanese mass media provided wide coverage of the atrocities which were taking place in Bangladesh in 1971. The people of Japan, who were stunned by the war, showed sympathy for the plight of the people of Bangladesh and provided support to the cause of Bangladesh’s independence. The Government of Japan cut off its

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economic support to Pakistan in May 1971 and co-sponsored a number of resolutions on the Bangladesh issue in the United Nations Security Council and General Assembly in December 1971 (Jalal, 2002). Japanese government ministers, parliament members, intellectuals, and distinguished persons actively supported Bangladesh’s independence movement, and even Japanese school children donated their tiffin money for the war-affected people of Bangladesh (Jalal, 2002). As Bangladesh’s largest bilateral development partner, Japan has worked hand-in-hand with Bangladesh for building infrastructure, supporting industrialisation, increasing access to health and education, and reducing vulnerabilities (JICA, 2019). Net official development assistance (ODA) from Japan to Bangladesh increased from USD 0.12 billion in 2011 to USD 1.94 billion in 2021 (Economic Relations Division, 2021). Net foreign direct investment (FDI) from Japan to Bangladesh increased from USD 35.05 million in 2011 to USD 49.87 million in 2021 (Foreign Investment & External Debt (FIED) Division, 2021). In terms of international trade, Bangladesh’s ready-made garment (RMG) exports have faced a number of constraints and challenges in accessing the Japanese market, such as building relationship with Japanese buyers, accessing appropriate market information, meeting demand for maintaining ‘zero tolerance’ in product quality, ensuring compliance, overcoming the language barrier, curtailing the prevalent lead time, raising the quality of yarn and fabrics, attracting FDI in the textiles sector, raising productivity of workers, diversifying manufacturing capacities, and ensuring technological upgradation (Moazzem & Rahman, 2010). However, in recent times, trade between the nations has been growing. Bangladesh’s exports to Japan as a share of its total exports increased from 1.31 per cent in 2010–2011 to 3.37 per cent in 2018–2019 (Export Promotion Bureau Statistics, 2021; WITS, 2021). On the other hand, Bangladesh’s imports from Japan as a share of its total imports increased from 2.60 per cent in 2010–2011 to 2.48 per cent in 2018–2019 (Export Promotion Bureau Statistics, 2021; WITS, 2021). Bangladesh is presently undergoing a dual graduation: graduation from a low-income country (LIC) to a lower middle-income country (LMIC), and graduation from a least developed country (LDC) to a developing country. Bangladesh is already facing less favourable terms on ODA from most sources due to its LMIC graduation. The composition of Japan’s ODA to Bangladesh has shifted away from grants to loans, and this shift is

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likely to continue in the coming days in recognition of Bangladesh’s increasing ability to borrow. At the UN Committee for Development Policy’s (CDP) triennial evaluations in 2018 and 2021, Bangladesh satisfied all three requirements for graduation from LDC status: gross national income (GNI) per capita, human assets, and economic and environmental vulnerability. In view of the socio-economic repercussions of the COVID-19 pandemic, the CDP has recommended the country for LDC graduation in 2026 after a five-­ year preparation phase. After graduation, Bangladesh will lose access to LDC-specific duty-free quota-free (DFQF) schemes which are currently available in the Japanese market. Bangladesh’s RMG exports to Japan would face tariffs ranging from 7.4 per cent to 12.8 per cent, while Bangladesh’s footwear exports to Japan would face tariffs ranging from 22 to 175 per cent after Bangladesh’s LDC graduation (UNDESA, 2020). Thus, LDC graduation is anticipated to have significant impacts on Bangladesh’s major exports to Japan. In accordance with the UN General Assembly’s recommendations in resolution 67/221, the Government of Bangladesh has set up a consultation process with major development and trading partners during the five-­ year transition period (2021–2026) to work collaboratively on the evaluation of LDC graduation implications as well as to prepare a ‘Smooth Transition Strategy’ following the United Nations Department of Economic and Social Affairs (UNDESA) guidelines. In the midst of its dual graduation, Bangladesh is also facing an uncertain future due to its low level of preparedness to deal with the disruptions caused due to the Fourth Industrial Revolution (4IR). Technological innovation is accelerating at an unparalleled rate in the 4IR era. The 4IR provides both opportunities and threats. As a result, it generates both problems and possibilities. On the one hand, there is concern that technological advancement would usher in automation and result in widespread job displacement. On the other hand, there is optimism that new technologies will be able to generate new work opportunities. As one of the most technologically advanced nations in the world, Japan’s experience and expertise may be useful for charting out a pathway for Bangladesh in the 4IR so that Bangladesh may be able to successfully leverage technology to achieve its development objectives. Following its LDC graduation, Bangladesh will need to increase economic diversification, skills, and productivity. This will require Bangladesh

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to expedite technological adoption to be more efficient and stay competitive. In its journey beyond LDC graduation and for technological advancement, Japan can extend its support to Bangladesh and collaborate with Bangladesh through higher investment in technology, physical and soft infrastructure, and strengthen trade and financial integration. Thus, at this juncture, it is of paramount significance to conduct a study that can describe the role of Japan in Bangladesh’s next development journey into the unknown waters beyond dual graduation and 4IR.  Such research can guide the direction of the bilateral economic relations between the two countries in the near future and be conducive towards achievement of several Sustainable Development Goals (SDGs). On the occasion of the 50-year anniversary of the establishment of diplomatic ties between Bangladesh and Japan, the Centre for Policy Dialogue (CPD) undertook a research study titled ‘Bangladesh-Japan Partnership for The Next Development Journey.’ The aim of this research was to discuss how Japan may support Bangladesh in its next phase of growth during 4IR and beyond the LDC status of Bangladesh. This book will have the following objectives: (i). To review the trade relationship between Bangladesh and Japan in the past five decades. (ii). To evaluate the Japanese ODA to Bangladesh and Japanese FDI in Bangladesh. (iii). To understand how Japan may support Bangladesh in its next development journey during the 4IR and beyond dual graduation.

Organisation of the Book Following the introduction chapter, the second chapter examines the historical pattern in international trade between Bangladesh and Japan as well as their trade relationship over the last 50 years. The chapter also shows an overview of existing trade policies and explores the measures Japan takes while importing goods from Bangladesh. Chapter 3 is centred around the development assistance provided by Japan to Bangladesh. This chapter evaluates the trend in food, commodity, and project aid given to Bangladesh by Japan over the course of the past 50 years while also drawing attention to the overall nature of Japanese aid to Bangladesh and the mega projects financed by Japanese foreign aid. Chapter 4 makes an effort to comprehend the trend in Japanese investments made in Bangladesh

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over the past five decades. This chapter examines the net inflow of Japanese FDI while also monitoring the main Bangladeshi sectors that Japan is investing in. Before summarising the ease of doing business in Bangladesh, it also emphasises the much-discussed economic zone being developed in Bangladesh specifically for Japan, as well as the potential problems and possibilities associated with the economic zone. Chapter 5 introduces the concept of the 4IR while providing a historical outlook of Japan’s ascent to technological development. The chapter also alludes to the existing impediments as well as the prospects of the 4IR for Bangladesh. Chapter 6 emphasises the necessity for a bilateral trade agreement to assist trade once Bangladesh graduates from the LDC status while also highlighting trade policies that can be favourable for both Bangladesh and Japan. It also suggests employing the assistance provided by Japan more effectively and adapting the suggested tools to help Bangladesh attract more Japanese investment. This chapter also provides a wide framework for how Japanese aid and investments may help Bangladesh overcome the obstacles posed by its lack of technical sophistication on the way to upper middle-income status. Finally, the chapter concludes by comparing the educational systems of Bangladesh and Japan before discussing the complementarities that may assist the two countries’ economic collaboration. The seventh and final chapter offers policy recommendations to support the continued economic cooperation between Bangladesh and Japan.

References Economic Relations Division. (2021). Flow of External Resources into Bangladesh. Ministry of Finance. Retrieved February 6, 2022, from https://erd.portal.gov. b d / s i t e / p a g e / 7 f 1 9 2 f 9 6 -­1 4 4 2 -­4 8 b 4 -­a 9 4 7 -­2 e 0 9 c e 3 0 e c 5 4 / Flow-­of-­External-­Resources-­2020-­21-­(Golden-­Jubilee-­Special-­Edition) Embassy of Japan in Bangladesh. (2021). Japan Bangladesh Relations. Retrieved December 9, 2021, from Embassy of japan in Bangladesh: https://www.bd. emb-­japan.go.jp/en/bilateral/jbrelation.html Export Promotion Bureau Statistics. (2021, December 1). Export Promotion Bureau: http://www.epb.gov.bd/ Foreign Investment & External Debt (FIED) Division. (2021, December 1). Bangladesh Bank: https://www.bb.org.bd/en/index.php/publication/ publictn/0/2 Jalal, S.  A. (2002). Japan’s Contribution in the Independence of Bangladesh. Hakkani Publishers.

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JICA. (2019, June). Our profile. Retrieved December 9, 2021, from Japan International Cooperation Agency (JICA): https://www.jica.go.jp/bangladesh/english/office/others/c8h0vm00009u4ya3-­att/leaflet.pdf Moazzem, K.  G., & Rahman, M. (2010, November 1). Bangladesh’s Apparels Export to the Japanese Market: Opportunities and Challenges. Dhaka: Centre for Policy Dialogue (CPD). Retrieved December 9, 2021, from Centre for Policy Dialogue (CPD): https://cpd.org.bd/cpd-­research-­monograph-­5-­ bangladesh-­a pparels-­e xport-­t o-­t he-­j apanese-­m arket-­o pportunities-­a nd-­ challenges/ UNDESA. (2020, March 3). Ex ante Assessment of the Impacts of the Graduation of Bangladesh from the Category of Least Developed Countries (LDCs). Revised. Retrieved December 9, 2021, from United Nations Department for Economic and Social Affairs (UNDESA): https://www.un.org/development/desa/ dpad/wp-­content/uploads/sites/45/Bangladesh.pdf WITS. (2021, December 1). Retrieved from World Integrated Trade Solution: https://wits.worldbank.org/Countr yPr ofile/en/Countr y/JPN/ Year/2019/TradeFlow/Import/Partner/BGD/Product/all-­groups

CHAPTER 2

Bangladesh’s Trade Relations with Japan

Abstract  This chapter describes the trends in international trade between Bangladesh and Japan during the five decades from 1972 to 2022 which shows that, over the years, Bangladesh’s exports to Japan as a share of total exports of goods and services have fallen. The chapter further sheds light on some of the trade policies adopted by both countries. It mentions how Japan has been providing trade preferences, such as the Generalised System of Preferences (GSP) and Duty Free Quota Free (DFQF) market access, to Bangladesh and how such preferences will no longer be available to Bangladesh once it graduates from the least developed country (LDC) group in 2026 unless further trade talks and negotiations are made between both the countries. Provided no Free Trade Agreement (FTA) is signed between the two countries before Bangladesh’s LDC graduation, Most Favoured Nation (MFN) tariff rates will range between 7 and 12 per cent for most products except fisheries, articles of leather, rice, and sugar for Bangladesh. Thus, the chapter concludes by highlighting the notion that the Bangladesh-Japan diplomatic relationship can be taken forward by using foreign policy instruments and adopting bilateral agreements, such as an FTA, for smooth trade facilitation. Keywords  Trade • Export • Import • Free Trade Agreement (FTA) • Generalised System of Preferences (GSP) • Bilateral trade

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Japan is one of Bangladesh’s top trading partners, besides the United States (US) and the European Union (EU). Both import and export volumes between the two countries have increased over the years due to the existence of Generalised System of Preferences (GSP) and other trade facilities. Bangladesh is one of the biggest exporters of Ready Made Garment (RMG) and textile products in the world. Bangladesh’s RMG and textile exports started entering the Japanese market in 1972. Japanese products such as electronic items, metals, and automobiles have been dominating the markets of Bangladesh for the last few decades. Japan and Bangladesh’s trade cooperation is dependent on their comparative advantage. The scope for further trade and diversification may enhance the volume of trade by using foreign policy instruments and adopting bilateral agreements, such as an Free Trade Agreement (FTA) after Bangladesh’s graduation from the least developed country (LDC) group.

Major Trends in Export and Import Between Bangladesh and Japan The total export of Bangladeshi goods and services to Japan has risen significantly since 1972. From 1972 till 2008, Bangladeshi’s export was below United Stated Dollar (USD) 100 million, but after 2008 there has been a sharp rise in the export of Bangladesh’s goods and services to Japan (IMF, 2021). This may be because of improvements in Bangladesh’s trade relationship with Japan over the years. Bangladesh’s exports to Japan increased by more than 300 per cent over the last decade (IMF, 2021). Bangladesh exported USD 720 million worth of goods to Japan in 2020 (IMF, 2021). With increase in the volume of exports, the volume of import also increases. Bangladesh’s goods and services imported from Japan increased over the last 50 years, with the highest value of import of USD 1.89 billion in the year 2018 (IMF, 2021). Total imports of goods increased from USD 79 billion in 1973 to USD 1786 million in 2020 (IMF, 2021). Japan’s exports to Bangladesh have always been substantially higher than Bangladesh’s exports to Japan. However, Bangladesh’s export to Japan as a share of Bangladesh’s total export of goods and services has fallen over the years. From 1972 till 1986, Bangladesh exported a relatively large percentage of its total export to Japan. In 1986, Bangladesh’s percentage of export to Japan was 8 per cent of its total export, but after 1986, the percentage dropped

2  BANGLADESH’S TRADE RELATIONS WITH JAPAN 

9

substantially and remained below 3 per cent till 2020 (IMF, 2021). Bangladesh’s imports from Japan as a percentage of Bangladesh’s total imports also fell from 1973 till 2019. Bangladesh’s import from Japan was highest during 1987, which was about 16 per cent of Bangladesh’s total imports, but it fell significantly to 3.89 per cent in 2019 (IMF, 2021). The proportion of import of goods from Japan remained below 4 per cent over the last decade (IMF, 2021). Although Bangladesh’s export of services may not be as competitive as its export of goods to Japan, it still takes up some part of Bangladesh’s total export. In 2018, Bangladesh’s service export to Japan was around USD 236 million which was 3.95 per cent of its total service export (EPB, 2021; Bangladesh Bank, 2021). Nevertheless, after a 28 per cent reduction in 2020, service exports to Japan as a share of total export declined to 2.8 per cent in 2021 (EPB, 2021; Bangladesh Bank, 2021). The rise in global demand for services such as Information and Communication Technology (ICT)-related services, healthcare services, transport services, tourism, and travel-related services has increased the demand for skilled and educated professionals in different sectors. This increase in demand for services has created opportunities to export professionals to developed countries including the US, the UK, Singapore, and Japan. These developed nations require 1.5 million new nurses every year, and if supplied with 200,000 nurses, Bangladesh could potentially earn USD 7 billion in overseas remittances per year (UNCTAD, 2016). The worldwide dearth of primary caregivers due to fast-growing ageing populations, expansion of healthcare services, shortage of supply of physicians and nurses, and a surge in chronic diseases has created huge demand for qualified midwives and nurses. According to estimates by the United Nations Department of Economic and Social Affairs Population Division, the median age of Japan’s population in 2020 was 58.8 years, whereas the median age of Bangladesh’s population was in 2020 was 27.8 years (UNESCAP, 2019). Japan has a relatively large elderly population, as 47.4 per cent of Japan’s total population belonged to the age group of 50 years and above in 2020 (UNDESA Population Division, 2019). On the other hand, Bangladesh has a relatively large young population, as 45.5 per cent of Bangladesh’s total population belonged to the age group of 24 years and below in 2020 (UNDESA Population Division, 2019). Since almost half of the population in Japan is above 50 years old whereas almost half of the population of Bangladesh is less than 25 years old, there is a strong demographic complementarity between the two countries. Therefore,

10 

F. KHATUN ET AL.

there is scope for sending young Bangladeshi people to Japan to perform nursing and midwifery services. Such an initiative would be mutually beneficial for both countries. In the context of export of nursing and midwifery services from Bangladesh to Japan, Japan has made no commitments under Modes 1 (cross-border trade), 3 (commercial presence), or 4 (movement of natural persons) of service delivery under the General Agreement on Trade in Services (GATS), and has only made commitments under Mode 2 (consumption abroad) (BFTI, 2018). However, Bangladesh considers preferential market access under Mode 4 to be the most important commitment for increasing its service exports to Japan. Bangladesh faces many obstacles in exporting these caregiving and health services to Japan. If Japan is willing to relax its restrictions on delivery of health services under Mode 4 for Bangladesh, then there may be good prospects for export of nurses, midwives, and caregivers from Bangladesh to Japan (Box 2.1). In addition, the government of Bangladesh may redesign the required policies for the health service sector to enhance service export and take necessary initiatives with the private sector to provide Box 2.1  Prospects of sending Bangladeshi caregivers to Japan

The demand for caregivers in Japan has been increasing over the years due to the unprecedented increase in Japan’s ageing population and life expectancy at birth. Japan has the second highest life expectancy in the world. Japanese-born individuals are expected to live for 84.6 years, where the female and male life expectancies are 87.5 and 81.3 years respectively (UNDESA Population Division, 2019). This has created a need for outsourcing caregivers and healthcare professionals into Japan from Asian countries like Indonesia, Philippines, Vietnam, and Thailand. Furthermore, due to a shrinking young population, Japanese healthcare institutions have recently been adopting robots and robo-therapy for elderly care. Migration of caregivers is a relatively new field for Bangladesh to explore. Japan is currently recruiting caregivers and nurses from Philippines and Indonesia under Economic Partnership Agreements (EPA). As Bangladesh does not have any EPA, FTA, or Preferential Trade Agreement (PTA) with Japan, this potential area of service export has not been fully explored, even though there is a huge scope for this kind of service export. The growing young population (continued)

2  BANGLADESH’S TRADE RELATIONS WITH JAPAN 

11

Box 2.1  (continued)

of Bangladesh can be placed in the Japanese health sectors to alleviate the deficit of caregivers in Japan. Young individuals in Bangladesh, especially women, can be given intensive education, skills, and training on Japanese language, culture, and healthcare-related services with the help of a collaborative partnership between the governments and private sectors of Bangladesh and Japan. The Government of Bangladesh in collaboration with the Government of Japan may fund Bangladesh’s public and private training institutions and medical universities to provide intensive training to young individuals who are interested to pursue caregiving in Japan. The training may be of three to four years long where young individuals may be exposed to extensive knowledge and field-­level experience. Upon completion of such training, they may receive a certificate which can be used to apply in Japan’s caregiving institutes. To bridge the gap between cultural and language barriers and to improve language proficiency, the caregivers may be mandated to complete a Japanese language and culture course which can be subsidised by the Government of Bangladesh in collaboration with institutions from Bangladesh and Japan. Logistical and transportation cost may be covered by the Government of Bangladesh by offering loans to migrants. A dedicated government authority may be appointed in Japan to support employment. This opportunity of sending caregivers to Japan can be advantageous for Bangladesh both in terms of earning remittance and in terms of improving the interconnected relationship between Bangladesh and Japan. It will also be valuable to Japan, as its growing elderly population will get the support and empathy of human caregivers. Thus, sending Bangladeshi caregivers to Japan will be mutually beneficial, and this needs to be further explored by the governments and health institutions of both countries.

quality education and training in skills including language and behaviour and communication skills (UNDESA Population Division, 2019). This year an agreement has been signed concerning technical intern training programme between Bangladesh Overseas Employment and Services Limited (BOESL) and ZENBI CO-OP of Japan, a company of ASEAN Financial Holdings, to encourage training of Bangladeshi youth in different service sectors of Japan (Embassy of Bangladesh in Tokyo,

12 

F. KHATUN ET AL.

2022). Moreover in 2017, an agreement between Bangladesh and International Manpower Development Organisation of Japan (IM Japan) was signed where Bangladeshi youth could visit Japan for pursuing an internship under the Technical Intern Training Programme (IM Japan, 2022). Under this programme, Bangladeshi youth will learn about the diverse industrial knowledge, skills, and technology in various sectors such as construction, manufacturing, and healthcare. Training received from Japanese professionals and experts will improve the quality of human capital in Bangladesh and also create an opportunity to expand service provision in Japan. This will also increase Bangladesh’s income received from remittance. Although Bangladesh does not have considerable service exports to Japan at present, there is prospect of increasing Bangladesh’s service exports to Japan through such agreements. Furthermore, if Japan is willing to expand market access to Bangladesh after LDC graduation, this will create a favourable environment to facilitate export of services to Japan. Bangladesh’s export diversity in the Japanese market has improved over the years compared to other major markets. Bangladesh’s top 10 exported goods to Japan accounted for about 95 per cent of its total export to Japan in the year 2020. As Bangladesh gets GSP facilities in the Japanese market, the number of goods exported to Japan, along with its volume, has increased over the years. Table 2.1 shows a list of top 10 goods exported from Bangladesh to Japan from the year 2011 to 2020. Over the years, it can be seen that Bangladesh’s overall export performance has improved. In 2020, articles of apparel and clothing accessories, textile articles, and articles of leather had the highest export values. This shows that Japan is one of the major importers of RMG products from Bangladesh. Moreover, footwear and leather products are also exported to Japan from Bangladesh along with fish, crustaceans, molluscs, and other aquatic invertebrates. The overall value of these top 10 exported Harmonised System (HS 2 digits) goods was USD 1.31 billion in 2020 (Table 2.1). The top 10 goods imported from Japan into Bangladesh include iron and steel, vehicles and parts of vehicles, machinery, mechanical appliances, electrical equipment, different kinds of minerals, and man-made staple fibres. The overall imports of goods and services from Japan to Bangladesh have increased over the years. The value and volume of the top 10 imported goods from Japan has also increased (Table 2.2). Bangladesh imports large quantities of steel, iron, and other raw materials from Japan for its production of goods. Bangladesh’s highest imports from Japan are of iron and

2  BANGLADESH’S TRADE RELATIONS WITH JAPAN 

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Table 2.1  Bangladesh’s top 10 exports (goods) to Japan in million USD (HS 2-digit level) Product label

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Articles of apparel and clothing accessories, not knitted or crocheted (HS62) Articles of apparel and clothing accessories, knitted or crocheted (HS61) Articles of leather; saddlery and harness; travel goods, handbags, and similar containers; articles (HS42) Other made-up textile articles; sets; worn clothing and worn textile articles; rags (HS63) Footwear, gaiters, and the like; parts of such articles (HS64) Furniture; bedding, mattresses, mattress supports, cushions, and similar stuffed furnishings (HS94) Fish and crustaceans, molluscs, and other aquatic invertebrates (HS03) Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television (HS85)

195

278

324

356

415

439

415

513

536

521

155

208

241

284

350

465

443

608

632

514

7

12

18

27

34

42

50

54

55

56

11

17

26

30

34

38

41

50

51

52

82

91

128

106

105

90

73

59

45

34

0

0

0

0

0

0

7

16

21

21

18

20

27

20

19

32

23

15

16

18

20

19

21

26

16

19

12

12

18

12

(continued)

14 

F. KHATUN ET AL.

Table 2.1  (continued) Product label

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Wadding, felt, and 12 nonwovens; special yarns; twine, cordage, ropes and cables, and articles thereof (HS56) Machinery, 13 mechanical appliances, nuclear reactors, boilers; parts thereof (HS84) All products 563

11

11

11

10

10

11

11

12

11

14

15

14

13

9

14

15

12

10

719

892

937

1081 1219 1168 1443 1474 1314

Source: Authors’ compilation based on data taken from International Trade Centre (ITC) trade map (ITC Trade Map, 2020)

Table 2.2  Bangladesh’s top 10 imports (goods) from Japan in million USD (HS 2-digit level) Product label

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Iron and steel (HS72) Vehicles other than railway or tramway rolling stock, and parts and accessories thereof (HS87) Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof (HS84) Commodities not elsewhere specified (HS99) Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television (HS85)

1074 985

874

1164 1375 1585 1742 1568 1422 1503

368

322

311

397

376

381

455

444

465

643

258

153

161

274

361

473

459

372

321

249

189

218

142

233

281

362

412

312

196

173

8

8

7

12

12

38

52

56

41

47

(continued)

2  BANGLADESH’S TRADE RELATIONS WITH JAPAN 

15

Table 2.2  (continued) Product label

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Mineral fuels, mineral oils, and products of their distillation; bituminous substances; mineral (HS27) Man-made staple fibres (HS55) Aluminium and articles thereof (HS76) Zinc and articles (HS79) Optical, photographic, cinematographic, measuring, checking, precision, medical, surgical (HS90) All products

49

69

27

33

47

47

74

56

48

39

0

0

0

0

3

5

1

3

1

36

19

10

8

27

41

16

11

15

24

35

0

1

1

1

1

1

1

7

7

33

9

20

16

8

33

19

21

20

16

25

874

1164 1375 1585 1742 1568 1422 1503

1074 985

Source: Authors’ compilation based on data taken from ITC trade map (ITC Trade Map, 2020)

steel, which was about USD 1.5 billion in 2020 and was equivalent to around 42.8 per cent of Bangladesh’s total import. Bangladesh’s second highest import is of Japanese vehicles, vehicle parts, and accessories which accounted for about USD 0.64 billion in 2020. The import of man-made staple fibres from Japan, which is used to manufacture man-made fibre-­ based clothing, was about USD 36 million in 2020. This type of clothing has rising demand in Japan and may be a potential item for export from Bangladesh to Japan. Bangladesh’s export of apparels has dominated Bangladesh’s export basket and the concentration of apparel exports has intensified over time (Moazzem & Rahman, 2010). Japan imported USD 1.18 billion of apparels from Bangladesh in 2020 (EPB, 2021). The RMG and apparel (HS 2 digit) products most exported to Japan include HS 61 (articles of apparel, accessories, knit or crochet), HS 62 (articles of apparel, accessories, not knit or crochet), and HS 63 (other made textile articles, sets, worn clothing, etc.). Over the years, large volumes of apparel and RMG goods have

16 

F. KHATUN ET AL.

been imported by Japan which account for about 83 per cent of Bangladesh’s total export to Japan (Moazzem & Rahman, 2010). According to Export Promotion Bureau (EPB), the articles of apparel with HS codes 61 and 62 have the highest share of total export from Bangladesh to Japan compared to HS 63 which has a relatively lower share (EPB, 2021). In the year 2021, both the HS 61 and HS 62 products had 41 and 39 per cent share of total exports respectively, but HS 63 had only a small share of export of about 4.1 per cent (EPB, 2021). Other top exported goods from Bangladesh to Japan include articles of leather and footwear items which have HS codes 41, 42, and 64 respectively. HS 41 includes raw hides and skins (other than fur skins) and leather; HS 42 accounts for articles of leather, animal gut, harness, and travel goods; and HS 64 contains footwear, gaiters, and other leather products. These three categories of goods are responsible for a significant share of the total export volumes. Among them, footwear had a higher share of export of around 14.7 per cent in FY 2012–2013, but it fell to around 2.4 per cent in FY 2020–2021 (EPB, 2021). On the other hand, export of articles of leather and other leather materials increased over the years, with the highest share of 4.1 per cent in FY 2020–2021 (EPB, 2021). Among some of the major exported goods, Bangladesh exports fish, crustaceans, molluscs, and other aquatic invertebrates (HS 03) to Japan. The total value of export of fish, crustaceans, molluscs, and other aquatic invertebrates was around USD 14.9 million in the FY 2011–2012, which rose to USD 17.9 million in FY 2020–2021 (EPB, 2021). Export of fish and other aquatic creatures to Japan as a share of Bangladesh’s total export fell over the period of 10 years from 2011–2012 to 2020–2021 (EPB, 2021) The percentage of HS 03 export as a share of total export of goods in FY 2012–2013 was the highest, about 3.5 per cent, however, the share fell to about 1.5 per cent in FY 2020–2021 (EPB, 2021). The International Trade Centre (ITC) has developed a methodology to identify export potential and export diversification opportunities of selected products, sectors, and markets (Decreux & Spies, 2016). It is a quantitative approach based on trade and market access data from the ITC database, which classifies capable export sectors and markets on an international scale. There are two approaches to this export potential assessment. The first approach is based on the Export Potential Indicator (EPI). EPI is designed to help governments increase exports to new or current target markets by helping and establishing export sectors EPI based on a structural model, such as the gravity model, that identifies prospective

2  BANGLADESH’S TRADE RELATIONS WITH JAPAN 

17

export values of home country based on the country’s supply capacity, demand conditions in the target market, and easiness of bilateral trade with foreign countries. Any gap between what countries could export and what they actually export is attributed to factors such as a lack of knowledge about the target market’s rules and regulations or difficulties in complying with them or meeting the preferences of its consumers (Decreux & Spies, 2016). Figure 2.1 shows the value of actual export versus potential exports of the top 10 exported goods from Bangladesh to Japan. There is a significant level of untapped export potential in the categories of knit-wear RMG and textile items (HS 61 and 62), as well as shrimps and frozen items (HS 03), products at the 6-digit level. The value of actual export of these items is below the value of potential export, which indicates that there is a scope for Bangladesh to supply more of these items to the Japanese markets. Bangladesh could use the market access, bilateral trade benefits, and duty-­ free quota-free (DFQF) access provided by Japan to reap the benefits of additional exports worth USD 229 million for t-shirts and vests of cotton, knit and crochet items, as well as USD 90 million for men’s trousers and shorts of cotton and other RMG and textile items.

40 30

Men's shirts of man-made fibres Shrimps & prawns, frozen

18

Men's trousers & shorts of synthetic fibres

44 52

23

54

T-shirts & vests, knit/crochet, nes Men's shirts of cotton

40

Women's trousers & shorts of cotton

72 91

85

129 133 126

Jerseys & similar of man-made fibres, knit/crochet Jerseys & similar of cotton, knit/crochet

80

137

Men's trousers & shorts of cotton

153

T-shirts & vests of cotton, knit/crochet

243 357

127

0

50

100

150

200 250 Million USD

300

350

Export potential

Actual exports

400

Fig. 2.1  Bangladesh’s exports to Japan, actual versus potential (in million USD). (Source: Authors’ illustration based on data from ITC Export Potential Map (ITC EPM, 2022))

18 

F. KHATUN ET AL.

Textile winding/reeling machines

20

Self-propelled mechanical shovels

46

43

54 59

Flat-rolled products of alloy steel Flat knitting machines

40

Diesel powered trucks

75

21

Compression-ignition internal engine

74 73

96

0.134

Waste & scrap of iron/steel

77

Other machinery

118 136

10

165

Flat-rolled products of iron or non-alloy steel

233 258 249

Motor vehicles for the transport of persons 0

50

100

150 200 250 Million USD Export potential Actual exports

300

Fig. 2.2  Japan’s exports to Bangladesh, actual versus potential (in million USD). (Source: Authors’ illustration based on data from ITC Export Potential Map (ITC EPM, 2022))

Similarly, Japan also has untapped potential for export of many products to Bangladesh including diesel-powered trucks, compression-ignition internal engines, waste and scrape of iron and steel, and other machinery items (HS 6-digit items). Japan has around USD 96 million worth of export potential with Bangladesh in compression-ignition internal engines (Fig. 2.2). Bangladesh could import more machineries from Japan as there is a significant untapped potential for Japan to export USD 126 million worth of machineries to Bangladesh. Moreover, Japan has untapped export potential of USD 26 million in textile winding and reeling machines which may be exported to Bangladesh. In turn, Bangladesh may export textile items to Japan, as Bangladesh has a large untapped potential in this area.

Analysis of Trade Flow Exchange rate of currencies may affect the volume of trade of goods and services between countries. The real effective exchange rate (REER) is a measure of a country’s price competitiveness in comparison to its trade partners (Beverelli, et  al., 2012). REER is a trade-weighted average of bilateral real exchange rate. For our analysis, we have taken 2010 as a base

2  BANGLADESH’S TRADE RELATIONS WITH JAPAN 

19

year and so price indices were normalised to 100 for 2010. In comparison to 2010, Bangladesh’s REER was relatively higher, above 300, during the 1970s, but afterwards it started declining and remained below 150 (CEPII, 2021). On the other hand, Japan’s REER increased slowly from 1973 till 1995, but after 1996 it started falling and remained below 100 (CEPII, 2021). This shows that Bangladesh’s trade competitiveness was quite low during the 1970s and early 1980s but improved after 1980s when the currency of Bangladesh started devaluing. On the other hand, Japan’s trade competitiveness remained significantly higher than Bangladesh’s till 1990. After 2013, Japan fared better than Bangladesh in terms of trade competitiveness (CEPII, 2021). The relative price of a country’s exports compared to its imports in overseas markets is defined as its terms of trade (TOT). When the price of a country’s exports rises in comparison to the price of its imports, the country’s purchasing power in the international markets improves. The barter TOT, also known as the commodity TOT, is an indicator of TOT which is defined as the ratio of the price index of a country’s exports and the price index of its imports (Beverelli, et  al., 2012). A fall in import prices leads to an improvement in TOT and a rise in import prices leads to deterioration in TOT. Net barter TOT for both Bangladesh and Japan declined from 2000 to 2015, and then started increasing at a slower rate after 2009 compared to the base year (2000) (WITS, 2022). In 2001, net barter TOT for Bangladesh and Japan was 104 and 101 respectively, which declined to 69 and 67 in 2015 (WITS, 2022). The worsening of TOT indicates a decline in the country’s income which results in reduced trade. However, the reduction of the TOT till 2008 did not affect the trade between the two countries, as both the import and export volumes during these years increased due to increasing bilateral trade between Japan and Bangladesh. Bangladesh enjoys comparative advantage in its exports of many products which are of interest to Japanese buyers, such as textile and clothing apparels, jute, fibres, leather, footwear, fish, and metals. Revealed comparative advantage (RCA) is the ratio of a country’s share of export of goods to its share of world trade (Beverelli, et al., 2012). The value of the RCA index ranges from zero and infinity. A value of zero of the RCA index indicates that the country has no export in the industry, whereas a value of the RCA index close to infinity indicates that the country is a major exporter relative to other industries of the economy.

20 

F. KHATUN ET AL.

Bangladesh has a relatively high RCA with Japan in products such as textiles and clothing, footwear, hides and skins, consumer goods, and so on (WITS, 2022). In 2020, Bangladesh’s RCA was the highest in jute and other textile-based fibres which was about 397.31, and the second highest in women’s and men’s clothing and articles of apparel which averaged to about 37.48 (UNCTAD, 2021). On the other hand, Japan has high RCA in transportation, metals, capital goods, minerals, intermediate goods, stone and glass, and other machineries and electrical appliances (WITS, 2022). Japan’s RCA in 2020 was the highest in cinematographic and photographic supplies (9.15) and second highest in machine tools (5.32) (UNCTAD, 2021). Both Japan and Bangladesh’s top 10 export commodities comprise of the goods in which they have a comparative advantage. According to the Heckscher Ohlin theorem, countries should specialise in the production and export of those goods which intensively use their relatively abundant factor of production (Jones, 2018). Bangladesh is a labour-abundant country and has a comparative advantage in exports of many labour-intensive products including RMG, textile products, jute products, footwear, hides, and skins. On the other hand, Japan is a capital-­ abundant country and has a comparative advantage in capital-intensive products such as transportation, electrical and machinery items, and other capital goods. Bangladesh and Japan are specialising in the production and export of goods which are intensively using their relatively abundant factor of production. As a result of specialising according to their comparative advantages, both countries are efficiently allocating resources within their own borders. Additionally, since Bangladesh and Japan have completely different comparative advantages, the two countries are complementary to each other and trade between the two economies can result in mutually beneficially outcomes. Over the last two decades, Japan has ranked top among all countries of the world in the Economic Complexity Index (ECI) (OEC, 2022). Economic complexity index shows a country’s productive capabilities based on their export basket (Mealy et al., 2019). Complexity portrays the level of knowledge and technology possessed by a country’s manufacturing sector and its trade pattern, particularly exports (Erkan & Yildirimci, 2015). A country with a high ECI is likely to have high export competitiveness as well. Japan has the highest ECI in the world which shows it is a highly competitive country that invests in research and development (R&D) for production and export of value-added goods. Japan exports large volumes of capital-intensive goods such as transportation and

2  BANGLADESH’S TRADE RELATIONS WITH JAPAN 

21

automobile parts, machineries and electrical items, and parts thereof, steel, and other metals, which add value to its exports. Japan also exports some relatively unique items such as optical instruments, internal combustion engines for boats, and analogue instruments for physical analysis, which are hard to imitate and science-based products. This indicates that Japan has some unique capabilities which other countries lack. On the other hand, Bangladesh mostly exports labour-intensive goods such as articles of RMG and textile items, footwear, hides and skins, and other consumer goods. Thus, Bangladesh has a lower ECI than Japan and ranks 105 among the 133 other countries in 2019 (OEC, 2022). Moreover, over the years, the economic complexity of Bangladesh has been negative and declining, which shows that Bangladesh’s export basket has become relatively less complex (OEC, 2022). Bangladesh’s score on the ECI has declined due to the increased share of RMG, which are labour-intensive goods with low complexity, in its export basket (Mahmood, 2022). Data indicates that RMG constitutes of around 80 per cent of Bangladesh’s total exports (Mahmood, 2022). This shows that Bangladesh lacks in scientific and complex value-added manufacturing and relies more on the export of simple labour-intensive goods. Therefore, Bangladesh should invest more on R&D to produce diversified high technology products like Japan.

Overview of Trade Policies Japan has been providing Bangladesh with special preferential measures, such as the GSP which includes a general preferential regime and a special preferential regime. In order to facilitate trade, industrialisation, and economic development, GSP schemes provide lower tariffs than the general tariffs. As an LDC, Bangladesh has also been enjoying special preferential tariff, which allows it DFQF trade with Japan in 97.9 per cent of its exported products, excluding fishery products, rice, sugar, and articles of leather (Takashi & Noriyoshi, 2021). Bangladesh currently does not have any Free Trade Agreement (FTA) with Japan which would have given Bangladesh an opportunity to trade with Japan free of all tariff, non-tariff, and para-tariff barriers. Furthermore, in 2014 Bangladesh and Japan adopted the Comprehensive Economic Partnership Agreement (CEPA) initiative which emerged as a significant tool for bilateral trade and economic cooperation. CEPA is designed to enhance the competitive position of Bangladesh by providing larger access to the Japanese market for

22 

F. KHATUN ET AL.

trade in goods and services, investment in intellectual property rights, free flow of capital, and a rule-based economic integration between the two countries (Rahman & Ara, 2010). In terms of investment, CEPA provides an opportunity for Japan to invest in South Asian countries like Bangladesh where it can access low-cost labour-intensive manufacturing and close proximity to major markets. CEPA also opens up a scope for technology transfer between the two countries. As Bangladesh is a member of the World Trade Organization (WTO), it will face Most Favoured Nation (MFN) tariffs on its exported goods to Japan after its LDC graduation. All WTO members who have not signed any preferential agreement must commit to MFN tariffs for importing from each other. Since Japan is currently providing GSP preferences, Bangladesh can enjoy preferential tariff treatments under its GSP schemes. The tariff rates vary from product to product and are subject to change in a given period. Table 2.3 illustrates both the MFN tariffs and effectively applied tariffs imposed on top 10 Bangladeshi goods exported to Japan in 2020. Most of the HS 2-digit products are subject to around 0–3 per cent effectively applied tariff under GSP preference (Table  2.3). After LDC graduation, Bangladesh will be faced with MFN tariff in the Japanese market, provided no FTA is signed between the two countries before that time. MFN tariff rates will range between 7 and 12 per cent for most products except fisheries, articles of leather, rice, and sugar (UNDESA, 2020). The margin of preference can be seen in Table 2.3 which shows the expected rise in tariff after Bangladesh’s LDC graduation. Table 2.3 also shows the total number of non-tariff measures (NTMs) imposed by Japan for each of these products. Therefore, the impact of the rise in tariff will depend on the usage of preferential schemes by Bangladeshi exporters. The prevalence of NTM has become more common in recent years and it has been followed by a rise in the regulatory frameworks in both bilateral and international trade (UNCTAD, 2018). The majority of trade agreements include clauses that cover the various forms of NTMs. NTMs are internationally classified into many categories which include sanitary and phytosanitary measures (SPS), technical barriers to trade (TBT), pre-­ shipment inspection, and export-related measures. As Japan is a very quality-­sensitive country, they are highly concerned about the quality of the products they produce and the products that they import from the rest of the world. For this reason, they impose several non-tariff barriers on the imported goods from different countries, including Bangladesh, to ensure that product quality and safety meet Japanese standards. Annex Table 1

2  BANGLADESH’S TRADE RELATIONS WITH JAPAN 

23

Table 2.3  MFN tariff imposed on top 10 Bangladeshi goods exported to Japan in 2020 HS Product description code

MFN tariffs

Effectively applied tariffs

Pref. Trade margin value (1000 USD)

PTA NTM

62

9.04%

0.14%

8.90%

156.06

1

4

9.51%

0.02%

9.49%

153.96

1

4

10.70% 1.57%

9.13%

16.96

1

3

5.59%

3.57%

15.43

1

10

38.43% 2.96%

35.47%

10.15

1

4

0.59%

0.26%

0.33%

6.18

1

16

4.38%

1.52%

2.85%

5.49

1

20

0.02%

0%

0.02%

3.52

1

13

61

42

63

64 94

03

85

Articles of apparel and clothing accessories, not knitted or crocheted Articles of apparel and clothing accessories, knitted or crocheted Articles of leather; saddlery and harness; travel goods, handbags, and similar containers; articles of animal gut (other than silkworm gut) Other made-up textile articles; sets; worn clothing and worn textile articles; rags Footwear, gaiters, and the like; parts of such articles Furniture; bedding, mattresses, mattress supports, cushions, and similar stuffed furnishings; lamps and lighting fittings, and so on Fish and crustaceans, molluscs, and other aquatic invertebrates Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles

2.02%

(continued)

24 

F. KHATUN ET AL.

Table 2.3 (continued) HS Product description code

MFN tariffs

Effectively applied tariffs

Pref. Trade margin value (1000 USD)

PTA NTM

56

3.34%

0.31%

3.03%

3.22

1

2

0%

0%

0%

3.13

1

17

84

Wadding, felt, and nonwovens; special yarns; twine, cordage, ropes and cables, and articles thereof Nuclear reactors, boilers, machinery, and mechanical appliances; parts thereof

Source: Authors’ compilation based on data from ITC MacMap (ITC, 2021) Note: PTA stands for Preferential Trade Agreement and NTM stands for Non-Tariff Measures, and Pref. margin refers to preference margin

illustrates the NTMs which Japan imposes on products from Bangladesh and many other countries. Besides export-related measures and TBT, Japan also imposes SPS measures on Bangladeshi goods. These SPS measures are mainly imposed on products such as live fish, turmeric, fruits, nuts, trees, shrubs, and bushes, packaging container of paper, paperboard, cellulose wadding, manufacture straw, other plastic materials, basket wares, sacks and plastic bags, articles of wood, and some other products. Since human health and safety is highly prioritised in Japan, it is unlikely that these measures will be relaxed in the future. Thus, Bangladesh and other countries will need to meet these Japanese standards to maintain their trade relationship with Japan.

References Bangladesh Bank. (2021, December). Monthly Economic Trend. Retrieved January 16, 2022, from Bangladesh Bank: https://www.bb.org.bd/en/index.php/ publication/publictn/3/10 Beverelli, C., Bacchetta, M., Cadot, O., Fugazza, M., Grether, J.-M., Helble, M., Nicita, A., & Piermartini, R. (2012). A Practical Guide to Trade Policy Analysis. World Trade Organization. Retrieved February 09, 2022, from https://www. wto.org/english/res_e/publications_e/wto_unctad12_e.pdf BFTI. (2018). Study on Export Potentials of Trade in Services in Bangladesh: Identifying the Opportunities and Challenges. Dhaka: Bangladesh Foreign Trade

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Institute (BFTI). Retrieved March 15, 2022, from http://www.bfti.org.bd/ pdf/Final_Service%20Study.pdf CEPII. (2021, September 2). CEPII Country Profile. Retrieved January 13, 2022, from CEPII: http://visualdata.cepii.fr/CountryProfiles/en/ Decreux, Y., & Spies, J. (2016). Export Potential Assessments. : ITC.  Retrieved March 10, 2022, from https://umbraco.exportpotential.intracen.org/ media/1089/epa-­methodology_141216.pdf Embassy of Bangladesh in Tokyo. (2022, February 16). Agreement Concerning Technical Intern Training Program between BOESL and ZENBI CO-OP of Japan. Retrieved June 19, 2022, from Embassy of Bangladesh in Tokyo: http://bdembjp.mofa.gov.bd/press-­r elease/26/agreement-­c oncerning-­ technical-­intern-­training-­program-­between-­boesl-­and-­zenbi EPB. (2021, December). Export Data. Retrieved January 16, 2022, from Export Promotion Bureau: http://epb.gov.bd/site/view/epb_export_data/-­ Erkan, B., & Yildirimci, E. (2015). Economic Complexity and Export Competitiveness: The Case of Turkey. Procedia—Social and Behavioral Sciences, 524–533. Retrieved March 10, 2022, from https://doi.org/10.1016/j. sbspro.2015.06.262 IM Japan. (2022, June). IM Japan’s Technical Intern Training Program. Retrieved June 19, 2022, from IM Japan: https://imm.or.jp/en/program/gov.html IMF. (2021, December 23). Direction of Trade Statistics. Retrieved January 09, 2022, from IMF: https://data.imf.org/?sk=9d6028d4-­f14a-­464c-­a2f259b2cd424b85 ITC. (2021, December). Market Access Conditions. Retrieved January 26, 2022, from ITC: https://www.macmap.org/ ITC EPM. (2022). Export Potential Map. Retrieved February 27, 2022, from ITC: https://exportpotential.intracen.org/en/products/gap-­chart?fromMar ker=i&exporter=50&toMarker=j&market=392&whatMarker=k ITC Trade Map. (2020). ITC. Retrieved January 02, 2022, from Trade Maps: https://www.trademap.org/Country_SelProduct_TS.aspx?nvpm=1%7c%7c% 7c%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c2%7c1%7c%7c1 Jones, R. (2018). Heckscher–Ohlin Trade Theory. In P.  Macmillan, The New Palgrave (pp. 5737–5746). Springer Nature. Retrieved September 2021, from https://doi.org/10.1057/978-­1-­349-­95189-­5 Mahmood, S. (2022). Government—Business Relationships in Bangladesh. In H. Khondker, O. Muurlink, A. B. Ali, H. Khondker, O. Muurlink, & A. Ali (Eds.), The Emergence of Bangladesh: Interdisciplinary Perspectives (pp.  177–202). Springer Nature. Retrieved March 10, 2022, from https:// link.springer.com/book/10.1007/978-­981-­16-­5521-­0 Mealy, P., Farmer, J. D., & Teytelboym, A. (2019). Interpreting Economic Complexity. Science Advances, 5(1), eaau1705. https://doi.org/10.1126/ sciadv.aau1705

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Moazzem, K.  G., & Rahman, M. (2010, November 1). Bangladesh’s Apparels Export to the Japanese Market: Opportunities and Challenges. Dhaka: Centre for Policy Dialogue (CPD). Retrieved December 9, 2021, from Centre for Policy Dialogue (CPD): https://cpd.org.bd/cpd-­research-­monograph-­5-­ bangladesh-­a pparels-­e xport-­t o-­t he-­j apanese-­m arket-­o pportunities-­a nd-­ challenges/ OEC. (2022, March). The Observatory of Complexity. Retrieved March 10, 2022, from Bangladesh’s Economic Complexity: https://oec.world/en/profile/ country/bgd?compareEciSelector=compareBy2&scaleSelector1=eciScale0 Rahman, M.  M., & Ara, L.  A. (2010). Assessing the Proposed Bangladesh-Japan CEPA: A CGE Approach. Dhaka. Retrieved February 5, 2022, from https:// www.researchgate.net/publication/262224455_Assessing_the_Proposed_ Bangladesh-­Japan_CEPA_A_CGE_Approach Takashi, U., & Noriyoshi, F. (2021, June 21). Implications of Bangladesh’s Graduation from Least Developed Countries Status on Japanese Companies. Journal of Contemporary Research in Social Sciences, 3, 28–39. https://doi. org/10.33094/26410249.2021.32.28.39 UNCTAD. (2016). Services Policy Review of Bangladesh (II). United Nations Conference on Trade and Development. 2, p. 96. New York and Geneva: United Nations. Retrieved March 20, 2022, from https://unctad.org/system/files/ official-­document/ditctncd2015d3_en.pdf UNCTAD. (2018). Non-Tariff Measures: Economic Assessment and Policy Options for Development. United Nations Conference on Trade and Development. UNCTAD. (2021). UNCTADstat. Retrieved January 2022, from UNCTAD: https://unctadstat.unctad.org/wds/TableViewer/tableView.aspx UNDESA. (2020, March 3). Ex ante Assessment of the Impacts of the Graduation of Bangladesh from the Category of Least Developed Countries (LDCs). Revised. Retrieved December 9, 2021, from United Nations Department for Economic and Social Affairs (UNDESA): https://www.un.org/development/desa/ dpad/wp-­content/uploads/sites/45/Bangladesh.pdf UNDESA Population Division. (2019). World Population Prospect 2019, Volume II: Demographic Profiles. Retrieved March 01, 2022, from https://population. un.org/wpp/Graphs/1_Demographic%20Profiles/Japan.pdf UNESCAP. (2019). World Population Prospects 2019. (O.  Edition, Editor) Retrieved March 21, 2022, from United Nations, Department of Economic and Social Affairs, Population Division: https://population.un.org/wpp/ Download/Standard/Population/ WITS. (2022). WITS. Retrieved January 13, 2022, from WITS Bartered Terms of Trade: https://wits.worldbank.org/CountryProfile/en/Country/JPN/ StartYear/1989/EndYear/2015/Indicator/TT-­PRI-­MRCH-­XD-­WD#

CHAPTER 3

Japanese Development Assistance to Bangladesh

Abstract  Japan has been a significant participant in the development journey of Bangladesh through the constant provision of development assistance to the country over several years. This chapter thus emphasises the importance of Japan as a development partner for Bangladesh and draws attention to the major trends of Japanese foreign aid provided to Bangladesh over the years. Japan’s Official Development Assistance (ODA) to Bangladesh mostly concentrates on the development of transportation, communication, energy and power plants, human resource development, and disaster relief. The total  amount of aid provided by Japan to Bangladesh is further segregated by active loans, active grants, closed loans, and debt relief grant assistance given by Japan to Bangladesh. The chapter then concludes by highlighting the major initiatives taken by Japan through its provision of aid and loans to Bangladesh including the Bay of Bengal Industrial Growth-Belt (BIG-B) which encompasses projects like the terminal three of Dhaka Airport, the special Japanese Economic Zone located in Araihazar, Naryanganj, Metro Rail in Dhaka, and the deep seaport under construction in Matarbari. Keywords  Foreign Aid • Development • Economic Cooperation • Loans • Grants • Official Development Assistance (ODA)

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 F. Khatun et al., Bangladesh-Japan Partnership, https://doi.org/10.1007/978-981-99-2568-1_3

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Development assistance is essentially government aid which is structured for the economic development and welfare of developing nations, and includes grants, loans, and technical assistance provided to donor countries (OECD, n.d.). The medium of providing aid can be under either bilateral or multilateral agreements, that is, through the United Nations or through the World Bank (Official Development Assistance, n.d.). Japan has been a significant participant in the development journey of Bangladesh through constant provision of development assistance to the country over several years. Grants and loans from Japan to Bangladesh are provided as food aid, commodity aid, or project aid. Food aid has always been provided as grants by Japan to Bangladesh. Up until 2021, Japan has provided about USD 16.19 billion as foreign aid to Bangladesh (Economic Relations Division, 2021). The huge volume of Japanese aid to Bangladesh demonstrates the nation’s aspirations to participate in international diplomacy and pursue economic goals. It is in Japan’s interests as a trading nation to facilitate the economic development of its trading partners, creating an environment of stability, peace, and the required state of affairs for steady investment and trade (Kawai & Takagi, 2004). Japan’s interests towards Bangladesh stem from various reasons. Japan seeks peace and stability in South Asia and is striving to establish a strong set of bilateral relationships, especially after the Second World War. Bangladesh is in a strategic location, which is suitable for both the procurement of raw materials to Japan and as a valuable market for manufactured products from Japan. Japan provides preferential market access to Bangladesh and continues to access the Bangladeshi market for its finished goods. This allows the industrialised economy of Japan to export at considerably affordable prices due to the low cost of production in Bangladesh. Moreover, foreign aid enables Japan to achieve its diplomatic objectives in Bangladesh, as from the Japanese perspective, aid is a practical, accessible, and effective diplomatic tool (Rahman S. A., 2005). For Japan, foreign aid is a mechanism for non-military power to contribute to international harmony (Rahman S. A., 2005).

3  JAPANESE DEVELOPMENT ASSISTANCE TO BANGLADESH 

29

Overview of Japanese Foreign Aid to Bangladesh in the Twentieth Century Bangladesh has been fighting to overcome many obstacles in its development journey since its independence in 1971. In order to address its difficult socio-economic concerns in the aftermath of the liberation war, the country relied on aid and assistance from the industrialised economies. Japan, as one of the first countries to recognise Bangladesh, has emerged as an important development partner for Bangladesh in terms of foreign aid. Between 1973 and 2000, Japan’s assistance towards Bangladesh was catered more towards re-orienting the economic status of the war-torn country, ensuring the stability in food supply, and reducing the deplorable degree of poverty in the country. This approach of providing development assistance was concurrent to Japan’s overall ODA policy which focused on delivering assistance and building regional cooperation between Japan and other South Asian economies from 1954 till 1976 (Huda, 2016). Initially, Japanese aid gave precedence to rebuilding Bangladesh, which was, at that time, a much-impaired country as result of the war for independence against Pakistan. The majority of Japanese aid was focused on providing food assistance to Bangladesh in order to address the food scarcity at that time, as developing the economy was the presiding priority. From 1972 through 1985, grants provided by Japan in terms of food aid increased as Bangladesh struggled from food insecurity and famine (Atahar, 2014). Up until 1976, food and commodity aid provided to Bangladesh by Japan were dominant, and it was only after 1977 that project aid gained traction, while loans progressively increased over grants (Economic Relations Division, 2021). In the next phase, after 1986, the flow of ODA from Japan gradually picked up, while the relationship between the two countries progressively began to strengthen. During this period, project aid was given significantly more importance over either food or commodity aid. The highest food grant that was provided by Japan to Bangladesh after 1986 amounted to about USD 26 million which gradually declined to about USD 8 million in 2001 (Economic Relations Division, 2021). On

30 

F. KHATUN ET AL.

the other hand, the disbursement of commodity aid as a grant fared better, however, commodity aid in the form of a loan decreased from about USD 144 million in 1987 to USD 3 million in 2000 (Economic Relations Division, 2021). Meanwhile, project aid from Japan to Bangladesh in the form of loans increased drastically from USD 139.5 million in 1986 to USD 390.6 million in 2000 (Economic Relations Division, 2021). This is further indicative of the fact that towards the end of the twentieth century, the key priority for Japan was the extensive development of Bangladesh’s infrastructure and communications.

Overview of Japanese Foreign Aid to Bangladesh in the Twenty-First Century Japanese ODA to Bangladesh in the twenty-first century is characterised as a ‘new era’ of Japan’s ODA to Bangladesh, as the two countries collaborated extensively in terms of economic and political objectives (Atahar, 2014). A key point that needs to be highlighted is that Japan did not offer food grants or commodity loans to Bangladesh after 2000. Japan, however, did continue to offer commodity aid as a grant to Bangladesh for three more years, till 2003. In conjunction with the termination of food aid followed by commodity aid, project aid began to increase exponentially, but more as loans to Bangladesh rather than as grants. The disbursement of project aid as loans to Bangladesh by Japan increased from USD 153.4 million in 2000 to USD 1926.4 million in 2021, making the total project loan provided by Japan to Bangladesh aggregate to about USD 11.2 billion (Economic Relations Division, 2021). This accounts for about 68.9 per cent of the total ODA disbursed by Japan to Bangladesh between 1972 and 2021. On the other hand, project aid as grants decreased from USD 24.9 million in 2000 to USD 19 million in 2021, which accumulated to USD 966.5 million granted towards the development of projects thus far (Economic Relations Division, 2021). There is a colossal difference in Japanese foreign aid between grants and loans provided towards the establishment of projects in Bangladesh (Economic Relations Division, 2021). This is in cognizance with the philosophy of Japanese ODA which stipulates that the constant necessity of repayments of assistance provided is conducive for the recipient country, as it will enable the recipient country to persist towards developing the notion of ‘self-help’ efficiency and become less reliant on aid (Huda, 2016). As per

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31

the revised ODA charter of Japan in 2013, poverty reduction, economic growth, humanitarian welfare and social security, and governance at all levels were the main priority areas for Japan’s aid to Bangladesh. During this period, Japan began to shift the direction of its ODA to Bangladesh to cater towards the improvement of the private sector, information and communication technology, transport and power generation, education and health, agriculture, and environment and disaster management (Atahar, 2014). Foreign aid from Japan in the twenty-first century has made revolutionary changes towards the urban expansion of Bangladesh with development projects targeted to improve the socio-economic environment of the country while elevating its economic growth patterns. This decade is also crucial in terms of the progress achieved on major development projects such as the Dhaka Mass Rapid Transit System or the Metro Rail. Japanese ODA has transcended from providing mainly food assistance in the twentieth century, to becoming one of the biggest contributors to the development of infrastructure, communications, and socio-economic growth for Bangladesh.

Japanese Official Development Assistance to Bangladesh Between 1972 and 2021, Japan’s overall disbursement and commitment of foreign aid to Bangladesh has increased over the years, further cementing Japan’s position as the largest provider of economic aid to Bangladesh (Fig. 3.1). The amount of total ODA committed by Japan to Bangladesh increased significantly in recent years, after a sharp fall in 2012. Between 1972 and 2021, the total commitment of ODA by Japan to Bangladesh was the largest in 2020, while 2021 marked the largest disbursement of ODA from Japan to Bangladesh (Economic Relations Division, 2021). Japan provides assistance to support Bangladesh’s aspirations to build a just, egalitarian, and affluent society that is less reliant on foreign aid through economic, technological, or altruistic assistance. Bangladesh suffered from an unstable economy, excessive debt, poverty, natural calamities, rapid population growth, low literacy rates, wealth discrepancies, and poor infrastructure after its independence. As a result, the country fits well with Japan’s ODA aims, as Tokyo has been working to transform its aid programmes from a humanitarian perspective and place greater emphasis

32 

F. KHATUN ET AL.

3500 3000

Million USD

2500 2000 1500 1000

Total commitment

2020-21

2018-19

2016-17

2014-15

2012-13

2010-11

2008-09

2006-07

2004-05

2002-03

2000-01

1998-99

1996-97

1994-95

1992-93

1990-91

1988-89

1986-87

1984-85

1982-83

1980-81

1978-79

1976-77

1974-75

0

1972-73

500

Total disbursement

Fig. 3.1  Foreign aid from Japan to Bangladesh, in million USD (1971–2021). (Source: Author’s illustration based on data from Flow of External Resources into Bangladesh (Economic Relations Division, 2021))

on the developmental aspects in order to secure world stability through developing countries’ socio-economic success (Moni, 2006). Moreover, a bilateral relationship between a developed country like Japan and a LDC like Bangladesh also reflects the mutual benefits and interests for both countries in this age of globalisation, free trade, and market-based development. Economic growth and market expansion of Bangladesh would not only broaden the market for Japanese products in concurrence with the improvement of Japanese commerce and economic expansion but also increase Japanese investment in the nation. This also provides job opportunities for Bangladeshis while assisting in the construction of infrastructure (Chowdhury M. H., 2008). Foreign aid is broadly defined as either bilateral or multilateral aid. Under bilateral agreements, aid is provided as either grants or finance and investment cooperation, which branches out towards technical assistance and ODA loans and private sector investment respectively. ODA loans are categorised as either short-term loans (closed loans) or long-term loans (active loans). Closed loans are loans that have a pre-determined repayment date by which the debtor must repay the full amount, along with the interest. These loans are generally granted for the purpose of purchasing a particular object by the debtor, the ownership of which is often acquired

3  JAPANESE DEVELOPMENT ASSISTANCE TO BANGLADESH 

33

by the creditor on the occasion of failure to return the loan (Legal Information Institute, n.d.). The amount of closed loans provided by Japan to Bangladesh between 1972 and 1993 peaked during 1988, amassing to Japanese Yen (JPY) 46.9 billion (Economic Relations Division, 2021). Alternatively, the lowest amount of closed loans received by Bangladesh was during 1993, amounting to JPY 0.04 billion, after a four-­ year interlude of having no closed loans at all (Economic Relations Division, 2021). In 1988, Japan granted closed loans in contribution to the production of chemical fertilisers through the Jamuna Fertiliser Project. This phenomenon paralleled the rise in the usage of chemical fertilisers in Bangladesh by about 200 per cent between 1965–1966 and 1989–1990 (Miah et al., 2020). The use of fertilisers, in conjunction with the use of high-yielding seed varieties (HYV), facilitated to enhance crop production of the agrarian economy of Bangladesh (Hossain, 1984). Such improvement in agricultural productivity might have been conducive to transforming the structure of the economy by releasing the labour force from the agricultural sector and propelling them towards the industrial and service sectors of Bangladesh (Miah et al., 2020). This phenomenon is best described by the Lewis Model, which states that if a wage greater than the institutional wage prevalent in the agricultural sector is established in the manufacturing or service sector by a particular fraction of the institutional wage, the manufacturing or service sector will be able to draw a substantial amount of labour from the agricultural sector (Lewis, 1954). Apart from servicing debt liabilities, the majority of the largest closed loans are commodity loans (Economic Relations Division, 2021). Commodity loans allow a country to import products such as capital goods, raw materials, fertilisers, agricultural chemical, and various machineries, set in advance by an agreement between the financing and receiving countries’ governments (Ministry of Foreign Affairs of Japan, n.d.). On the other hand, active loans are long-term loans with a repayment period that exceeds more than 10 years. Most of the active loans granted by Japan to Bangladesh have a repayment period of 10, 20, or 30 years. Such loans are utilised to fund large development projects targeted to improve the communication infrastructure, transportation, and energy generation in Bangladesh. The total amount of active loans or long-term loans disbursed by Japan to Bangladesh between 1989 and 2021 began to increase after 2013. The year 2019 recorded the highest amount of active loans received from Japan, amassing around JPY 326 billion (Economic

34 

F. KHATUN ET AL.

Table 3.1  Top 10 active loans of Bangladesh from Japan Sector

Loan description/development partner reference

Signing date

Loan amount in million Yen

Energy

Matarbari Ultra Super Critical Coal Fired Power Project (V) BD-P106 Matarbari Ultra Super Critical Coal Fired Power Project, Loan No- BD-P118 Dhaka Mass Rapid Transit Development Project, Loan No- BD-P117 Jamuna Railway Bridge Construction Project (II) BD-P110

30-06-­ 19 16-10-­ 21

143,127

16-10-­ 21

115,027

12-08-­ 20

89,016

Hazrat Shahjalal International Airport Expansion Project (II) Loan No BD-P111 Dhaka Mass Rapid Transit Development Project (III), Loan No BD-P102 Hazrat Shahjalal International Airport Expansion Project (I), Loan No BD-P93 Dhaka Mass Rapid Transit Development Project, Loan No BD-P87 Dhaka Mass Rapid Transit Development Project (IV), Loan No BD-P112 Matarbari Ultra Super Critical Coal-Fired Power Project (IV), Loan No BD-P103

12-08-­ 20

80,000

14-06-­ 18

79,271

29-06-­ 17

76,825

29-06-­ 16

75,571

12-08-­ 20

72,194

14-06-­ 18

67,311

Energy

Transport and Storage (Rail Transport) Transport and Storage (Road Transport) Transport and Storage (Air Transport) Transport and Storage (Rail Transport) Transport and Storage (Air Transport) Transport and Storage (Rail Transport) Transport and Storage (Rail Transport) Energy

137,252

Source: Author’s compilation based on data from Flow of External Resources into Bangladesh (Economic Relations Division, 2021)

Relations Division, 2021). The greatest amount of active loans that were provided to Bangladesh by Japan was mostly for the purposes of the development of rail, air, and road transport (Table 3.1). For the construction of the coal-fired power project being developed in Matarbari, Japan provided JPY 143,127 million in 2019 and JPY 137,252 million in 2021 (Economic Relations Division, 2021). Majority of the long-term loans provided by Japan to Bangladesh were allocated for the development of the coal-fired

3  JAPANESE DEVELOPMENT ASSISTANCE TO BANGLADESH 

35

power project in Matarbari and the construction of Dhaka Metro Rail. The subsequent loans were provided for the construction of Jamuna Railway Bridge and the expansion of Hazrat Shahjalal International Airport respectively. However, Japan has halted funding for the second phase of the Matarbari coal-fired power plant, which was prompted by a worldwide movement against projects involving coal-fired power generation (Sajid, 2022). Moreover, after 2019 the amount of active loans provided by Japan to Bangladesh has been gradually decreasing, reaching to JPY 252 billion in 2021 (Economic Relations Division, 2021). Loans, granted on either short-term or long-term basis, help facilitate emerging economies by allowing them access to low interest-bearing concessional funds to support their development projects. ODA loans, which must be repaid, encourage effective use of borrowed funds and proper oversight of the projects they fund, reinforcing developing nations’ ownership of the development process. Furthermore, because ODA loans are financial assistance with a payback requirement, they impose a minimal financial burden on the Japanese government and are a long-term development aid vehicle (JICA, n.d.-b). Analogous to loans, foreign aid provided as grants are also effective tools to alleviate the socio-economic issues of an emerging economy and further improve the development status in coherence with the standard of living for all individuals. Grants provided by Japan to Bangladesh act as a financial assistance where funds are given to finance building projects or services including purchasing equipment and supplies that are required for economic and social development. Because ODA grants are non-repayable financial aid, they are primarily targeted at developing nations with low income levels (JICA, n.d.-a). The purpose of the grants provided by Japan to Bangladesh are at large centred towards the improvement of social security and safety, climate action, disaster management, and human resource development. The top 10 allocations of grants from Japan are summarised in Table 3.2. These include funds disbursed broadly for developing capacity to improve public food storage, improving capabilities to manage natural disasters caused by climate change, enhancing solid waste management, and increasing airport safety and security. About JPY 2.88 billion was also allocated to the Meteorological Radar System in Rangpur and Dhaka which was the largest grant allocated by Japan to Bangladesh (Economic Relations Division, 2021). Grant aids do not have a repayment period as they are investments made to strengthen the economic ties between the donor and the

36 

F. KHATUN ET AL.

Table 3.2  Top 10 active grants in terms of allocation to Bangladesh by Japan Type

Agreement title

Signing date

Allocation in million JPY

Natural Disaster Management

The Project for Improvement of Meteorological Radar System in Dhaka and Rangpur The Project for Improvement of Rescue Capacities in the Coastal and Inland Waters Improvement of Airport Safety and Security Systems Improvement of the Capacity of People’s Public Food Storage in The People’s Republic of Bangladesh (Combined Detailed Design Yen 42 and Main Project Part Yen 2156) Programme for the Improvement of Capabilities to cope with Natural Disasters Caused by Climate Change The Project for Improvement of Solid Waste Management Equipment The Project for the Densification of Global Navigation Satellite System Continuously Operating Reference Station Network and the Tidal Stations in Bangladesh Improvement of Solid Waste Management in Dhaka Towards the Low Carbon Society Through Enhancing Waste Transport Capacity Economic and Social Development Programme Economic and Social Development Programme (COVID-19)

24-06-­ 15

2881.00

27-08-­ 18 03-12-­ 13 17-06-­ 12

2729.00

25-04-­ 10

1500.00

25-05-­ 15 30-06-­ 19

1486.00

28-02-­ 09

1215.00

30-03-­ 17 16-07-­ 20

1000.00

Search and Rescue Safety and Security Food Security

Natural Disaster Management Environmental Protection Natural Disaster Management

Environmental Protection

Development Development

2402.00 2198.00

1258.00

1000.00

Source: Author’s compilation based on data from Flow of External Resources into Bangladesh (Economic Relations Division, 2021)

recipient nation. The trajectory in Japanese grant provision to Bangladesh has been shifting between 2005 and 2020, with two major reductions in 2011 and again in 2014 (Economic Relations Division, 2021). In 2015 Japan awarded JPY 4.7 billion, which was the highest amount received by Bangladesh from Japan as a grant overall between 2005 and 2020 (Economic Relations Division, 2021). This was provided for the improvement of human resources and the development of solid waste

3  JAPANESE DEVELOPMENT ASSISTANCE TO BANGLADESH 

37

management and natural disaster management. Since 2015, total grant provided to Bangladesh by Japan decreased to JPY 1.7 billion in 2019 (Economic Relations Division, 2021). In 2020, there was a sharp increase in grants which amounted to JPY 2.9 billion, most of which was allocated to develop the competency of human capital (Economic Relations Division, 2021). These included funding for Japanese Grant Aid for Human Resource Development Scholarship (JDS) and the Fourth Primary Education Development Programme. Additionally, Japan provided grants to Bangladesh for economic and social development programmes in order to support Bangladesh during the COVID-19 pandemic (Economic Relations Division, 2021). Furthermore, Japan is the only donor to have transformed the loans disseminated to Bangladesh as grants. The Government of Japan also awards an annual grant known as Debt Relief Grant, which holds equivalent weight to debt service payments on Japanese loans made throughout the fiscal year in Japan from April till March. The deposited amounts are reimbursed in two cash instalments in conjunction with the interest to finance imports. After 1990, these compensations were also used to finance projects in Bangladesh as local corresponding funds. Debt relief sanctioned by Japan increased initially from 1979 till 1991, after which the amount of relief assistance provided on debt fluctuated till around 1998. In 1999, the relief on debt was the highest, which accounted for JPY 28.4 billion, followed by a sharp fall in the amount of relief provided by Japan in 2000 (Economic Relations Division, 2021). In 2001, there was a rise in the amount for debt relief offered by Japan which amounted to JPY 21.5 billion, after which there was a subsequent fall in debt relief grant when the amount decreased to JPY 10.2 billion in 2003 (Economic Relations Division, 2021). After 2003, Japan did not provide any debt relief grant assistance to Bangladesh. This trend of debt relief by Japan provides an insight regarding Bangladesh’s improving economic status and increasing ability to repay loans to Japan within the stipulated period (Economic Relations Division, 2021). To summarise, Japan’s ODA to Bangladesh mostly concentrates around development of transportation, communication, energy and power plants, human resource development, and disaster relief. Japan has been very generous through its assistance to Bangladesh since 1972, which has only augmented over the years. Data from OECD statistics suggests that the aid provided by Japan to Bangladesh as a share of aid granted by Japan to other countries has increased over the years (Fig. 3.2). Between 1972 and

38 

F. KHATUN ET AL.

14.0 12.0

Percentage

10.0 8.0 6.0 4.0 2.0

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

-2.0

1972

0.0

As percentage of ODA to the rest of the world

Fig. 3.2  Japan’s ODA to Bangladesh as a share of Japan’s ODA to the rest of the world. (Source: Author’s illustration based on data from Organisation for Economic Co-operation and Development [OECD] (OECD stats, n.d.))

1990, the share of ODA from Japan to Bangladesh fluctuated, peaking at 7.7 per cent in 1979 (OECD stats, n.d.). However, from 1991 till 2011, the proportion of ODA from Japan to Bangladesh as a share of total ODA that Japan allocated to the rest of the world stagnated between 0 to nearly 2 per cent (OECD stats, n.d.). From 2012, the share of ODA from Japan progressively increased reaching to 11.7 per cent in 2018 before declining to 9.7 per cent in 2019 (OECD stats, n.d.). Financial assistance from Japan proliferated after the establishment of the Comprehensive Partnership between Bangladesh and Japan in 2014. In FY 2020–2021, Japan committed USD 2.6 billion in aid to Bangladesh, which was more than what Japan had provided to other countries (Shazzad, 2022). Therefore, the overall trend indicates the increasing geostrategic importance of Bangladesh to Japan in comparison to other economies of the world.

Bay of Bengal Industrial Growth-Belt (BIG-B) To further strengthen the bilateral relationship between the two countries, a new initiative was undertaken by Japan in 2014, known as Bay of Bengal Industrial Growth-Belt (BIG-B). Japanese contribution to this project was granted as a loan of USD 5 billion to Bangladesh, facilitating industrial

3  JAPANESE DEVELOPMENT ASSISTANCE TO BANGLADESH 

39

clustering along the belt area constituting of Dhaka, Chittagong, and Cox’s Bazar (JICA, 2016). The BIG-B programme aims to boost agglomeration of industries in the Dhaka-Chittagong-Cox’s Bazar region and beyond by strengthening economic infrastructure, supplying power and energy to industries, enhancing the investment climate, and encouraging connectivity. It is also projected to provide mutual advantages and prosperity to both nations by maximising the utilisation of Japan’s leading technology and socio-economic development experiences (JICA, 2016). By establishing a gateway between South Asia and Southeast Asia, ensuring closer inter-regional cooperation, and incorporating Bangladesh into regional and global value chains, Japan’s BIG-B initiative has the potential to play a prominent role in transforming Bangladesh into a hub of the regional economy. The key projects that are being implemented under the BIG-B include terminal three of Dhaka Airport, the special Japanese Economic Zone located in Araihazar, Naryanganj, Metro Rail being built in Dhaka, and the deep seaport under construction in Matarbari. Bangladesh does not have any deep seaport of its own. Therefore, the country must rely on smaller vessels to get the cargo in and out which can cost an additional USD 15,000 per day (Pearson, 2015). The development of a deep seaport is critical for Bangladesh, specifically in terms of international trade. The lack of proper seaport infrastructure has hindered Bangladesh’s connectivity with its neighbours in South Asia and the rest of the world, stunted its economic progress, and decreased the competitiveness of its exports. The average turnaround time at Chittagong seaport was 3.23 days in 2012 compared to the South Asian average of 2.08 days (Dappe & Suárez-Alemán, 2016). In terms of median time spent at seaports by container ships, in 2018 Bangladesh ranked at 150 out of 156 countries in the world (UNCTAD, 2019). If the seaport facilities in Bangladesh were efficient, then Bangladesh’s exports to the United States could increase by 0.5 per cent (Dappe & Suárez-Alemán, 2016). Therefore, Matarbari Deep Sea Port is necessary in order to increase the volume of exports from Bangladesh to other countries in the world. Furthermore, Dhaka Mass Rapid Transit (MRT), or more commonly known as Metro Rail, is another development project undertaken by the Government of Bangladesh jointly with the Government of Japan using the public-private partnership (PPP) system on a government-to-­ government (G2G) basis (DMTCL, 2018). This project is expected to create several benefits for Bangladesh, which includes reducing congestion and the associated economic loss incurred due to traffic, reducing air

40 

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pollution, and providing citizens with a safe and a convenient way of travelling across the city. Additionally, the MRT is projected to generate employment, as the maintenance and the operation of the project will necessitate an increasing amount of manpower. Moreover, the project will induce the creation of business developments around the stations as well as improve transportation and infrastructure for firms to operate efficiently. In addition, the MRT will encourage the decentralisation of the population, as individuals would not require the need to move to Dhaka in order to commute to their workplace; instead, the MRT would allow individuals living outside of Dhaka to travel conveniently and quickly. This development of a rapid and efficient transportation system will also enable technological adoption for the economy of Bangladesh (Business Inspecton, 2021). The MRT structure is valued at USD 2.7 billion, out of which USD 2.1 billion will be provided by Japan as a loan (Railway Technology, 2013). The project was initiated in 2012 and is expected to be completed in 2030 (DMTCL, 2018). The MRT system is scheduled to be constructed in three phases. The first phase will include the development of MRT Line 6 with an implementation period lasting between 2012 and 2024, with routes running between Motijheel and Uttara North Sector (DMTCL, 2018). Phase 2 will incorporate the construction of MRT Line 1 and MRT Line 5 involving the Northern Route which are projected to be completed by 2026 and 2027 respectively (DMTCL, 2018). MRT Line 1 will consist of two routes involving the Airport Line and Purbachal Line connecting two transportation nodes, which are the Kamalapur and the International Airport (DTCA, 2018a). MRT Line 5, on the other hand, will include both elevated and subterranean sections, with the elevated route connecting Gabtoli and Notun Bazar and the subterranean route running from Hemayetpur to Amin Bazar and Notun Bazar to Vatara (DTCA, 2018b). Finally Phase 3 consists of the Southern Route of MRT Line 5, MRT Line 2, and MRT Line 4, all of which are expected to be completed by 2030 (DMTCL, 2018). The Southern Route of MRT Line 5 will also consist of a subterranean route connecting Gabtoli to Aftabnagar and then an elevated route from central Aftabnagar to Dasherkandi (DMTCL, 2022), while MRT Line 4 will run between Kamalapur and Naryanganj (DMTCL, 2019b) and MRT Line 2 between Gabtoli and Chattogram road (DMTCL, 2019a). These projects will transform Bangladesh’s infrastructural environment, encourage industrial agglomeration, ensure energy security, and improve regional connectivity (Shazzad, 2022).

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References Atahar, S. A. (2014). An Assessment of Japan’s ODA to Bangladesh: Changing to a New Height of Relations. A Research journal of South Asian Studies, 29(1), 239–258. Retrieved February 23, 2022, from http://journals.pu.edu.pk/ journals/index.php/IJSAS/article/view/2923 Business Inspecton. (2021, November 17). Economical Impacts of Dhaka Metro Rail Project in Bangladesh. Retrieved February 23, 2022, from Business Inspecton BD: https://businessinspection.com.bd/economical-­impacts-­of-­ dhaka-­metro-­rail-­project/#:~:text=Metro%20Rail%20will%20be%20a,be%20 available%20at%20each%20station. Chowdhury, M. H. (2008). Japan-Bangladesh Relations: A Review of Development Partnership. International Studies, 45(1). https://doi.org/10.1177/ 002088170804500101 Dappe, M.  H., & Suárez-Alemán, A. (2016). Competitiveness of South Asia’s Container Ports: A Comprehensive Assessment of Performance, Drivers, and Costs. World Bank. DMTCL. (2018). Annual Report 2017–2018. Dhaka: Dhaka Mass Transit Company Limited. Retrieved February 23, 2022, from http://dmtcl.gov.bd/ site/view/annual_reports/-­ DMTCL. (2019a, December 10). MRT Line-2 Route Map. Retrieved December 26, 2022, from Dhaka Mass Transit Company Limited (DMTCL): http:// dmtcl.gov.bd/site/page/d05b142d-­68dc-­4680-­9b8b-­a94cac0cd14b/-­ DMTCL. (2019b, December 10). MRT Line-4 Route Map. Retrieved December 26, 2022, from Dhaka Mass Transit Company Limited (DMTCL): http:// dmtcl.gov.bd/site/page/8c9b3788-­4a91-­4e25-­a205-­4db05ecbe01a/-­ DMTCL. (2022, October 19). MRT Line-5: Southern Route Map. Retrieved December 26, 2022, from Dhaka Mass Transit Company Limited (DMTCL): http://dmtcl.gov.bd/site/page/b47275d5-­5530-­4401-­ad37-­f1899c0c6763/-­ DTCA. (2018a, February 14). MRT Line 1. Retrieved December 26, 2022, from Dhaka Transport Co-ordination Authority: https://dtca.portal.gov.bd/site/ page/f9be75e8-­f19a-­47c0-­9a4c-­baa6f1e67421/MRT-­Line-­1 DTCA. (2018b, February 14). MRT Line 5. Retrieved December 26, 2022, from Dhaka Transport Co-ordination Authority: https://dtca.portal.gov.bd/site/ page/0f8d5192-­3d64-­444d-­8521-­678a8461810f/MRT-­Line-­5 Economic Relations Division. (2021). Flow of External Resources into Bangladesh. Ministry of Finance. Retrieved February 6, 2022, from https://erd.portal.gov. b d / s i t e / p a g e / 7 f 1 9 2 f 9 6 -­1 4 4 2 -­4 8 b 4 -­a 9 4 7 -­2 e 0 9 c e 3 0 e c 5 4 / Flow-­of-­External-­Resources-­2020-­21-­(Golden-­Jubilee-­Special-­Edition) Hossain, M. (1984). Agricultural Development in Bangladesh: A Historical Perspective. Bangladesh Development Studies, 12(4), 29–57. Retrieved February 23, 2022, from https://www.jstor.org/stable/40795208

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Huda, M.  I. (2016). Evolution of Japanese ODA 1945–2015: An Analysis. International Journal of East Asian Studies, 5(1), 14–28. Retrieved June 19, 2022, from http://mojem.um.edu.my/index.php/IJEAS/article/ view/18806 JICA. (2016). JICA’s Operation in Bangladesh. Japan International Cooperation Agency. Retrieved February 23, 2022, from https://www.jica.go.jp/bangladesh/english/office/others/c8h0vm00009u4ya3-­att/brochure.pdf JICA. (n.d.-a). Official Development Assistance Grants. Retrieved February 22, 2022, from Japanese International Cooperation Agency: https://www.jica. go.jp/english/our_work/types_of_assistance/grant_aid/about.html JICA. (n.d.-b). Official Development Assistance Loans. Retrieved February 22, 2022, from Japan International Cooperation Agency: https://www.jica.go.jp/ english/our_work/types_of_assistance/oda_loans/overseas/index.html Kawai, M., & Takagi, S. (2004). Japan’s Official Development Assistance: Recent Issues and Future Directions. Journal of International Development, 16, 255–280. https://doi.org/10.1002/jid.1074 Legal Information Institute. (n.d.). Legal Information Institute. Retrieved February 13, 2022, from Cornell Law School: https://www.law.cornell.edu/ wex/closed-­e nd_loan#:~:text=A%20closed%2Dend%20loan%20is,fails%20 to%20repay%20the%20loan. Lewis, A. (1954). Economic Development with Unlimited Supplies of Labour. The Manchester School, 22(2), 139–191. https://doi.org/10.1111/ j.1467-­9957.1954.tb00021.x Miah, M. D., Hasan, R., & Uddin, H. (2020). Agricultural Development and the Rural Economy: The Case of Bangladesh. In M. K. Barai (Ed.), Bangladesh’s Economic and Social Progress: from a Basket Case to a Development Model (pp.  237–266). Palgrave Macmillan. Retrieved February 23, 2022, from https://link.springer.com/chapter/10.1007/978-­981-­15-­1683-­2_8 Ministry of Foreign Affairs of Japan. (n.d.). Ministry of Foreign Affairs of Japan. Retrieved February 13, 2022, from Ministry of Foreign Affairs of Japan: https://www.mofa.go.jp/policy/oda/guide/1998/3-­4.html Moni, M.  H. (2006). Japan-Bangladesh Economic Partnership: Focus on Aid, Trade and Investments. International Studies, 43(4), 395–410. Retrieved February 23, 2022, from https://journals.sagepub.com/doi/abs/10.1177/ 002088170604300403 OECD. (n.d.). Official Development Assistance. Retrieved February 16, 2022, from OECD Library: https://www.oecd-­ilibrary.org/development/official-­ development-­a ssistance-­o da/indicator-­g r oup/english_5136f9ba-­ en#:~:text=Official%20development%20assistance%20(ODA)%20is,and%20 welfare%20of%20developing%20countries.&text=Committee%20(DAC).-­ ,Official%20dev

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OECD stats. (n.d.). Query Wizard for International Development Statistics. Retrieved February 27, 2022, from Organisation for Economic Co-operation and Development: https://stats.oecd.org/qwids/#?x=1&y=6&f=4:1,2:1,3:5 1,5:3,7:1&q=4:1 PLUS_SPI 2:1 PLUS_SPI 3:51 PLUS_SPI 5:3 PLUS_SPI 7:1 PLUS_SPI 1:2 PLUS_SPI 6:2015,2016,2017,2018,2019,2020 Official Development Assistance. (n.d.). Net ODA. Retrieved February 16, 2022, from OECD Data: https://data.oecd.org/oda/net-­oda.htm Pearson, N. O. (2015, June 24). Japan Beating China in Race for Indian Ocean Deep-Sea Port. Retrieved April 24, 2020, from Bloomberg: https://www. bloomberg.com/news/articles/2015-­06-­23/japan-­beating-­china-­in-­race-­ for-­bangladesh-­s-­first-­deep-­sea-­port Rahman, S. A. (2005). Japan’s Political and Economic Goals in Bangladesh. Asian Affairs, 27(4), 41–50. Retrieved February 23, 2022, from https://citeseerx. ist.psu.edu/viewdoc/download?doi=10.1.1.611.3348&rep=rep1&type=pdf Railway Technology. (2013, February 24). Japan Provides Funds for Dhaka Metro Rail System. Retrieved February 23, 2022, from Railway Technology: https:// www.railway-­t echnology.com/uncategorised/newsjapan-­p rovides-­f unds-­ dhaka-­metro-­rail-­system/ Sajid, E. (2022, June 22). Japan Cancels Financing Matarbari Coal Project Phase 2. Retrieved December 22, 2022, from The Business Standard: https://www. tbsnews.net/bangladesh/japan-­c ancels-­f inancing-­m atarbari-­c oal-­p roject­phase-­2-­445162 Shazzad, H. (2022, February 10). 50 Years of Japan-Bangladesh Ties: From Economic to Strategic Partnership. Retrieved February 22, 2022, from The Diplomat: https://thediplomat.com/2022/02/50-­y ears-­o f-­j apan-­b angladesh­ties-­from-­economic-­to-­strategic-­partnership/ UNCTAD. (2019). Review of Maritime Transport 2019. New  York: United Nations Conference on Trade and Development (UNCTAD).

CHAPTER 4

Japanese Foreign Direct Investment in Bangladesh

Abstract  This chapter examines Japan’s overall Foreign Direct Investment (FDI) in Bangladesh and describes the trajectory of Japanese investment in Bangladesh over the years. It examines Japanese investment patterns in Bangladesh, which are classified by major sectors, in order to examine the nature of Japanese investments in Bangladesh’s various industries. It also discusses the opportunities and obstacles related to the Japanese Economic Zone, which is being built by Bangladesh as a means of attracting more Japanese investors to the country. Finally, the chapter concludes with a detailed description of the impediments around starting a business in both Dhaka and Chittagong. Keywords  FDI • Japanese investment • Japanese Economic Zone • Doing business FDI promotes economic development of the recipient countries as it facilitates transfer of technologies, capital resources, and managerial competencies, which are essential for economic growth (Urata & Kawai, 2000). This is usually true for the economic development of a LDC like Bangladesh. FDI inflows to Bangladesh augmented exponentially since 1980s after policy reforms had taken place (Alam D. M., 2012). In 1980, the government legislated the ‘Foreign Investment Promotion and

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 F. Khatun et al., Bangladesh-Japan Partnership, https://doi.org/10.1007/978-981-99-2568-1_4

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Protection Act,’ which opened most sectors excluding railways, minting and security printing, nuclear energy, defence equipment, and forestry in the reserved forest area to FDI (Kafi et al., 2007).

Overview of Japanese Foreign Direct Investment in Bangladesh Japanese FDI in Bangladesh began in 1977 and accelerated in the early 1990s when the country’s liberalisation policies were implemented. As of 2022, there were over 300 Japanese companies, such as Uniqlo (Box 4.1) and Honda Motor Company Limited (Box 4.2), operating in

Box 4.1  Grameen Uniqlo

Uniqlo, owned by Fast Retailing Co. from Japan, started their operations in Bangladesh from 2008 (Short, 2013). Uniqlo initially sourced clothes and items for export purposes from Bangladesh. It was the first company in Japan to build a business model that encapsulated the various stages of business, including design, production, and final sale. This was known as specialty store retailer of private label apparel (SPA) model. Uniqlo introduced SPA to Bangladesh as the design, production, and the final sale took place in Bangladesh after the joint venture between Grameen Bank and Uniqlo was established in 2011 (Luangpituksa, 2016). Uniqlo has expanded its operations to Bangladesh, where it has adapted to the local environment. The items developed in Bangladesh were also sold all over the world; therefore, such investments with the application of SPA hold the potential to transform the receiver of foreign investments into a producer (Luangpituksa, 2016). Grameen Uniqlo is a social business which reinvests the profit made in order to make poor women in Bangladesh financially independent. Fast Retailing Co had initially planned to invest USD 100,000 (Nextbillion, 2010). However, Grameen Uniqlo set up its first store in Dhaka in 2013, investing USD 4.6 million (Bose & Paul, 2013). The local factories that create all of Grameen Uniqlo’s products provide a safe and secure working environment, which is uncommon in Bangladesh. They provide employment prospects for women and Grameen Bank provides these women with a low-interest loans to help them become financially independent, while also collaborating with Uniqlo on clothing creation (The Borgen Project, 2020).

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Box 4.2  Honda Motor Company Limited

The market for automobiles in Bangladesh has been growing extensively, with a probable market size of about USD 164 million in 2019. The market is reliant on imports bringing in a wide range of vehicles, largely from Japan and some other countries as well (Light Castle Partner, 2020). According to the Investment Handbook published by Bangladesh Invest Development Authority (BIDA) in 2020, Bangladesh manufactures or assembles over 95 per cent of the motorcycles that are currently plying inside the country. Honda is now manufacturing motorbikes in Bangladesh resulting in the development of emerging industry for automotive parts and components (BIDA, 2020). Honda Motor Company Limited of Japan and Bangladesh Steel and Engineering Corporation entered into a joint venture under the label ‘Bangladesh Honda Private Limited (BHL)’ in 2012 with an initial investment of BDT 2.3 billion for purchasing land and construction purposes (Honda Global, 2018). The cumulative capital investment was BDT 610 million, out of which Honda Motor Company Ltd holds 70 per cent and Bangladesh Steel and Engineering Corporation holds 30 per cent of the share (Bangladesh Honda, 2017). BHL initiated manufacturing in the Abdul Monem Economic Zone established in Gazaria in Munshiganj district in 2018. Honda is developing its business in Bangladesh with a customer-­centric strategy to produce goods that fit the rising market’s demands. BHL is spearheading the growth of the country’s motorcycle sector and contributing to Bangladesh’s industrialisation as one of its major objectives. The technical assistance from Honda Motor Company Limited in Japan includes incorporating welding and painting divisions for localisation (Honda Global, 2018) Bangladesh and a total of USD 1007 million FDI made till 2021 (Bangladesh Bank, 2021a). However, unlike foreign aid, the trend in investments made by Japan in Bangladesh has not been as impressive throughout the years. Figure 4.1 shows the fluctuating trend of net FDI inflows from Japan to Bangladesh between 1997 and 2021. The data indicates that the flow of FDI from Japan to Bangladesh peaked in 1997, 2000, 2005, 2009, and 2015, with the highest amount received in 2013 which accounted for USD 99 million. Since then, the flow of FDI from Japan to Bangladesh has mostly been falling especially after 2019, as the amount of FDI inflow decreased from USD 73 million to USD 50

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99

120

73

78 44 28

35

35

31

22

29

27

2006-07

2007-08

2020-21

2019-20

2018-19

2017-18

2016-17

2015-16

2014-15

2013-14

2012-13

2010-11

2011-12

2008-09

2009-10

2005-06

2004-05

2003-04

2001-02

2002-03

2000-01

1999-00

1998-99

1997-98

1996-97

7

10

20

50

59 50 24 17

23

40

29

41

46

60

0

60

65

80

26

Million USD

100

Fig. 4.1  FDI inflows from Japan to Bangladesh in million USD (1997–2021). (Source: Author’s illustration based on data from Foreign Direct Investment and External Debt (Bangladesh Bank, 2021))

million in 2021. This decline was more pronounced which is indicative of the fact that Bangladesh needs to put more effort in attracting Japanese investments. Additionally, the share of FDI inflow to Bangladesh from Japan compared to FDI inflow from other countries also does not represent an optimistic perspective. In 2000, the share of FDI from Japan was only about 12 per cent compared to the FDI received by Bangladesh from the rest of the world. The ensuing years depict a more declining trend, as FDI inflow from Japan decreased gradually in comparison to the investments made by other countries. In 2021, Japanese investments accounted for merely 2 per cent of the total inflow of foreign investments received by Bangladesh (Bangladesh Bank, 2021a). Regardless of the overall trend in Japanese investments, Japan has contributed to major sectors of Bangladesh which include power and energy, gas and petroleum, textiles, construction, and fertiliser. Table  4.1 highlights the net FDI from Japan categorised in accordance with major sectors of Bangladesh between 2011 and 2021. Japan has shifted its gears of investment in Bangladesh towards energy and power plants from textiles since 2013, while making an investment of USD 11 million in gas and petroleum in 2020. The country has invested USD 23 million in fertiliser in 2015, which was the highest amount during the period between 2011 and 2021. Furthermore, Japan has gradually increased its investments in computer software and information technology (IT), especially after 2018,

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Table 4.1  Net FDI inflows from Japan to Bangladesh in order of major sectors in million USD Year Sectors Textile and clothing Power Food Banking Telecommunication Gas and petroleum Trading Chemicals and pharmaceuticals Construction Leather and leather products Cement Agriculture and fishing Insurance Computer Software and IT Fertiliser Metal and machinery products Vehicle and transport equipment NBFI Other sectors Total

2011 2012

2013 2014 2015

2016 2017

2018 2019 2020 2021

24 – – – 0.01 – – –

5 – 0.1 – 1.2 – 0.6 0.01

7 21 – 1 9 – – –

3 4 0.3 0 5 – 3 5

5 5 0.2 0.01 3 – 3 0.02

3 6 1.4 0.3 2 – 3 0.1

2 4 – 0.1 2 – 2 −0.6

3 2 −0.1 0.3 – – 4 −1

4 2 1 0.3 4 5 2 −1

2 2 3 1 2 11 2 −0.3

3 3 1 1 – 6 1 2

– 0.1

– –

– 0.1

0.2 3

– 4

0.1 1

5 1

5 1

11 0.5

1 1

2 1

– 0.01

– 1

– –

– –

– 0.3

– –

−0.02

– −6

– 1

1 −1

– 0.2

– –

– 0.4

– 0.02

– 0.3

– –

– 0.2

– 0.2

– 1

– 0.4

– 1

– 1

– –

– –

6 –

14 0.7

23 0.4

8 –

4 –

7 –

17 –

11 –

15 –

–

–

–

–

0.3

–

–

–

–

–

–

– 1.5 25

– 2.3 10

– 34 79

– 58 96

– 33 78

– 11 35

– 24 44

13 28

– 27 73

– 26 60

– 14. 50

Source: Author’s compilation based on data from Foreign Direct Investment and External Debt (Bangladesh Bank, 2021)

by consistently contributing USD 1 million each year, with the exception of 2019. However, the industries which observed the least amount of investments from Japan in the past decade include metal and machinery, as well as vehicle and transport. Apart from net foreign investments inflow, FDI stock is another variable that can be utilised to understand the nature of foreign investments made in an economy at a particular moment in time. FDI stock position in Bangladesh records the aggregate value of an investment at the end of June in each fiscal year. Contrary to the net FDI inflow, FDI stock portrays a more optimistic state of Japanese investments made in

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Bangladesh. Initially, until 2007, the trend of FDI stock position was in decline. However, after 2007 there was a sharp increase in Japanese investments made at the end of June. The greatest FDI stock in the past 21 years was recorded to be about USD 456 million in 2011, after which it decreased once again to USD 231 million in 2012, followed by a sharp rise to USD 424 million in the subsequent year. FDI stock, however, remained stagnant between USD 295 million to USD 330 million from 2014 till 2018 before escalating to USD 418 million in 2020 (Bangladesh Bank, 2021). Over the years, Japan has been selective of its investments and differentiated the degree of FDI stock in various sectors. Table 4.2 exhibits the stock Table 4.2  FDI stock in Bangladesh from Japan in order of major sectors at end of June, in million USD Year Sectors Textile and clothing Power Food Banking Telecommunication Gas and petroleum Trading Chemicals and pharmaceuticals Construction Leather and leather products Cement Agriculture and fishing Insurance Computer Software and IT Fertiliser Metal and machinery products Vehicle and transport equipment NBFI Other sectors Total

2011 2012 2013 2014

2015

2016

2017 2018

2019

2020

2021

300 – 0.2 – 51 – – 0.5

73 – 2 – 44 – – 10

123 22 5 1 59 – 69 9

52 22 3 1 48 – 3 13

37 14 0.8 1 51 – 6 13

37 19 2 1 51 – 10 12

46 21 2 2 44 2 12 11

36 22 0.2 1 41 2 7 10

36 23 2 1 48 9 12 9

43 26 4 2 47 17 11 9

51 26 5 2 – 23 15 11

– –

– –

– 3

– 3

3 9

– 9

– 9

25 10

29 11

34 11

43 11

– 1

– 1

– 1

– 0.1

– 3

– 2

– 2

– 2

– 1

– −0.3

– −1

– –

– –

– –

– –

– –

– 5

– 5

– –

– 5

– 6

– –

61 1

45 3

59 –

– –

44 7

43 7

– 8

– 8

– –

– –

– 13

–

–

–

–

–

–

–

–

–

–

–

– 42 456

– 51 231

– 73 424

– 152 298

– 111 298

– 113 311

– 162 325

– 163 326

– 198 385

– 209 418

– 213 412

Source: Author’s compilation based on data from Foreign Direct Investment and External Debt (Bangladesh Bank, 2021)

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51

of FDI from Japan to Bangladesh organised by major sectors at the end of June between 2011 and 2021. The data representing the FDI stock at the end of June over the past 10 years illustrates that the sectors receiving greater FDI stock include textiles and clothing, power, telecommunications, trading, and gas and petroleum. As aforementioned, Japan has shifted its trajectory of investments to emphasise more on energy and power. Despite the fact that the FDI stock in textiles is still higher, investment in power has been steadily growing, reaching USD 26 million in 2021. With regards to telecommunications, the FDI stock was recorded to be the highest in 2013, accumulating to USD 59 million. However, after 2016, FDI stock in telecommunications has mostly been declining. FDI stock in trading observed a sharp fall in 2014, as it fell to USD 3 million, from an amount of USD 69 million which progressively rose after 2017. Furthermore, FDI stock from Japan to Bangladesh in construction increased after 2018, while the leather industry observed an increase in FDI stock during the same year.

Japanese Economic Zone (JEZ) According to Bangladesh Investment Development Authority (BIDA), at present around 321 Japanese companies operate in Bangladesh (SASEC, 2021). The Government of Bangladesh employs various incentives to attract more FDI from Japan, including providing tax holidays, tax exemptions, accelerated depreciation, reduced tariff on imported capital machinery, and other incentives (BIDA, n.d.). In conjunction with creating an amicable environment for investments through infrastructure development, Bangladesh has also initiated establishment of a special economic zone (SEZ) exclusively for Japan which is expected to invite greater FDI. The development of the Japanese Economic Zone (JEZ) is expected to be completed by 2023, with operations initiating in the same year. The JEZ will potentially bring in new FDI as 100 Japanese companies are expected to start their ventures as soon as the JEZ is operational (SASEC, 2021). The project is being developed by the Sumitomo Corporation, and is funded jointly by the Government of Bangladesh and the Japanese International Corporation Agency (JICA). Japan is investing around USD 300 million for the development of the JEZ in Narayanganj (Rahman & Yusuf, 2019). The JEZ is planned to stretch over a land of 1000 acres. The potential for expansion of the JEZ lies more on the north and southeast of Bangladesh, although such expansion will inevitably entail substantial relocation of local populations (pwc, 2021). The JEZ will create a cordial

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environment for inviting new investors, enabling diversification of industries, and manufacturing more products. Additionally, companies located in an economic zone (EZ) are subjected to different incentives and tax exemptions in Bangladesh including income tax immunity on 50 per cent of earnings from export, duty-free export, facilities for bonded warehousing and duty drawback, and cash incentives (BIDA, n.d.). Challenges for the Japanese Economic Zone (JEZ) Despite the existing benefits of establishing an exclusive EZ for Japan, the location of the JEZ is not ideal for foreign investors, especially in terms of its poor connectivity with the national transportation networks. The JEZ is located near Meghna River and, thus, there it has no explicit access to the highway. The closest road from the JEZ is 35 km away and the nearest seaport is 258 km away in Chittagong. The closest railway, airport, riverport, and land port are 33 km, 64 km, 53 km, 116 km away respectively. Due to a lack of direct road connection, it may be difficult to attract Japanese investors to the EZ. As a result, the prospect of merchandise conveyance should be evaluated for practicality. A major challenge for the JEZ is that its location is rather distant from the Chittagong seaport. This poses a hindrance in attracting Japanese investors, since they may feel that the location of the JEZ may cause high supply chain costs for imports. Moreover, the requirement to relocate to a new site in order to construct a new manufacturing facility also makes it difficult to make an investment in the proposed EZ. Several investors have already expressed uncertainty about how long it would take to build the envisioned EZ. As a result, some potential investors are yet to make a move into the JEZ (pwc, 2021). In terms of energy, the estimated total power required during the initial operations of the JEZ will be 47 MVA. As far as water is concerned, the river Meghna could be a source of surface water for the JEZ, ensuring water availability for the establishment. However, currently there are no facilities to manage wastewater or solid waste at the JEZ, and this could pose serious hazards to the surrounding environment once the JEZ is fully functional. Additionally, educational accessibility on par with international standards is not available in the proposed area of the JEZ. However, there are 128 Technical and Vocational Education and Training (TVET) enterprises operating in Narayanganj which may be able to provide moderately skilled individuals for the JEZ (pwc, 2021).

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Projections for the Japanese Economic Zone (JEZ) A feasibility study on the JEZ conducted by PwC estimated the viability and likely benefits of this economic zone for Bangladesh. The goal of the study was to estimate the number of years it would take for businesses to occupy all of the land available, to create the maximum number of industrial units, and to achieve full employment in the zone. These projections were made under the assumption of three different scenarios which included a conservative scenario, a base scenario, and an optimistic scenario. The base scenario assumed regular activities for the economy and the region of influence, but the conservative and optimistic scenarios anticipated negative and excellent economic and infrastructural performance for the country and the impact region, respectively (pwc, 2021). In the conservative scenario, when economic activities are assumed to be rather slow, it may take anywhere between 2038 and 2047 for industries to fully occupy the JEZ. In the base scenario, when economic activities continue business-as-usual, the JEZ may reach full occupancy by the year 2036. Finally, in the most optimistic scenario, when economic activities are considered to be at their peak performance, the JEZ may be fully occupied by industries as early as 2034. However, it must be noted that these projections were made under assumptions which were valid before the pandemic had begun. A post-COVID-19 analysis shows that industries may need as long as 2038 in the conservative scenario, 2036 in the base scenario, and 2034  in the most optimistic scenario to achieve full occupancy in the JEZ.  This is indicative of lower demand for industrial land due to the slower growth of industries during the pandemic in comparison to pre-pandemic times. In case of the total number of industrial units that are forecasted to be established in the JEZ by 2047, it is projected that the JEZ has a capacity of housing approximately a maximum of 128 industrial units. In the conservative scenario, it has been forecasted that it may take as long as 2047 for 128 industrial units to be established in the JEZ. On the other hand, in the base scenario, 128 industrial units may be established in the JEZ by 2036, while in the most optimistic scenario, they may be established in the JEZ as early as 2034. In the most optimistic situation, the proposed JEZ is estimated to produce 61,330 direct jobs between 2038 and 2047. The employment creation estimates in the base and conservative scenarios are 60,393 and 59,509 respectively within the same time frame. All of these statistics are approximations and may change as the project progresses (pwc, 2021).

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Proposed Recommendations for the Challenges for the Japanese Economic Zone (JEZ) The proposed JEZ is situated on a riverbank island with no road access, necessitating the construction of a bridge to connect it to the mainland, which will facilitate unobstructed movement of people and materials. Currently, the Dhaka-Chittagong highway is a combination of two-lane and four-lane routes. Given the route’s critical importance in the country’s export and import operations, its capacity is prone to being limited in particular portions, causing traffic congestion. Given the expected increase in freight and passenger traffic on the route in the future, the capacity of this route will need to be increased. By 2025, the capacity of the Dhaka-­ Chittagong highway should be increased to six lanes. Since most of the country’s imports pass via the Chittagong port, a six-lane highway connecting Chittagong and Dhaka will lower logistical costs between the country’s two major metropolitan areas, as well as the cost of procuring raw materials. To facilitate the increased traffic flow that is expected in the future, an expansion of the highway is necessary. Currently there are about 6000 wagons travelling daily between Dhaka and Chittagong using the railway lines that connect the cities. Due to the anticipated increase in traffic in the Chittagong port, it is important to expand the capacity of the rail-dependent supply chain between Dhaka and Chittagong to accommodate at least 12,000 wagons every day. This will decrease the time taken for the delivery of goods and materials and reduce logistical costs. Additionally, the lack of sophisticated surveillance systems is having a negative impact on cargo handling at Bangladesh’s ports. Therefore, freight-­ forwarding facilities should be mechanised at land ports to reduce the shipment time for finished goods and raw materials. The JEZ is connected to the national road network through Bishandi ferry terminal which increases the transit time for raw materials and finished goods. Thus, the development of a modern jetty will allow efficient transportation access to the JEZ in the future (pwc, 2021).

Doing Business in Bangladesh In order to attract Japanese companies to invest in the JEZ and in other parts of Bangladesh, it is essential to improve the ease of doing business in Bangladesh. These measures include studying the time and cost involved in starting a business, acquiring construction permits, getting access to electricity, registering property, trading across borders, and enforcing

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Table 4.3  Time and cost involved in starting a business in Bangladesh Procedure

Verify the uniqueness of the proposed company name on the website of the Registrar of Joint Stock Companies and Firms Register at the Registrar of Joint Stock Companies and Firms Pay all applicable registration fees and duties at a designated bank Make a company seal Obtain a Tax Identification Number Open a Bank Account Obtain a trade licence Register for VAT Receive physical inspection of the business premises by a government agent and after VAT registration Total

Dhaka

Chittagong

Time (days)

Cost (BDT)

Time (days)

Cost (BDT)

0.5

200

0.5

200

0.5

0

0.5

0

1

7920

1

7920

1 1 1 7 7 1

40

40

0 4500 0 0

1 1 1 7 7 1

19.5

12,660

19.5

12,660

0 4500 0 0

Source: Author’s compilation based on data from Doing Business 2020 (World Bank, 2020) Note: Cost of making company seal is an approximate average cost. The actual cost of making a company seal may vary depending on the quality of the seal

contracts if required. These measures are further discussed in detail below. Dhaka and Chittagong are two of the largest business cities in Bangladesh. Table 4.3 shows the time taken and the cost incurred to start a business in these two cities of Bangladesh. According to Table 4.3, it takes around 20 calendar days and BDT 12,660 to start a business in both Dhaka and Chittagong. Among all the procedures needed to start a business, the most expensive procedure is to pay all the applicable fees and related duties to a certified bank which costs about BDT 7920 and takes a day to complete for both cities. Most of the procedures included take around half a day to a full day to complete given that all of these formalities are carried out on different days. Therefore, the actual time may perhaps be less. The longest procedures that take seven days to complete in Dhaka and Chittagong involve attaining a trade licence and registering for value-­ added tax (VAT). The time taken and the costs involved in obtaining construction permits for both Dhaka and Chittagong are shown in Table 4.4. Dealing with constructing permits in Bangladesh is a long procedure involving 16

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Table 4.4  Time and cost involved in dealing with constructing permits in Bangladesh Procedure

Dhaka Time (days)

Obtain cadastral survey map from Land Settlement Office Obtain Land Use Clearance Obtain soil test report Obtain project clearance from the local authority (Ward Commissioner, Dhaka City Corporation) Obtain project clearance from the Environmental Directorate Obtain fire safety clearance Obtain clearance from Bangladesh Development Board Obtain clearance from Dhaka Electricity Supply Company (DESCO) Obtain water and sanitation clearance Request and receive inspection from the City Development Authority (RAJUK) Request and obtain project clearance and building permit from the City Development Authority (RAJUK) Receive random inspection from the City Development Authority (RAJUK) Submit notice of completion and obtain Occupancy Permit Request water and sewerage connection Receive Site Inspection for Water Connection Obtain Water Connection Receive inspection by tax inspector from Dhaka City Corporation upon completion of construction Total

3

Cost (BDT) 350

45 24 3

1000 59,500 0

30

10,000

15

8000

15

0

15 60

0 0

105

1

8300

Chittagong Time (days) 3

Cost (BDT) 350

50 24 4

5000 59,500 0

15 15

8000 0

15 60

0 0

105

8300

0

1

0

21

1000

1

1000

10 1 1 1

30,000 0 0 0

1 1 21 1

0 0 30,000 0

350

118,150

317

112,150

Source: Author’s compilation based on data from Doing Business 2020 (World Bank, 2020)

formalities for Dhaka and 15 formalities for Chittagong that businesses have to complete. It takes 350 calendar days and costs BDT 118,150 to complete these procedures in Dhaka. In Chittagong it takes 317 calendar days and costs BDT 112,150 to get a construction permit. The most expensive procedure for both Dhaka and Chittagong is obtaining the soil

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test results which costs BDT 59,500. The second most expensive procedure for Dhaka includes requesting a water and sewage connection which costs BDT 30,000 and for Chittagong it involves requesting a water connection which also costs BDT 30,000. The longest procedure, however, is requesting and obtaining project clearance and building permit from the city development authority which takes up to 105 calendar days in both cities. Lastly, in dealing with constructing permits in Dhaka, companies need to obtain project clearance from the Environmental Directorate which costs BDT 10,000 and takes 30 calendar days. However, companies do not have to obtain such clearance while requesting for constructing permits in Chittagong. The time taken and the costs incurred to obtain an electricity connection in Dhaka and Chittagong are shown in Table  4.5. It takes 145 Table 4.5  Time and cost involved in getting electricity in Bangladesh Procedure

Dhaka Time (days)

Obtain permission for installation of underground cable Hire electrical contracting firm to purchase substation equipment, get it tested, and carry out installation and earthing Apply for licence from Electrical Licensing Board (ELB) Receive an inspection from the Electrical Licensing Board (ELB) Submit application to Dhaka Electric Supply Company (DESCO) and await estimate Have electrical contracting firm carry out external works Receive installation of solar panels by private firm Have electrical contracting firm purchase meter Receive meter testing and installation, final inspection, and electricity flow Total

Chittagong

Cost (BDT)

Time (days)

Cost (BDT)

21

0

–

–

15

1,800,000

30

1,400,000

10

11,820

28

5000

0

1

0

30

158,678.11

50

381,678.11

20

270,000

30

270,000

14

310,000

14

310,000

14

50,000

–

–

20

0

20

0

1

145

2,600,498.11 173

2,366,678.11

Source: Author’s compilation based on data from Doing Business 2020 (World Bank, 2020)

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calendar days and costs BDT 2,600,498.11 to get an electricity connection in Dhaka. In Chittagong, however, it takes 173 calendar days to get an electricity connection, which is relatively longer compared to Dhaka, and costs BDT 2,366,678.11, which is slightly less in comparison to Dhaka. In Dhaka, hiring an electrical contracting firm to buy substation equipment, getting it tested, and executing installations and earthing is the most expensive procedure to complete, and costs BDT 1,800,000. However, in Chittagong, carrying out these tasks is less expensive as it costs BDT 1,400,000, but it takes double the number of days as it does in Dhaka. Overall, almost all the procedures required to obtain an electricity supply cost much less in Chittagong as opposed to Dhaka, but it takes longer for them to be completed in Chittagong. In order to be able to do business in Bangladesh, it is important to register the properties owned by companies in the cities in which they envision to set up their businesses in. Table 4.6 shows the costs involved and the time taken to register property in the two business cities of Dhaka and Chittagong. There are eight procedures for both Dhaka and Chittagong that companies have to go through to be able to register their property. Overall, the number of days taken and the expenses incurred are similar for both cities. The largest cost involves hiring a lawyer to draft the deed transfer, which costs BDT 6000 and takes a day to complete. However, the cost of paying duties, registration fees, capital gains tax, and further related taxes depend on the property value for both Chittagong and Dhaka. For foreign investors, the ease and efficiency with which they can trade across borders is very important to establish a successful business. Table 4.7 shows the number of days and the expenses incurred while trading across borders from both Dhaka and Chittagong. It should be noted that the costs mentioned in Table 4.7 do not include the calculations for tariffs. It takes 384 hours and costs USD 1308.2 to acquire all clearances for both exports and imports in Dhaka and Chittagong. Export clearance takes 96 hours or four days, while import clearance may take 120 hours or five days to obtain. However, the time taken also depends on the time of the day the documents are submitted and picked up and therefore may vary. The time and costs involved in enforcing contracts in Bangladesh are shown in Table 4.8. It takes 1442 calendar days, or around four years, to enforce a contract in instances of any particular violations of particular agreements between businesses in both Dhaka and Chittagong. The cost incurred depends on the claim value of the contract. The process of trial and decision takes 1047 days, or roughly three years, and the fees for lawyers may be as much as 40 per cent of the claim value.

Table 4.6  Time and cost involved in registering property in Bangladesh Procedure

Verifying the current Khatian (record of rights) at the Directorate of Land Records and Surveys (DLRS) Conduct the first mutation and obtain an updated record of rights (Khatian) at the Assistant Commissioner of Lands (AC Land)—Tahsil Inspection of the property for updating the record of rights (Khatian) by the Assistant Commissioner of Lands (AC Land)—Tahsil Obtain the non-encumbrance certificate from the relevant sub-registry office A lawyer or a deed writer draft the deed transfer Pay stamp duty, capital gains tax, registration fee, and other taxes at designated bank Apply for registration at the relevant sub-registry Conduct second mutation to change the ownership at the Assistant Commissioner of Lands (AC Land)—Tahsil

Dhaka

Chittagong

Time Cost (BDT) (days)

Time Cost (BDT) (days)

20

0

30

0

53

2340

53

2340

53

0

30

0

8

150

30

200

1

6000

1

6000

1

Depends on property value 6

1

Depends on property value 6

180 53

2340

180 75

2340

Source: Author’s compilation based on data from Doing Business 2020 (World Bank, 2020)

Table 4.7  Time and cost involved in trading across borders in Bangladesh Procedure

Dhaka Time (hours)

Export: clearance and inspections required by customs authorities Export: clearance and inspections required by agencies other than customs Export: port or border handling Import: clearance and inspections required by customs authorities Import: clearance and inspections required by agencies other than customs Import: port or border handling Total

96 0 72 120 0 96 384

Cost (USD) 151.9 0 256.3 400 0 500 1308.2

Chittagong Time (hours) 96 0 72 120 0 96 384

Source: Author’s compilation based on data from Doing Business 2020 (World Bank, 2020)

Cost (USD) 151.9 0 256.3 400 0 500 1308.2

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Table 4.8  Time and cost involved in enforcing contracts in Bangladesh Procedure

Dhaka Time (days)

Filing and service 30 Trial and judgement 1047 Enforcement of 365 judgement Attorney fees Court fees Enforcement fees

Cost (percentage of claim value)

Chittagong Time (days)

Cost (percentage of claim value)

30 1047 365 40 8.3 18.5

40 8.3 18.5

Source: Author’s compilation based on data from Doing Business 2020 (World Bank, 2020)

References Alam, D. M. (2012). Foreign Direct Investment in Bangladesh: A Critical Analysis. South East Asian Journal of Contemporary Business, Economics and Law, 1. Retrieved February 23, 2022, from https://seajbel.com/wp-­content/ uploads/2014/07/Foreign-­Direct-­Investment-­In-­Bangladesh-­A-­Critical-­ Analysis-­Dr.-­Md.-­Shah-­Alam.pdf Bangladesh Bank. (2021a). Foreign Direct Investment and External Debt. Retrieved February 8, 2022, from Bangladesh Bank: https://www.bb.org.bd/en/index. php/publication/publictn/1/30 Bangladesh Bank. (2021b, December). Monthly Economic Trend. Retrieved January 16, 2022, from Bangladesh Bank: https://www.bb.org.bd/en/index. php/publication/publictn/3/10 Bangladesh Honda. (2017, November 6). Honda Breaks Ground for a New Motorcycle Production Plant in Bangladesh. Retrieved March 3, 2022, from Bangladesh Honda: https://www.bdhonda.com/media-­center/pr-­details/27 BIDA. (2020). Bangladesh Investment Handbook: A Guide For Investors. Dhaka: Bangladesh Investment Development Authority. Retrieved March 3, 2022, from https://www.bangladeshembassy.org.sa/noticeandc/BIDA-­ Investment%20Handbook.pdf BIDA. (n.d.). General Incentives. Retrieved February 22, 2022, from Bangladesh Investment Development Authority: https://bida.gov.bd/incentives

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Bose, N., & Paul, R. (2013, July 5). Uniqlo Brings Fashion Back to the Source in Bangladesh. Retrieved March 2, 2022, from Reuters: https://www.reuters. com/article/us-­uniqlo-­store-­bangladesh-­idUSBRE9630R920130705 Honda Global. (2018, November 11). Honda Inaugurates New Motorcycle Factory in Bangladesh. Retrieved March 3, 2022, from https://global.honda/newsroom/news/2018/c181111aeng.html#:~:text=Honda%2C%20along%20 with%20its%20partner,in%20Munshiganj%20District%2C%20Dhaka%20 Division. Kafi, M. A., Uddin, M. M., & Islam, M. M. (2007). Foreign Direct Investment in Bangladesh: Problems and Prospects. The Journal of Nepalese Business Studies, 1(1). https://doi.org/10.3126/jnbs.v4i1.1029 Light Castle Partner. (2020, July 9). Bangladesh Automotive Industry: A Roadmap to the Future. Retrieved March 3, 2022, from https://www.lightcastlebd.com/ insights/2020/07/bangladesh-­a utomotive-­i ndustry-­a -­r oadmap-­t o-­t he-­ future/ Luangpituksa, C. (2016). New Phenomenon in Retail Internationalization. In Proceedings of 39th International Business Research Conference. Tokyo. Retrieved March 2, 2022, from http://www.gribaworld.com/img/1522488725.pdf Nextbillion. (2010, July 14). Japan’s Uniqlo Joins Grameen Bank to Help Poor in Bangladesh. Retrieved March 2, 2022, from Nextbillion: https://nextbillion. net/news/japans-­uniqlo-­joins-­grameen-­bank-­to-­help-­poor-­in-­bangladesh/ pwc. (2021). Final Report- Pre Feasibility Study for Proposed Economic Zone at Araihazar, Bangladesh. PricewaterhouseCoopers Private Limited. Retrieved March 10, 2022, from https://www.beza.gov.bd/wp-­content/ uploads/2021/05/Pre-­Feasibility-­Study-­Report-­of-­Araihazar.pdf Rahman, M., & Yusuf, M. A. (2019). Economic Zones as Key Players in Economic Advancement: the Bangladesh Perspective. Bangladesh Journal of Public Administration (BJPA), 27(1), 34–49. Retrieved March 14, 2022, from http://bjpa.bpatc.org.bd/index.php/bjpa/article/view/10/9 SASEC. (2021, November 23). Japanese Economic Zone in Bangladesh Set to Raise $1 Billion Investment. Retrieved June 23, 2022, from South Asia Subregional Economic Cooperation: https://www.sasec.asia/index.php?page=news&nid= 1332&url=jap-­economic-­zone-­bangladesh Short, K. (2013, December 7). Uniqlo Opens Bangladesh Stores Instead Of Joining Factory Safety Accord. Retrieved March 2, 2022, from Huffpost: https://www. huffpost.com/entry/uniqlo-­opens-­in-­bangladesh_n_3587939 The Borgen Project. (2020, August 28). HOW UNIQLO IS FIGHTING POVERTY IN BANGLADESH. Retrieved March 3, 2022, from The Borgen Project: https://borgenproject.org/?s=uniqlo+poverty+in+bangladesh+

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Urata, S., & Kawai, H. (2000). The Determinants of the location of Foreign Direct Investment by Japanese Small and Medium-sized Enterprises. Small Business Economics, 15, 79–103. Retrieved February 23, 2022, from https:// link.springer.com/article/10.1023/A:1008173912813 World Bank. (2020). Doing Business 2020. Economic Profile Bangladesh. Washington, DC.: World Bank. Retrieved March 3, 2022, from https://www. doingbusiness.org/content/dam/doingBusiness/countr y/b/bangladesh/BGD.pdf

CHAPTER 5

Bangladesh-Japan Cooperation for Leveraging the Fourth Industrial Revolution

Abstract  This chapter introduces the components of the Fourth Industrial Revolution (4IR) and what it implies for the society of Bangladesh and Japan. The chapter further describes the historical journey of Japan’s technological progress starting from the Meiji Restoration and leading towards the Japanese Economic Miracle. It provides a brief discussion of the achievements made by Japan in its attempt to become forward looking in terms of technology adoption and the key lessons that Bangladesh may take away from Japan’s experience. It also discusses the existing major trends in technology adoption and innovation in Bangladesh, which includes the number of new patent applications in Bangladesh. Finally, the chapter concludes with the opportunities and challenges for Bangladesh during the paradigm shifts of the 4IR. Keywords  Fourth Industrial Revolution (4IR) • Technology • Industry 4.0 The first industrial revolution began with the introduction of water, with steam as a key component that spurred the creation of the steam engine near the end of the eighteenth century, ushering in mechanical industry and railroad construction (Xu et  al., 2018). The second industrial

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 F. Khatun et al., Bangladesh-Japan Partnership, https://doi.org/10.1007/978-981-99-2568-1_5

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revolution, which started in the late nineteenth century continuing till the early twentieth century, was marked by the increase in ability to use electricity to engage in mass production (Davis, 2016). The third industrial revolution, beginning in 1960, was defined by the introduction of semiconductors, mainframe computing, personnel computing, and the internet, enabling the digital revolution (Schwab, 2016). The term fourth industrial revolution (4IR) or ‘Industry 4.0’ was first coined in Germany in 2013 and quickly disseminated all across the world. The ideologies and innovations of the 4IR were built on the third industrial revolution and are mainly characterised by the integration of Information Technology (IT) with physical machineries in order to build a cyber-physical system (CPS) that connects the virtual world with the real world. Cyber-physical systems (CPSs) are the foundation for the 4IR as they are a collection of diverse technologies that combine to create a self-­ contained, intercom-enabled, and intelligent mechanism that can permit integration between diverse and physically separated individuals. Data production and collection, processing, aggregation, and finally data-driven decision-making are all possible with this system. The elements of CPS include big data, cybersecurity, automated robots, cloud computing, three-dimensional (3D) printing, vertical and horizontal integration technology, simulation systems, and augmented reality (Petrillo et al., 2018). Technological innovation is accelerating at an unparalleled rate in the 4IR era. The 4IR provides both opportunities and risks. As a result, it generates both problems and prospects. On the one hand, there is concern that technological advancement would usher in machines and result in widespread job displacement. On the other side, there is optimism that new technologies will be able to generate new work opportunities. In Japan, the recent development in the field of science and technology is known as ‘Society 5.0’ instead of ‘Industry 4.0’ (Deguchi et al., 2018). This notion of Society 5.0 encapsulates the fundamental idea of the 4IR including big data analytics, cloud computing, Artificial Intelligence (AI), and Internet of Things (IoT). However, there are several differences between Society 5.0 and Industry 4.0 (Deguchi et al., 2018). Japan has always sought to keep their social integrity and social bond secured and protected. In every industrial revolution, the most destructive part may be the segregation of bonds within society. Despite it being an advanced economy, Japan has societal morals that it values and maintains. This is something that needs to be understood gradually and with a detailed perception regarding Japanese philosophy. For example, Japan retains high values with respect to women’s rights. Japanese people never let women

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be engaged in hard working environments. This is because Japan does not want to damage its social structure. Society 5.0 does not only refer to technological development but also refers to social integrity. This is the difference between Japan and the rest of the world. Industry 4.0 is centred around factories where it aims to develop and enhance the nature of manufacturing methods at lower costs. On the other hand, Society 5.0 advocates for the establishment of a ‘smart-society.’ It focuses on the entire society, and measures the successes achieved in accordance with the overall wellbeing of the society and elevated standards of living for all individuals (Deguchi et al., 2018).

Brief Historical Review of Technological Progress in Japan The arc of economic development for Japan began during the Meiji Restoration in 1868 when the end of the Tokugawa Shogunate was declared. The Meiji Restoration brought about a series of revolutions associated with human resources, democracy, and liberalisation (Kitaoka, 2019). From a historical standpoint, the Meiji Restoration is seen as a success which changed the axis of Japanese economic perspectives. The Meiji generation advocated for fast Westernisation rather than restoring tradition. In a nation previously dominated by military, and with little to no regard to civilians, the Meiji age built not just a new military but also new civic organisations (Paine, 1957). This era marked the beginning of Japan’s journey to reform from a feudal to a modern nation. The Meiji period began with the coalition of Satsuma and Choshu, who were fundamentally responsible for the abjuration of the Tokugawa Shogunate. The new government which had decided to abandon the feudal system and adopt the systems and tools of the Western civilisations eventually established its first constitution in 1889. However, imperialism was largely present, as the emperor acted as a sovereign leader over the land with political parties sustaining little power (Sumikawa, 1999). The Meiji restoration initiated comprehensive economic, political, and social changes which laid the foundation of modern Japan. There were many reforms that were implemented during the Meiji Restoration, which included diversifying agriculture, importing overseas technologies, establishing a conventional banking system in Japan, and investing in infrastructure. The government made extensive investments in transportation

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and communication networks, allowing the economy to develop and powerful family-owned corporations to thrive. During the early Meiji period, the cooperation between the state and private enterprise may have been what cemented the national framework, and this cohesiveness was fundamental to Japan’s economic progress. Both social and industrial infrastructure were developed by the government. State leaders made substantial investments in public projects and allocated a significant portion of national wealth to importing foreign technologies and knowledge and building modern-day factories. Japan’s modernisation was largely facilitated by the government’s direct investments during the Meiji period (Sumikawa, 1999). In the Meiji era, Japan concluded that modernisation without Westernisation was not pragmatic. Westernisation did not only translate to the utilisation of technological or military tools, but also indicated the restructuring of civil institutions. Therefore, in order to sufficiently utilise the imported technologies, a degree of Westernisation was needed to develop the competency to create these technologies as well, over just being a mere patron of them (Paine, 1957). Japan is a country that is characterised by low availability of natural resources. However, in response to the foreign demand for tea and raw silk, Japan was able to diversify its agricultural production and export tea and silk in large quantities. This generated substantial income for the government, which was later invested in the purchase of machines from overseas in order to contribute to the country’s technological development. Bangladesh can also try to make improvements in the agricultural sector and diversify its agricultural products in accordance with international demands. This may provide the government with enough revenue to invest in technological innovations in Bangladesh (Alam M.  J., 2016). Japan prioritised capital goods imports above consumer products because the replication and innovation of such technology allowed the country to develop industries and compete on a global scale. Bangladesh should also try to make an active attempt to restructure its industries. This will eventually allow Bangladesh to become an exporter of the goods that are currently being imported from overseas and maintain economic stability (Alam M. J., 2016). Perhaps the most prominent feature of the Japanese economy’s influence on the West in recent decades has been the Japanese competition, and eventual victory, in areas where the West would seem to have comparative advantages. This includes Swiss watches, British motorcycles, US or Western European automobiles, and musical instruments

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which have all been overtaken by Japanese products (Sumikawa, 1999). Then emerged the Japanese companies such as Honda for motorcycles, Yamaha Corporation for musical instruments, Toyota Motor Company Ltd for automobiles, and Seiko for watches. The origins of this occurrence, as with silk and cotton, may be traced back to the Meiji Period (Sumikawa, 1999). There was a significant gap between Japan and the Western nations when Japan decided to become an open economy in the late 1800s. However, agricultural technology established during the Tokugawa Period and a succession of reform policies implemented by the central government during the Meiji Period helped Japan bridge the gap, making it easier to acquire technologies and ideas from Western nations (Takada, 1999). These achievements were important driving factors in the journey towards the Japanese Economic Miracle. The Japanese Economic Miracle (1955–1973) is a period when Japan experienced rapid economic growth after the Second World War (Katzner, 2001). As an aftermath of the Second World War, Japan suffered from underemployment and low income, lack of energy and food security, and high levels of inflation. The Allied Powers, mostly consisting of America, acquired indirect control over Japan under the premise of assisting the country’s reconstruction, which was known as the Occupation of Japan. The first reform policy to be implemented was the demilitarisation of Japan which assured that all materials hitherto supplied to the military were discontinued. Japan had given up its rights to utilise any military forces and became largely dependent on the United States for their defence. Decrease in military spending facilitated Japan’s economic growth after the war. Apart from the reduction in investment in military, there were three other policies which aided the Japanese Economic Miracle including the dissolution of business conglomerates, labour democratisation, and land reform. During the Meiji Restoration, ‘Zaibatsu’ or business corporations run by major Japanese families gained significant dominance. These corporations were government facilitated firms who benefitted from lower taxes and government funds for growth. Therefore, the disintegration of these corporations transcended into intense competition between smaller broken-up firms, which further enabled economic growth. The second reform was distributing land ownership to people who actively farmed the land, as well as improving agricultural leasing standards for those who remained landowners. In Japan landlords who possessed fertile land were not generally farmers themselves. Therefore, in

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order to make the most efficient use of their property, Japanese landlords rented their land to tenant farmers, and received some sort of benefit in exchange for the rent. Finally, labour democratisation enabled the formation of labour unions in Japan, which improved the working environment and wages, in addition to the introduction of a lifetime employment system (Takada, 1999). The reform policies were one of the reasons due to which Japan was able to make a quick recovery after the war. However, these reform policies acted merely as a foundation which supported the changes that came about after the 1950s that catapulted the Japanese economy to new heights of technological and industrial growth. Japan received its autonomy from America in 1952 with the help of the San Francisco Peace Treaty which also ended the America-Japan Security Pact (Iyoda, 2012). From thereafter, a succession of improvements gathered momentum, assisting Japan’s economy in experiencing tremendous expansion. The factors that contributed to the rapid post-war economic growth in Japan included progress in technology, high savings rate, low investment in military, and sound fiscal policies (Iyoda, 2012). Japan produced very little technology of its own. However, it excelled at adapting the foreign technologies that it imported and put into pragmatic use. The Japanese used the transfer of knowledge gained from other nations to build effective production methods and developed other productive notions which transcended into manufacturing strength as they aligned with domestic invention (Takada, 1999). The advancement of technology allowed the Japanese economy to expand significantly, allowing Japan to compete on a global scale. Japan’s strong savings rate also played a significant role in the development process for Japan as it meant that it had the income to support large investments (Iyoda, 2012). The increase in real earnings, which was followed by an increase in bonuses and temporary income, resulted in Japan’s high savings rate (Nakamura, 1995). Additionally, during the Ikeda administration, Japan employed the Income Doubling Plan in 1960 which doubled the wages earned by workers and also elevated living standards. This accelerated investments in both public and private companies by the central Government of Japan. The positive outcomes of this plan were not immediate, but eventually allowed Japan to grow at a rate of 10.8 per cent by the end of the 1960s (Takada, 1999). The success of the Ikeda administration was also supported by domestic corporations such as Panasonic, Toyota Motors, and Sony. Panasonic implemented the ideology of ‘Peace and Happiness through

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Prosperity’ into their working environment, which improved the working conditions in their factories, leading to its corporate success. Toyota invented the Toyota Production System, which essentially embodied the Kaizen system of production (Chiarini et al., 2018). The Kaizen philosophy is associated with a pertinent process of change and enhancement of the working standards. It harbours the idea of continuous improvements of working standards, management, production, and strategies which is essential in a competitive environment (Singh & Singh, 2009). The third factor that enabled Japanese economic growth after the Second World War was low investments in defence and military. As a result of lower military expenditure, more funding was spent towards developing social infrastructure and state projects in Japan. Lastly, Japan’s monetary and fiscal policymakers made prudent policy judgments from 1955 till 1964, such as prohibiting the government from issuing any bonds to subsidise the general financial plan. To minimise the crowding-out effect, balancing the budget was critical to rapid expansion (Iyoda, 2012). In addition to these policies, the Ministry of Economy, Trade and Industry, previously known as the Ministry of International Trade and Industry (MITI), provided incentives and guidance to industries which were projected to have potential to expand rapidly. These industries included shipbuilding, steel, chemicals, and machineries. Foreign reserves were first used to purchase raw materials and machinery and equipment. Later, with the support of Japanese government institutions such as the Japan Development Bank, Japanese enterprises were able to get subsidised loans to finance equipment and buildings (Iyoda, 2012; Takada, 1999). The Japanese Economic Miracle was a pivotal period for Japan as the economy went through rapid economic development and technological progress from a state of tragedy. The growth induced during that time was caused by various interconnected causes that involved policy reforms, alternative investment patterns, and the innate skills for knowledge and technological adoption.

Major Trends of Technology Adoption in Bangladesh In Japan, the share of medium and high-tech industry as a percentage of manufacturing value added has increased from 50 per cent in 1990 to 57 per cent in 2018 (World Bank, 2022) (Fig. 5.1). On the other hand, in

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Fig. 5.1  Number of new patent applications in Bangladesh. (Source: Authors’ illustration based on data from Department of Patents, Designs and Trademarks (DPDT) (DPDT, 2022))

Bangladesh, the share of medium and high-tech industry as a percentage of manufacturing value added has decreased from 24 per cent in 1990 to 8 per cent in 2018 (World Bank, 2022) (Fig. 5.1). Since Japan is a capital-­ abundant country which specialises in the production and export of capital-­ intensive goods and Bangladesh is a labour-abundant country which specialises in the production and export of labour-intensive goods, these trends are consistent with each country’s comparative advantages. However, the low share of medium and high-tech industry may be a challenge for Bangladesh during the 4IR. The number of new patent applications in Bangladesh skyrocketed in the early 1990s during the take-off period of the Bangladesh economy which was characterised by widespread privatisation and liberalisation (Fig. 5.1). However, the increase in the total number of new patent applications in Bangladesh has been driven mainly by foreign applications, whereas local applications have been largely stagnant over the years (DPDT, 2022). This indicates that FDI inflows into Bangladesh may have facilitated technology transfer and innovation. Hence, it is anticipated that when the JEZ becomes operational in Bangladesh, it may bring new technologies and new innovations to Bangladesh.

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Opportunities of the Fourth Industrial Revolution The 4IR paradigm has greatly contributed to a plethora of prospects, involving the combination of multiple intelligent technologies, and blurring the barriers between the digital, physical, and biological domains. Unlike the preceding industrial revolution, the 4IR has no parallel in history, with its evolution occurring at an exponential rate (Xu et al., 2018). The opportunities that have emerged in the age of the 4IR includes (i) reducing the barriers between the producers and the market; (ii) presenting a ubiquitous role of AI; (iii) incorporating different methods and spheres; (iv) enhancing living standards using robotics; and (v) implementing IoT to connect individuals. Smaller businesses can use 3D printing technology to create goods or prototype models which saves time and lowers initial costs. This theoretically closes the gap between the innovators and the market by decreasing the usual barriers to entry for newer entrepreneurs striving to enter the market (Anderson, 2012). The technologies presented in ‘Industry 4.0’ essentially make the production process time-efficient by persuading employees to be their most productive selves (Stancioiu, 2017). The utilisation of AI is becoming more prominent as production assemblies are gradually aiming to become completely automated using present technologies, which are being projected to save businesses billions of dollars while also creating new employment (Manyika et al., 2017). Creative technologies could possibly amalgamate the differentiated areas of science and technology integrating small improvements from these disciplines and creating novel ideas and products as a result. Thus, the 4IR has the ability to create new markets with opportunities for all individuals involved. The innovative idea of using automated tools or simply robotics would be pivotal for economic transformation in the coming future. Robots have the ability to produce as well as perform ordinary chores more efficiently than human beings, enhancing the quality of life and allowing individuals to invest their time on other aspects of life. Furthermore, the use of IoT will likely facilitate the emergence of various types of automation in every sector (Xu et al., 2018). IoT involves the interaction of physical actuators that enable improved connection of devices, services, and systems that extend beyond machine-to-machine (M2M) communication and encompass a wide range of interfaces, disciplines, and implementations (Holler et al., 2014).

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Bangladesh can benefit greatly from the implementation of IoT applications. Monitoring and management of the environment and water using IoT can increase the effectiveness of fish production in Bangladesh. Smart city applications can be used to reduce the amount of traffic in Bangladesh, while the agricultural sector and the blue economy can be profited by using IoT (BGD e-GOV CIRT, 2020). For Bangladesh, the 4IR presents immeasurable opportunities that have the potential to allow the economy to leapfrog into the next stage of development. With the introduction of 3D printing, automation, AI, cloud computing, and IoT, along with other components of the 4IR, the production capacity for the domestic market in Bangladesh can be increased greatly while also ensuring standardisation and quality of products, improving livelihoods, and providing the economy with a competitive edge among other economies.

Challenges of The Fourth Industrial Revolution The disruptive nature of the 4IR also presents challenges that the economy of Bangladesh may need to overcome. The existence of the digital divide means that the benefits of technological progress will be largely enjoyed by those who are on the higher end of the income and wealth spectrum. Hence, it is likely that the 4IR may create greater inequality which can be an impediment to the development of Bangladesh. Another significant factor that will propel inequality in the era of the 4IR is the rise in unemployment (Davis, 2016). Every industrial revolution creates jobs but also destroys them. There is evidence indicating that recent industrial revolutions are generating fewer vacancies in relevance to the previous industrial revolutions (Davis, 2016). With the introduction of the Industry 4.0 paradigm, manufacturing is becoming less labour-intensive, which might pose a problem for Bangladesh’s manufacturing sector, as it is mostly driven by inexpensive labour (pwc, 2021). Therefore, the workforce of Bangladesh may experience unemployment as they may get displaced with automated machines performing similar tasks with greater efficiencies. For instance, sewing robots are automated sewing machines that were introduced in 2018. The automated procedure will enhance output while lowering production costs dramatically benefiting companies who chose to adopt to this technology (Motif, 2020). Since the RMG sector in Bangladesh employs around 4.22 million workers (Haque & Bari, 2021), the introduction of sewing robots in the textile and apparel industry may

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spell catastrophe for the workers in the RMG sector in Bangladesh. Thus, sewing robots and related technologies pose a great drawback for Bangladesh in the age of the 4IR. However, on the positive side, the transition to sewing robots will neither be technically easy nor be financially feasible for most factories due to high costs of purchase and maintenance. Additionally, even if there is some degree of displacement of workers, the introduction of new technology is likely to create another industry which facilitates the growth and expansion of the market. This phenomenon caused by the 4IR may generate more jobs for the young population of Bangladesh who are open to knowledge and skill transfer. This may mitigate the displacement effect to some extent. However, the kind of employment that is anticipated to be produced in these areas may need a higher degree of education and technical skill. This is because in the future, the demand for individuals who are more adept at solving complex problems may tend to be higher over those habituated to a more basic or repetitive tasks (Davis, 2016). The young workforce of Bangladesh who have received at least a tertiary level of education will be more attuned to learn a new skill or nurture their existing talents over the low-skill workers who have only received either primary or secondary level of education. In 2020, only 14.1 per cent of the population of Bangladesh who were either 25 years of age or more attained at least a bachelor’s degree according to the World Bank (World Bank, 2021). Individuals who can generate new ideas and breakthroughs will be the most valuable resource in the time of the 4IR. Talent will be more sought after than capital and will be a vital component in production (Xu et  al., 2018). Bangladesh’s workforce must be prepared for the new difficulties that come with a dynamic digital economy. The economy of Bangladesh is undergoing structural reforms as technological advancement has recently accelerated the transformation of production and service practices. Firms must not only adapt their business and production models to new technology developments on a continuous basis but also have highly qualified staff to support such change in processes. Bangladesh’s young workforce must put an effort to increase their productivity and drive economic growth. It is imperative for Bangladesh to provide the young generation with the necessary employment skills so that the country may take full advantage of the 4IR (The World Bank, 2019). In addition to the displacement of jobs, other challenges that remain in the midst of the 4IR are cybersecurity threats such as hacking and data

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theft. When the world becomes integrated and connected extensively to the digital space through various devices, there are various security threats that may create interferences. With everything being connected to the IoT, the security vulnerabilities in any particular network will grow. With additional switches, connections, and connectivity constraints, systems will need to be more secure (Xu et al., 2018). For Bangladesh it is difficult to maintain cybersecurity, a problem exacerbated by IoT. Due to the interconnected nature of IoT applications, a single cyberattack could transcend into a loss of substantial data for both public and private firms with the addition of threats against the spillage of personal information. In the past there have been cyber infiltrations among the financial organisations of Bangladesh which revealed several vulnerabilities in the current cyberspace (BGD e-Govt CIRT, 2016).

References Alam, M. J. (2016). Japan’s Transformation from the Meiji Era to Modern Age: A Politico-Economic Overview. Social Science Review, 33(1), 127–143. Retrieved March 15, 2022, from https://scholar.google.com/citations?view_op=view_ citation&hl=en&user=2lYPMvEAAAAJ&citation_for_view=2lYPMvEAAAAJ: Tyk-­4Ss8FVUC Anderson, C. (2012). Makers: The New Industrial Revolution. Retrieved February 27, 2022, from https://books.google.com.bd/books/about/Makers. html?id=2PQFNrG9n-­oC&redir_esc=y BGD e-GOV CIRT. (2020, December 31). IoT Possibility and Challenges in Bangladesh context. Retrieved March 2, 2022, from BGD e-GOV CIRT: https://www.cirt.gov.bd/iot-­p ossibility-­a nd-­c hallenges-­i n-­b angladesh­context/ BGD e-Govt CIRT. (2016, September 8). Common Vulnerabilities in Cyber Space of Bangladesh. Retrieved March 2, 2022, from https://www.cirt.gov.bd/ common-­vulnerabilities-­in-­cyber-­space-­of-­bangladesh/ Chiarini, A., Baccarani, C., & Mascherpa, V. (2018). Lean Production, Toyota Production System and Kaizen Philosophy: A Conceptual Analysis from the Perspective of Zen Buddhism. TQM Journal, 30(3). https://doi.org/10.1108/ TQM-­12-­2017-­0178 Davis, N. (2016). What is the Fourth Industrial Revolution? World Economic Forum. Retrieved March 3, 2022, from https://www.weforum.org/ agenda/2016/01/what-­is-­the-­fourth-­industrial-­revolution/ Deguchi, A., Hirai, C., Matsuoka, H., Nakano, T., Oshima, K., Tai, M., & Tani, S. (2018). What is Society 5.0? In Society 5.0: A People Critic Super Smart Society (pp.  1–23). Tokyo: Springer. Retrieved February 27, 2022, from

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https://library.oapen.org/bitstream/handle/20.500.12657/41719/2020_ Book_Society50.pdf?sequence=1#page=18 DPDT. (2022, January 30). Latest Statistics of Patents Application. Retrieved March 14, 2022, from Department of Patents, Designs and Trademarks (DPDT):http://www.dpdt.gov.bd/site/page/cda6b625-­2ebd-­4354-­bc48-­46e40c14656d/Haque, A.  K., & Bari, E. (2021). A Survey Report on the Garment Workers of Bangladesh 2020 (1st ed.). Asian Center for Development. Retrieved February 27, 2022, from https://www.researchgate.net/publication/350156796_A_ Survey_Report_on_the_Garment_Workers_of_Bangladesh_2020 Holler, J., Tsiatsis, V., Mulligan, C., Karnouskos, S., Avesand, S., & Boyle, D. (2014). From Machine-to-Machine to the Internet of Things: Introduction to a New Age of Intelligence. Amsterdam: Elsevier. Retrieved February 27, 2022, from https://www.sciencedirect.com/book/9780124076846/from-­machine-­to­machine-­to-­the-­internet-­of-­things Iyoda, M. (2012). Rapid Economic Growth. In M. Iyoda (Ed.), Postwar Japanese Economy (pp. 37–48). Springer. Retrieved February 25, 2022, from https:// link.springer.com/chapter/10.1007/978-­1-­4419-­6332-­1_4 Katzner, D. W. (2001). Explaining the Japanese Economic Miracle. Japan and the World Economy, 13, 303–319. Retrieved February 25, 2022, from https:// www.sciencedirect.com/science/article/abs/pii/S0922142501000561 Kitaoka, S. (2019). Chapter 1. Meji Revolution: Start of Full-Scale Modernization. In Seven Chapters on Japanese Modernization. Japanese International Cooperation Agency. Retrieved February 24, 2022, from https://www.jica. go.jp/dsp-­chair/english/chair/modernization/ku57pq00002mpdct-­att/ modernization_chapter_01.pdf Manyika, J., Chui, M., Miremadi, M., Bughin, J., George, K., Willmott, P., & Dewhurst, M. (2017). Harnessing Automation for A Future That Works. McKinsey Global Retrieved. Retrieved March 2, 2022, from https://www. mckinsey.com/featured-­insights/digital-­disruption/harnessing-­automation-­ for-­a-­future-­that-­works Motif. (2020, February 27). Can Automated Sewing Transform the Apparel Industry? Retrieved March 2, 2022, from Motif: https://motif.org/news/ automated-­sewing-­robots/ Nakamura, T. (1995). The Postwar Japanese Economy: Its Development and Structure. In T. Nakamura (Ed.), The Postwar Japanese Economy: Its Development and Structure (2nd ed.). Tokyo: University of Tokyo Press. Retrieved February 25, 2022, from https://books.google.com.bd/books/about/The_Postwar_ Japanese_Economy.html?id=xqu0AAAAIAAJ&redir_esc=y Paine, S. (1957). The Meiji Generation. In S. Paine (Ed.), The Japanese Empire Grand Strategy from the Meiji Restoration to the Pacific War (pp.  1–14). Retrieved February 25, 2022, from https://www.cambridge.org/core/ books/japanese-­e mpire/meiji-­g eneration/04AC68D9AD040F0E671DC 2F884B7FB90

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Petrillo, A., Feice, F. D., Cioffi, R., & Zomparelli, F. (2018). Fourth Industrial Revolution: Current Practices, Challenges, and Opportunities. In A. Petrillo, F. D. Feice, R. Cioffi, F. Zomparelli, A. Petrillo, R. Cioffi, & F. D. Felice (Eds.), Digital Transformation in Smart Manufacturing. Retrieved February 27, 2022, from https://books.google.com.bd/books?hl=en&lr=&id=2WaQDwA AQBAJ&oi=fnd&pg=PA1&dq=Fourth PLUS_SPI Industrial PLUS_SPI Revolution: PLUS_SPI Current PLUS_SPI Practices, PLUS_SPI Challenges, PLUS_SPI and PLUS_SPI Opportunities&ots=2pr1zbBdQp&sig=Jg1vj6JAu nKW6BnZVc8Jbzuk5t8&redir_esc=y#v=onepage&q=Four th%20 Industrial%20Revolu pwc. (2021). Final Report- Pre Feasibility Study for Proposed Economic Zone at Araihazar, Bangladesh. PricewaterhouseCoopers Private Limited. Retrieved March 10, 2022, from https://www.beza.gov.bd/wp-­content/ uploads/2021/05/Pre-­Feasibility-­Study-­Report-­of-­Araihazar.pdf Schwab, K. (2016). The Fourth Industrial Revolution. In K. Schwab (Ed.), The Fourth Industrial Revolution. World Economic Forum. Retrieved February 27, 2022, from https://www.weforum.org/about/the-­fourth-­industrial­revolution-­by-­klaus-­schwab Singh, J., & Singh, H. (2009). Kaizen Philosophy: A Review of Literature. Academia. Retrieved February 25, 2022, from https://d1wqtxts1xzle7.cloudfront.net/36988672/7_rew-­with-­cover-­page-­v2.pdf?Expires=1646292966& Signature=YdJfxdUhFjKhdDP8dQu0WWQDOn4xmSAuCWPOzQO0iq9k Vt6r8gHoVPgWb~OvvgQ-­X5XQXA9bK1DU7akVGX~3Sj-­oV8UGleVwwlh MXBbao6RNUgbxnt84Cs3SmzM13WvUtNJLFpuNJxce76-­BoeHnLP Stancioiu, A. (2017). The Fourth Industrial Revolution “Industry 4.0”. Fiability and Durability, 10(1), 74–78. Retrieved February 27, 2022, from https:// w w w. u t g j i u . r o / r e v _ m e c / m e c a n i c a / p d f / 2 0 1 7 -­0 1 / 1 1 _ A l i n % 2 0 ST%C4%82NCIOIU%20-­% 20THE%20FOURTH%20INDUSTRIAL%20 REVOLUTION%20%E2%80%9EINDUSTRY%204.0%E2%80%9D.pdf Sumikawa, S. (1999). The Meiji Restoration: Roots of Modern Japan. Retrieved February 25, 2022, from https://www.lehigh.edu/~rfw1/courses/1999/ spring/ir163/Papers/pdf/shs3.pdf Takada, M. (1999). Japan’s Economic Miracle: Underlying Factors and Strategies for the Growth. Retrieved February 25, 2022, from https://www.lehigh. edu/~rfw1/courses/1999/spring/ir163/Papers/pdf/mat5.pdf The World Bank. (2019). Bangladesh Tertiary Education Sector Review: Skills and Innovation for Growth. The World Bank. World Bank. (2021, September). Educational Attainment, at Least Bachelor’s or Equivalent, Population 25 PLUS_SPI , Total (%) (Cumulative)—Bangladesh. Retrieved March 2, 2022, from The World Bank Data: https://data.worldbank.org/indicator/SE.TER.CUAT.BA.ZS?locations=BD

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World Bank. (2022). Sustainable Development Goals (SDGs). Retrieved March 14, 2022, from Databank, World Bank: https://databank.worldbank.org/source/ sustainable-­development-­goals-­(sdgs)# Xu, M., David, J. M., & Kim, S. H. (2018). The Fourth Industrial Revolution: Opportunities and Challenges. International Journal of Financial Research, 9(2). Retrieved March 3, 2022, from http://creo.sc-­celje.si/pluginfile. php/2387/mod_resource/content/1/4.1.4_01_The%20fourth%20industrial%20revolution.pdf

CHAPTER 6

The Way Forward

Abstract  This chapter provides an outlook for the economic relationship between Bangladesh and Japan in the way forward. It emphasises the need for signing a Free Trade Agreement (FTA) in order to increase bilateral trade beyond Bangladesh’s graduation from the Least Developed Countries (LDC) group. It also describes how Japanese development cooperation and investment may be able to support Bangladesh’s aspirations to become an upper middle-income country. Additionally, it outlines the role that Japan may play in supporting Bangladesh during the Fourth Industrial Revolution (4IR) including the relevance of the Japanese education system for Bangladesh. The chapter provides a detailed description and makes a comparison between the education system of Bangladesh and Japan to draw attention to the important areas of improvement for the education framework of Bangladesh. Interviews with 20 Japanese university graduates who now reside in Bangladesh were also conducted as part of this study in order to better understand the advantages of these scholarship programmes offered by Japan and the differences between the educational curricula in Bangladesh and Japan at the higher education level. Finally, this chapter provides a conceptual model illustrating how complementarity between Bangladesh and Japan may serve as the basis for their partnership in the next development journey. Keywords  Least developed country (LDC) graduation • Development cooperation • Foreign direct investment • Fourth Industrial Revolution (4IR) © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 F. Khatun et al., Bangladesh-Japan Partnership, https://doi.org/10.1007/978-981-99-2568-1_6

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The Bangladesh-Japan diplomatic relationship can be taken forward using foreign policy instruments and adopting bilateral trade agreements like FTA or Preferential Trade Agreement (PTA). Such bilateral trade agreements will increase the share of duty-free quota-free (DFQF) export for Bangladesh. Using Japanese aid and assistance, Bangladesh is investing in many development projects, one of which is the Bay of Bengal Industrial Growth Belt (BIG-B). The adoption of BIG-B will facilitate and strengthen trade and development which will yield long-term benefits for both Bangladesh and Japan. The development of the Japanese Economic Zone (JEZ) in Araihazar, Narayanganj will attract more investment from Japanese investors, which will eventually accelerate bilateral trade between Bangladesh and Japan. After the completion of Japanese Economic Zone, many industries including agro-food, light engineering, chemicals, pharmaceuticals, automobile assembly, power, and energy will be set up in that region. This will expand Bangladesh’s basket of potential export items to Japan. There will be huge opportunities for Japan in Bangladesh in wide-­ ranging sectors with high revenue including ready made garment (RMG), technology, power, and energy (Rahman S. A., 2021). Moreover, Bangladesh is a vital source for indispensable raw materials required for Japanese products and has a big marketplace to sell Japanese finished goods (Akon et al., 2020). Since Japanese consumers prefer high-­ quality imported goods, Bangladesh must manufacture products with good-quality raw materials and high precision to attract and retain Japanese customers. For example, Grameen Uniqlo in Bangladesh is currently a major brand exporting clothing to Japan using high-quality imported materials from foreign countries including Japan. The local Bangladeshi market should have the ‘know how,’ precision, technology, and management to reap benefits from Japan and attract Japanese investment. Hence attracting Japanese investors in the local market to produce locally by training local people and maintaining Japanese quality and standards will gradually help Bangladesh to satisfy Japanese buyers and strengthen Bangladesh’s export potential to Japan. The most appropriate way to popularise Bangladeshi products in Japan is by attracting Japanese investment in Bangladesh. Bangladesh’s low labour cost and emerging market should be portrayed as lucrative to Japanese investors in order to encourage them to set up their production plants in Bangladesh. Following the long-term Japanese investments and Bangladesh’s graduation from the LDC group, Japanese investors will benefit if successful negotiation of bilateral trade agreements can be made between Bangladesh and Japan. The Bangladesh-Japan relationship may not achieve its full potential if FTA or PTA is not signed in the future,

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especially after least developed country (LDC) graduation of Bangladesh (Rahman S.  A., 2021). To build a strong partnership with Japan, Bangladesh needs to adopt the Japanese way of conducting business, understand Japanese culture and language, upgrade technology in line with Japanese business requirements, train more people, and adopt business models used in Japan.

Bangladesh-Japan Trade After Bangladesh’s Graduation from the LDC Group Bangladesh is expected to graduate out of the LDC group in 2026, and as a result of this graduation, Bangladesh will lose the LDC-specific support measures along with DFQF access to the market of Japan and other developed countries. Japan has been one of Bangladesh’s top 10 export destination besides European Union (EU), United States of America (USA), China, and India for the last few decades. But after graduating from the LDC group, Bangladesh will have to lose all the preferential market access for goods and services, special and differential treatment under World Trade Organisation (WTO) agreements, trade-related capacity building, training, and technical assistance. This may have a negative impact on Bangladesh’s volume of trade with Japan and other developed countries. Many manufactured goods, especially RMG and textile items, exported from Bangladesh to Japan will be subjected to higher Most Favoured Nation (MFN) tariffs ranging from about 7.4 per cent to 12.8 per cent (UNDESA, 2020; Takashi & Noriyoshi, 2021). Tariff for footwear, which is a major export item to Japan, would range from 22 to 175 per cent (UNDESA, 2020). The loss of GSP is expected to impact the garment industry of Bangladesh heavily because RMG and textile have the largest shares of Bangladesh’s export to the Japanese market as well as to other developed countries. Moreover, the benefits from LDC provisions in regional agreements will no longer be applicable to Bangladesh after its graduation, unless successful negotiation of FTA or EPA is made between Bangladesh and Japan. In a survey conducted by Japan External Trade Organisation (JETRO) and Japan-Bangladesh Chamber of Commerce & Industry (JBCCI), it was found that 85 per cent of Japanese companies operating in Bangladesh and 87 per cent of Bangladeshi companies and multinational companies want an FTA to be signed between Japan and Bangladesh once the Generalised System of Preferences (GSP) is abolished (JETRO & JBCCI, 2022). Without GSP, Bangladesh’s trade competitiveness will fall due to high import tax, compared to other ASEAN countries, and Bangladesh

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may face unfavourable consequences while exporting goods to Japan. If GSP facilities are withdrawn and trade agreement is not signed, 20 per cent of the Japanese companies may consider relocating from Bangladesh to other competitive nations like India, or other ASEAN countries (JETRO & JBCCI, 2022). Besides, Japan’s export to Bangladesh will also be hampered if Bangladesh signs an FTA with China before it signs with Japan. Imports from Japan to Bangladesh will be negatively impacted as Bangladesh will find it cheaper to import textile machineries, automobiles or automobile parts, consumer electronics, and so on at a tax-free rate from China (JETRO & JBCCI, 2022). In order to sign an FTA, Bangladesh and Japan need to negotiate the terms and conditions of such an agreement by abiding to the rules of trade in goods of General Agreement on Tariffs and Trade (GATT) (Article XXIV) and the rules of GATS (Article V) to keep the outcome of this agreement in conformity with the WTO rules (Goode, 2005). The steps that are needed for an FTA for goods include establishing a free-trade area comprising of two or more customs territories, creating a mechanism for rules of origin to determine which goods will be considered by the participating customs territories as products originating in the other participating customs territories, and eliminating taxes and other stringent trade regulations on almost all trade in goods considered to be originating products. Ensuring that the barriers against third parties are not raised as a result of the preceding measures, the WTO should be notified of any decision to enter into an FTA (Goode, 2005). WTO’s Committee on Regional Trade Agreements (CRTA) will examine the agreement to ensure a high-quality trade agreement is made based on WTO rules and disciplines. However, for Bangladesh full trade liberalisation may not be feasible because there is still a lack of fiscal space for Bangladesh to adopt a FTA. Therefore, after graduating in 2026, Bangladesh will need a transition period of at least three years from Japan, like the one given by the EU, so that Bangladesh can have a smooth transition out of the LDC group. Beyond the transition period, Japan and Bangladesh may start negotiating an FTA depending on the degree of economic development and interest of both countries. In addition to FTA, a comprehensive Economic Partnership Agreement (EPA) may also be considered between both nations to facilitate trade in goods and services. Bangladesh and Japan have already established several successful bilateral treaties and agreements which include (i) exchange of notes concerning the dispatch of Japan Overseas Cooperation Volunteers in 1973; (ii) Agreement for the Exchange of International Money Orders in 1978; (iii) Agreement for Air

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Services in 1980; (iv) Cultural Agreement in 1982; (v) convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion concerning Taxes on Income in 1991; (vi) Agreements concerning the promotion and protection of investment in 1999; and (vii) Agreements of Technical Cooperation in 2002 (Alam M. J., 2022). Therefore, there is a scope to also establish a bilateral trade agreement between Bangladesh and Japan. A successful trade agreement after the LDC graduation would ensure greater market access, trade liberalisation in manufacturing and agricultural sectors, increase in vertical investments, protection of intellectual property, and increase in trust and transparency between Japan and Bangladesh. A bilateral trade agreement between Bangladesh and Japan will be highly beneficial for both countries in terms of both trade and investments.

Japanese Development Assistance and Foreign Direct Investment in Bangladesh in the Context of Bangladesh’s Aspirations of Becoming an Upper Middle-Income Country Japan has been a major development partner for Bangladesh. Japan promotes peace and stability, especially among South Asian countries. Bangladesh still faces many development challenges which provide Japan with an opportunity to offer assistance to Bangladesh. From Japan’s point of view, Bangladesh is still an agrarian economy, despite some industrial growth the country has experienced. Therefore, Japan’s ODA structure to Bangladesh is such that it greatly circulates around agricultural, regional, infrastructural, and social development. The major driver of the increase in Japan’s Official Development Assistance (ODA) to Bangladesh has been the development of infrastructure along with Bangladesh’s increasing geopolitical significance to Japan. The improvement of infrastructure in Bangladesh has mutual benefits for both countries. For instance, the development of roads and bridges in Bangladesh proved to be advantageous for Japanese automobile manufacturers. As of 2018 Toyota had an 80 per cent share of the automobile market in Bangladesh while Honda and Nissan account for 7 per cent and 6 per cent of the market (Light Castle Partner, 2020). From a strategic point of view, Bangladesh is a gateway to South Asia and Southeast Asia making the country an important location for

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Japanese companies. More importantly, Bangladesh has a constantly stable foreign policy which is in a neutral position internationally and adheres to the notion of being a peace-loving nation, just like Japan. Importance of FDI from Japan to Bangladesh With Bangladesh’s graduation from the LDC group, and with its aspirations of reaching an upper middle-income country status, it is important to attract relatively more investments from Japan and utilise the aid provided by Japan towards more productive purposes. One reason Bangladesh was able to develop its RMG sector was because it was able to bring in Foreign Direct Investment (FDI) from other countries which took the advantage of the historical resourcefulness of the textile industry that was inherent in Bangladesh. Foreign investors brought the knowledge, training, and technology which helped the RMG industry to flourish even more. FDI received from Japan will not only help the development of Bangladesh but also provide the country with the ability to export more products other than textiles, footwear, or fisheries to Japan. Japan prioritises greatly on quality control. However, it is difficult to reach the precision of Japanese standards for Bangladesh. Thus, it is critical for Bangladesh to focus on entering the Japanese market with substantial investments from Japan. Therefore, Bangladesh needs to better manage the FDI received from Japan and also find novel ways to attract more investments from Japan. Greater Japanese FDI will help popularise Bangladeshi products in Japan and increase the possibility of meeting the expected design and quality assurance needed to export goods and services to Japan. A challenge for Bangladesh is that it is not adequately integrated into the regional and global supply chains. Japan has investments in various Southeast Asian countries from where it procures specific items. Japan wants to operate in a larger market differentiated by products that it can source. It is easier for Japan to trade and invest greatly with countries that have similar standards and duty structures to make business more efficient across borders. This is an area where Bangladesh is falling behind. Therefore, Bangladesh needs to apply innovative methods to better utilise the ODA received from Japan and attract more FDI from Japan.

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Methods to Attract Greater Foreign Direct Investment from Japan Japan has been providing aid to Bangladesh and contributing to development projects such as the establishment of the BIG-B initiative, the JEZ, and a deep seaport in Matarbari. These projects, as aforementioned, have considerable prospects of inviting greater number of investments from Japan. Japan is already anticipating USD 1 billion investment from the 100 Japanese companies expected to operate in the Japanese Economic Zone in Araihazar, Narayanganj (SASEC, 2021). This might further encourage more investments from other sectors such as Information Technology (IT), food value chain, and human resource skill development. However, importance should be given to early and concrete solutions of customs, tax, exchange regulations, and the remittance issues incurred by current Japanese companies operating in Bangladesh, as it will create an investment-friendly ecosystem and promote a flow of more Japanese investors in Bangladesh through positive word of mouth. Bangladesh should also reform policies in support of foreign companies. For example, it is difficult for foreign companies to apply for an Electronic Tax Identification Number (e-TIN) due to the absence of a local business registration number. Medical services, pharmaceutical companies, electronic firms, and many other basic industries from Japan are open to the idea of producing high-quality goods in Bangladesh by utilising domestic professionals, as costs of production are relatively low. However, inability to apply for e-TIN presents difficulties for these companies as they are unable to obtain a tax return and pay taxes in Bangladesh. Therefore, a technological modification to the e-TIN application system is required to allow international enterprises to apply for e-TIN. This will enable international investors to make an income in Bangladesh and pay the appropriate taxes. In order to bring more FDI Bangladesh needs to develop its domestic market and improve its human resources so that they can receive and utilise the technology that will come through Japanese FDI. There needs to be a national database that registers the local professionals previously hired by Japanese companies to work in development projects, so that they can be re-hired to develop and work on other Japanese projects in Bangladesh. This will allow the recognition of Bangladeshi experts who have already learned the Japanese way of business and will allow them to disseminate the knowledge to other local executives.

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Learning the Japanese way of business management can be another way to attract more FDI from Japan. Japanese business management system in the corporate environment is influenced by Japanese culture and religion. The core values that symbolise the Japanese business management system are kindness, reliance, empathy, and social responsibility. Japanese companies practice life-time employment with a reward structure based on hierarchical position. They put great importance on training, self-discipline, and harmony, and prioritise unity, unanimous decision making, equality, and voluntary involvement within the organisation, along with quality control and admirable mannerisms (Sorin-George et  al., 1980). Japan conducts business on inter-generational terms, which implies that they begin business ventures with the mindset of prolonging them for the long term. An alternative production technique which has been long recognised as an important element in the success of Japanese business management is known as the Kaizen technique. Several companies from Western nations have implemented the Kaizen technique of doing business and have experienced favourable results. Kaizen is a Japanese word that translates to ‘continuous improvement’ and was first coined by Masaaki Imai in 1986. Kaizen implies a continuous process of change and improvement in both professional and personal walks of life. From the perspective of an organisation, Kaizen implicates excellence in business endeavours. Under this philosophy, every employee is expected to practice a consistent state of improvement in their work and consider it as a part of their jobs. Everyday must reflect a minimum amount of increment being made in the organisation (Smadi, 2009). The underlying principle of the Kaizen technique adheres to total quality management (TQM) (Brunet & New, 2003). Kaizen fundamentally depends on human efforts to produce effective results through the process of improvement. Quality assurance is another primary feature of Kaizen and takes precedence over cost and delivery (Smadi, 2009). The Kaizen concept is considered as a method of problem-­ solving that requires hard data to be analysed in order to make decisions (Montabon, 2005). Additionally, Kaizen advocates for all employees to practice visualising problems in order to find creative solutions and ensure that similar problems are avoided in the future (Smadi, 2009). Despite being a global corporation, Toyota Motor Company takes its roots from the Japanese-style business management system, including the Kaizen technique to build a business management structure, formally known as the Toyota Production System (TPS). Toyota is an organisation

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that is very much centred around human resources. As per TPS, people are an important resource necessary for global competition. TPS believes in eliminating waste in order to increase efficiency. Similar to the Kaizen philosophy, Toyota prioritises quality over profit. Quality assurance stems from the hard work and cooperation from the employees in order to ensure a streamlined production process. Emphasis in quality also branches out towards the nature and ability of the workforce and the management system. TPS advocates for automation additive to human input and encourages innovative ideation (Sorin-George et al., 1980). Bangladeshi local producers can learn and study ways of evolving their business models in accordance with Japan’s management system, which includes the Kaizen method or TPS. Therefore, Bangladesh’s domestic producers may adopt such Japanese ways of doing business which will increase the appeal of the local market to Japanese investors and also increase the efficiency of the companies. Furthermore, Bangladeshi businesses can also hire consultants from Japan or individuals who have experience in working with Japanese firms for technical or knowledge-based support to further transform the local market in accordance with the Japanese way of conducting business. Japanese investors prefer to speak in their own language and, therefore, prioritise companies from other countries who are well versed in the Japanese language. Therefore, it is also important to establish an institutional base that concentrates around learning the Japanese language apart from adopting Japanese business models, hiring individuals from Japanese companies for their experience, and having a mentality to conduct a business venture for the long term. It is important to gain the trust of Japan as Japanese investors take a long time to decide before starting business in an overseas market. In order to attract more FDI from Japan, Bangladesh needs to increase the transparency of its policies as well. If there is any trust deficit, then Japan might not be eager to invest in Bangladesh. There are three main issues that impede FDI inflows into Bangladesh which need to be mitigated to attract new investments from Japan: (i) clear incentives; (ii) conducive investment environment; and (iii) completely transparent and streamlined procedures of exports and imports. Incentives provided to Japanese investors should be made clear to all by publishing them widely in Bengali, English, and Japanese languages. A conducive business environment with transparent and simplified service processes will encourage the flow of FDI to Bangladesh. However, in terms of the business environment present in Bangladesh, various bottlenecks are yet to be resolved. It

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is important to show transparency and make the business environment more understandable to the representatives of Japan. Bangladesh has too many complex government formalities and an administrative backlog which needs to be streamlined in order to attract more FDI from Japan. As discussed earlier, it is important to increase the ease and efficiency with which current Japanese investors are conducting business in Bangladesh. Complicated procedures in customs, delayed shipments, lack of skilled IT professionals, and inadequate internet connectivity add to the existing impediments and bottlenecks which are creating a hindrance for current Japanese investors operating in the country. Due to a lack of mechanised devices in customs clearance, import processes take a long time due to which the delivery of finished goods is delayed. Additionally, this also causes obstructions in making electronic payments to international clients owing to complicated foreign exchange rules and regulations. Hence it is important to streamline the processes needed in custom services. This can be done by employing adequate number of officials in customs and for handling freight, digitisation of custom authorisations, and extension of the function for priority lane system in customs clearance (BIDA, 2022). Other challenges that disrupt the business operations of current investors are the disruption to broadband internet connection and the lack of technically skilled workers. Therefore, it is important to establish a robust Information and Communication Technology (ICT) infrastructure for uninterrupted broadband connection in Bangladesh. Fiscal incentives to promote the business’s efforts for the placements of IT professionals are also required. This will help to promote technologically skilled people who can be resourceful to the current Japanese investors. These incentives may include double tax reduction on the expenses of achieving IT competency such as training, skills certification, and internship scholarships for students. It is also critical to simplify the process of repatriation of dividend remittance. This will enable current investors to transfer the dividends collected to their parent company, encouraging further foreign investments and business ventures in Bangladesh. Bangladesh should also make an effort to create a favourable environment for investors by ensuring a simpler process for working capital loans at low interest rates from domestic lenders, while also making it easier for enterprises to get international loan approvals. Finally, Bangladesh should encourage green investments in order to mirror the growing international demand and to also reduce the adverse impacts of climate change (BIDA, 2022).

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Mitigating these investment barriers will create an amicable environment which will attract more Japanese investors to Bangladesh.

Japan’s Support to Bangladesh During the Fourth Industrial Revolution In consideration of the 4IR, it is critical for countries like Bangladesh to move away from low-cost labour as their major source of competitiveness and instead focus on infrastructure, transportation, research and development, and technology to remain competitive in a changing global business environment. As a result, it is critical to improve industrial and production management so that efficiency may be significantly boosted. Japan embarked on its industrialisation journey once its administration changed from military to a more peace-oriented regime, and when it decided to adopt imported technologies. However, because there was a short supply of foreign currency in Japan, the government imposed restrictions on foreign technologies and thus business enterprises had to submit a proposal describing their capacity and sales before importing the necessary technologies. This created an environment of intense competition among domestic firms in Japan, while also providing protection to domestic firms from foreign companies. This also allowed Japanese companies to further assimilate and improve the foreign technology that was present in the country. Japan implemented several policies to further stimulate technological development among which, investment in Research and Development (R&D) and liberal tax repayments for companies that invest in R&D proved to be pivotal. National R&D programmes taken under the Ministry of International Trade and Industry were structured to enhance the competitive nature of industries in Japan by initiating state projects in prominent technological disciplines where the investment risks were too large for private companies (Oshima, 1969). Bangladesh also needs to invest more on R&D and revise its guidelines for allocating resources in disciplines of science and technology to facilitate greater innovations in technology in this time of the 4IR. However, government intervention should be limited, as industries understand the market the best and are able to decipher the suitable areas for R&D investments. The role of the government should be to try and create an atmosphere where these industries will thrive and utilise their resources efficiently (Duckworth, 1969).

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Bangladesh may also adopt a similar notion and ideology as Japan and work towards reforming its institutions in order to develop the aptitude to innovate and create the skills and knowledge needed to leapfrog towards a technologically adept economy. However, the Japanese way to technological advancement may not work for Bangladesh. Rather than focusing on the need to acquire technological tools, it is important for Bangladesh to emphasise on the exchange of knowledge from Japan. This may include learning the various ways of cultivation of fish or the use of high-yielding seeds for crop production. The technological gap between Japan and Bangladesh is colossal. Japanese industrialisation is structured in a manner that tech-savvy industries exist in agglomeration, and numerous small and medium enterprises (SME) that are less technologically inclined co-exist around them. Therefore, companies in Bangladesh could instead focus on developing ways in which they could supply to these SMEs in Japan. In order to facilitate technological progress, Bangladesh first has to make itself capable and then reach the next level of innovation. Japan is taking in IT professionals from Bangladesh, but on a small scale. If these experts return to Bangladesh, then they may disseminate their knowledge in the local market. Japan’s policy mandates that working individuals in Japan must eventually return to their own country. This has enabled these individuals to be trained and later put their capabilities to use in successful development projects in Bangladesh. Japan has invited individuals, trained them, transferred knowledge to them, gave them the opportunity to gain experience by working in Japanese companies, and then sent them back home at the end of their term. Having strong skills that meet Japanese standards are very important. Therefore, Bangladesh can also facilitate Japanese-certified online training programmes and various courses to further refine the skills of Bangladeshi professionals in the labour market. In terms of the 4IR, the special economic zone will potentially invite many Japanese investors and experts to Bangladesh. These Japanese experts can help train domestic employees in relevant sectors of Bangladesh and enable them to acquire a standard of certification accredited by Japan. Japanese ODA-facilitated projects in Bangladesh will further increase the technological transfer from Japan to Bangladesh. Bangladeshi workers are involved in these Japanese projects, but only up to a certain level. In the more professional levels where advanced technical skill sets are required, workers comprise mostly of Japanese managers and supervisors. It is important for Bangladeshi workers to acquire sufficient knowledge and skills to be able to work with Japanese experts.

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There are a lot of software and technology-based companies in Bangladesh, but the employees do not have sufficient amount of knowledge. Japanese companies prefer to work with local workers; however, local workers may not have the knowledge and competency to understand the complexities of the technology brought by Japan. This is why technological transfer often fails. Increasing the skill of human resources, improving education, enhancing digital literacy, and investing in research and development are important for Bangladesh in order to mitigate the challenges present in this age of the 4IR. A different way to approach technological progress is to adapt the existing technology of an economy and make improvements or necessary adjustments required for growth and development. Technology adaptation refers to technologies being adjusted or improved in accordance with the existing resources available in an economy, while technology adoption indicates acquiring a new kind of technology entirely (Mencher, 1969). In such cases, the scope for reconstructing existing technology becomes greater than innovating newer technology. With technological development, it is unlikely that all sectors in an economy will be able to attain the same level of achievements in technology. Some sectors will progress more than the others, while some sectors may even deteriorate in terms of being unable to bear the high maintenance cost and investments that are required to improve the existing tools and machines. In such cases, it may be wiser to concentrate the factors that are productive to higher or relatively more capable sectors. This will not only enable the development of existing technology but will also disseminate the benefits to the relatively low productive sectors enabling overall economic growth (Peccei, 1969). Bangladesh might not yet be proficient enough to adopt all kinds of Japanese technology or innovate any new technology at this stage of development. However, Bangladesh does retain the potential to adapt to or assimilate the technological and managerial systems of Japanese technologies and business management schemes on a basic to intermediate level, in conjunction with existing competencies and resources, to make human capital more capable and business management more efficient. Technological improvement in one industry will cause a ripple effect influencing the technology used in other industries as well as facilitating Bangladesh in the 4IR. Innovations that take place in one industry have the tendency to be conducive to other newer industries that were unable to invest as much in research and development. Innovation especially takes place when there is an opportunity for a new scientific idea to materialise,

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along with the availability of competent individuals who can take advantage of that opportunity. Organisations should also strive to relate science and technology to the marketplace to effectively use the ideas generated. Organisations devoted to R&D should be centred around individuals and should also adhere to an organised system. This will provide researchers and developers with the freedom to create and innovate within or between their fields of knowledge. A structured system will enable the constant flow of motivation and encouragement, influencing novel ideation especially when existing products become outdated in the market. Geography also plays a key role in enabling innovations in technology. Geographical proximity to key professionals in universities dedicated to science and technology may be pivotal for young engineers and developers in generating successful research and inventions. The development of regions catered to R&D in areas closer to universities allow experts and technicians to consolidate their research with their peers and gain outside expert knowledge with regards to their current projects (Goldman, 1969). For Bangladesh the most important aspect is to avoid the middle-­ income trap which can be done through technological progress. Therefore, quality education, stable electricity supply, along with a stable Information and Communication Technology (ICT) infrastructure is essential to support the technological development in Bangladesh during the 4IR.

Lessons from the Japanese Education System for Bangladesh The most prominent reform during the Meiji Restoration was the amendment that made education obligatory. In 1871, a new mandatory education system was implemented in Japan, fostering a culture of scientific investigation and rigorous research. In order to progress towards technological development, Bangladesh needs to adopt a similar notion and exploit the opportunities presented by science to develop human competency (Alam M. J., 2016). During the Meiji restoration a comprehensive public school programme was gradually introduced, beginning with elementary school, and progressing through national colleges. Japan recruited international experts, while Japanese intellectuals studied Western sciences and languages, allowing the country to transition from an agricultural to a technologically adept industrialised economy.

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From the beginning of the Meiji Restoration, Japan has emphasised greatly on education and has invested substantially to make quality education available for everyone. Similarly, Bangladesh has also provided much importance in the education sector of the economy. The Government of Bangladesh introduced a female stipend programme in 1982 to increase the enrolment of female students (Raynor & Wesson, 2006). Furthermore, the country made primary education for children between 6 and 11 years of age compulsory as per the Compulsory Education Act 1990 allowing a large number of students to receive education (Islam & Fardosh, 2013). In view of the 4IR, Bangladesh may now take a step further and perhaps introduce a female stipend programme for tertiary education as well. The female stipend programme for tertiary education may be structured around three conditions, similar to the conditions stipulated for female stipend programme for secondary education, making them eligible for a small cash transfer. This may include maintaining a 75 per cent classroom attendance, obtaining a minimum Cumulative Grade Point Average (CGPA) of 3.00, and remaining unmarried till the completion of their undergraduate degree. Japan has the most educated population in the world with a 100 per cent enrolment rate in primary education. The current educational system in Japan was reformed after the Second World War, which mandates six years of elementary school, three years of junior high school, three years of senior high school, and four years of university. In comparison, in Bangladesh, the system dictates five years of primary education, five years of secondary education, two years of higher secondary, and four years of university. The primary education in Japan emphasises on acquiring knowledge, academic growth, or occupational skills while Bangladesh focuses on eradicating illiteracy (Alam C. M., 2011). During the Meiji period, Japan provided scholarship opportunities for all grades, which increased the importance of education at elementary level. Consequently, almost all children were enrolled in schools by the end of the period. However, in Bangladesh, scholarships are awarded only after grade five which may be an inadequate incentive for children to be enrolled in primary education if they have to wait at least five years to have the opportunity for a waiver. Compulsory education for Japan means the provision of books and a waived tuition fee for the first six years of elementary and an additional three years of junior high school. However, in Bangladesh, compulsory education is only applicable for the first five years of primary education. The classrooms for Japanese schools are more

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diverse and engaging as opposed to the ones in Bangladesh. In Japanese primary education, students are asked to perform group activities, and are provided with a sense of responsibility. In Bangladesh, students have regular classes and at the end of each year they have to sit for an annual examination in order to be promoted to the next grade. Bangladesh should reform the educational system to involve more group activities among students and include the development of vocational skills to diversify the educational curriculum catering to the Japanese style of academic classrooms (Alam C.  M., 2011). This will further facilitate the adoption of specialised education needed for a smooth transfer of technology from Japan to Bangladesh. Education is the first requirement for progressing in technology in Bangladesh. Japan has granted several extended scholarships to people from Bangladesh involved in medicine, infrastructure, and agriculture to provide them with higher education. Every year, Japan experiences an influx of overseas students enrolling in national and private academic institutions. Among the major universities accepting the greatest number of international applicants, University of Tokyo ranked first with 4,084 overseas students enrolled in 2021. The majority of the inbound students in Japan come from Asia, however, there are also students from Europe, Africa, and other regions as well who also take a keen interest in the modern Japanese education system. The Japanese government provides scholarships to students who pursue their higher education which includes graduate programmes, undergraduate programmes, professional training colleges, and university preparatory courses, with the addition of Japanese language courses. In 2021, the number of international students studying in Japanese universities was 242,444, among which 201,877 students were enrolled in higher education programmes. Most international students go to Japan to pursue higher education in social science, followed by engineering and humanities. However, in 2021, Bangladesh accounted for only 1.3 per cent of the overall international student body in Japan, while Chinese students made up 46.6 per cent of the overall foreign student population in the same year (JASSO, 2022). In 1954, the government of Japan introduced the Ministry of Education, Culture, Sports, Science, and Technology (MEXT) Scholarship Program, also known as the Monbukagakusho scholarship under the Ministry of Education. The MEXT scholarship provides funds to students in seven different disciplines. These include research, undergraduate programmes, associate degree or diploma, specialised training of

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college students, Japanese studies, and Young Leader’s Programme (YLP) (Chowdhury et  al., 2022). The MEXT scholarship is a favoured programme in Bangladesh. However, Japan provides other scholarship programmes to Bangladesh as well, some of which include United Nations-The Nippon Foundation Fellowship, Master’s programme in the University of Tsukuba, Japan, and the Japanese Grant Aid for Human Resource Development Scholarship (JDS). The project for human resource development scholarship by Japanese grant aid or JDS aims to assist nations receiving Japanese foreign aid to improve human capital of the recipient country. The JDS programme was launched in Bangladesh in 2001, with 458 fellows benefitting from it (JDS, n.d.). The JDS programme is designed particularly for government officials to be equipped with the capability to effectively implement sound economic policies which will lead to the socio-economic development of a country. JDS fellows from Japan are expected to participate in strengthening the economic development of Bangladesh and the bilateral relationship with Japan (MoFA, 2022). In 2020, Japan provided JPY 446 million as a foreign aid grant to provide funding for Bangladeshi applicants under the JDS scholarship (Economic Relations Division, 2021). JICA also funds an exclusive training programme for young IT enthusiasts interested in ICT engineering. This programme is called the Bangladesh-Japan ICT Engineers’ Training (B-JET) Programme which was initiated in 2017 and is in coalition with Bangladesh Computer Council (BCC). This programme is coherent with the ideology of the technical cooperation which forms a part of the foreign aid provided by JICA to recipient countries. This programme is aimed to create competent and adept Bangladeshi ICT engineers, providing them with qualifications such as fluency in Japanese language, IT skills, and the Japanese way of doing business, and to receive the opportunity to be employed by a Japanese enterprise. The programme accepts applications twice a year, and up until its eighth term a total 280 students were enrolled in this programme, among which 265 candidates completed the three-month-­long training programme and later 186 applicants among them were able to get employed in Japanese firms. In 2021, a new memorandum of understanding (MoU) was signed between Miyazaki University, North South University, and Bangladesh Computer Council with the agenda of restructuring the programme towards a more private business framework. In Japan, there is a significant scarcity of IT personnel. Bangladesh, on the other hand, has a large pool of IT talent, but very little employment

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prospects. This initiative was created and launched in response to the needs between Japan and Bangladesh. B-JET is also known as the ‘Miyazaki-­Bangladesh Model’ since it was developed via collaboration between business, academia, and government with Miyazaki authorities (JICA, n.d.). To better comprehend the benefits of these scholarship programmes provided by Japan and to understand the nuances in the educational curricula at higher education level between Japan and Bangladesh, interviews with 20 Japanese university alumni living in Bangladesh were conducted as part of this study. Japanese academic and research fundings are highly sought after, which is manifested by the high demand for Japanese scholarships in Bangladesh. The interviews made it apparent that people are inspired to pursue their higher education in Japan because of the country’s technological advancement, highly trained lecturers, and practical lab facilities. The Japanese educational system is organised and upholds a rigorous curriculum with supportive classmates and motivating teachers. Japan conducts extensive and prominent research in the field of agriculture, pharmaceuticals, science, and technology in conjunction with a substantial funding provided by the Japanese government. All these characteristics of the Japanese education system were contributing factors for scholars and academics from Bangladesh to acquire a degree from Japan. Additionally, studying in Japan allows better career opportunities enabling individuals with the privilege to work for reputable Japanese companies, such as Toyota Motors and Panasonic. Bangladeshi scholars who participated in the interview received either a postgraduate or master’s degree, PhD, or a postdoctoral fellowship from various universities in Japan such as Ehime University, University of Tokyo, Undergraduate School of Gifu, and Tokyo Institute of Technology, to name a few. It is reasonable to say that people from Bangladesh prefer research-­ based Japanese degrees like a master’s or PhD over a bachelor’s degree in fields that fall largely under the category of science, engineering, and technology, followed by business management, and economics. Among the ones interviewed, most of them were the applicants of the MEXT or Monbukagakusho scholarship programme which is funded by the Ministry of Education in Japan through recommendations from either Japanese Embassies or universities. Others either applied through the JDS programme provided by JICA, the Japan Society for the Promotion of Science (JSPS) postdoctoral fellowship, Shizuka University Fellowship or through the Meiji University Research Fellowship which is provided to the faculty

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members of Asia University of Bangladesh. However, these scholarships are very difficult and competitive to attain. According to the interviews, only a small number of Bangladeshi candidates are chosen, and the total number of students from Bangladesh in general does not surpass 100. Furthermore, the number of students who are eligible to be selected varies depending on the type of funding received. For instance, the number of Bangladeshi government personnel chosen for the JDS scholarship may be as low as 20, whereas the number of students approved each year for the MEXT scholarship programme is determined by the Japanese government which also fluctuates each year. The biggest limitation for a PhD funding, however, is the age cap which is usually limited to 30–35 years. After returning to Bangladesh, most of the scholars resumed to their previous employment as they were on study leave and later received a promotion. But despite receiving a degree from Japan, these scholars did not notice any difference in their remuneration scale in comparison to their colleagues who have completed their higher education from Bangladesh. The ones who experienced a discernible increase in their income were perhaps recognised not for their Japanese degree but rather for the continuous research habits which they were able to cultivate while studying abroad in Japan. Regardless, a Japanese degree holds significant value as the education system in Japan is reputable for their dedication, modern teaching methods and technology, and research-based programmes. According to the interviews undertaken, it was observed that there are substantial differences between the education system of Bangladesh and Japan. While in Bangladesh the higher education system is inclined more towards an exam-oriented programme, Japan follows a more outcome-­ based education system which is structured in a more practical way to facilitate a knowledge-based society. In Japan, professors contribute greatly to public research and receive a large amount of funding. Higher education in Japan is consistent with in-depth analysis with the addition of critical thinking playing a significant role. Unlike Bangladesh, research is given great importance in Japan which is strengthened by the colossal investments made in research by the Government of Japan. Furthermore, the teacher-to-student ratio in Japan is strictly maintained and the classrooms are clean and modern. Students in Japan hardly have course-based materials and spend most of their time in research. However, in Bangladesh, higher education is usually based on memorising theoretical concepts over practical research, especially in the graduate level.

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Japanese government scholarship holders have aided in the development of many projects in Bangladesh. They have encouraged innovative tools and techniques in production and design. Many of these innovations were perhaps developed in Japan but later implemented successfully in Bangladesh. This is important because in order to foster technology transfer, the most important factor is to enhance the knowledge and capability to better support that transfer of new technology. However, Bangladesh still requires capable human resources to facilitate the technological transfers that the Japanese companies are bringing with them. Human resource development is essential because technology transfer needs highly trained labour to be able to utilise the new technology. As a result, upgrading the country’s present educational infrastructure, with a concentration on secondary and higher education, is critical (pwc, 2021). Methods to Improve the Education System of Bangladesh to Facilitate the Fourth Industrial Revolution The population of Bangladesh is very much divided digitally, necessitating the role of education in technological advancement to be diverse as well. To foster technological innovation, it is important to make individuals capable of exploiting the opportunities presented by science and technology and educate the engineers in order to provide them with special qualifications. Therefore, Bangladesh needs to emphasise on providing education based on Science, Technology, Engineering, and Mathematics (STEM) to progressively assimilate the transfer of knowledge from Japan. The government should employ specific budget for the training of specific sectors, apart from investing in primary and secondary education, and encourage individuals to gain technological competency to broaden the accumulation of knowledge. Perhaps joint research between different universities in interdisciplinary fields from Bangladesh and Japan or collaborations between enterprises and academia from both countries will enable scientific research and lead to institutional growth in Bangladesh. Bangladesh also needs to improve its education system, adopt new teaching methods, and utilise appropriate technology to better deliver academic lectures. Moreover, Bangladesh needs to build a strong foundation with regards to primary education by constructing better infrastructure, providing resources and facilities, instilling moral lessons within the

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classrooms, and practicing cleanliness and hygiene like Japan. Primary and secondary schools in Bangladesh should introduce extra-curricular activities, interactive learning, and group work rather than being limited within the bindings of textbooks. Additionally, Bangladesh needs to value quality research by introducing knowledge-based research or field-oriented research, which is based on outcomes, rather than being anchored on prescribed course materials. The government needs to provide greater funding for collaborative research that will foster knowledge and innovation in society. Placing more emphasis on research also postulates improving ethical standards, quality of supervisors, work culture, and discipline among the academics in institutes dedicated to providing higher education. Education and training should also be provided to problem identifiers or analysts. These individuals specialise in interdisciplinary fields such as biomedical engineering, robotics, nanotechnology, quantum science and technology, and other technical disciplines. Providing these individuals with special training, at least on an intermediate level, will allow them to identify problems in multiple fields and also find suitable solutions for them (Wolff, 1969). Japan is a pioneer in hardware and robotics, quantum science, and nanotechnology. Japan has been transforming the entire system of production, management, and governance in its companies while connecting the mass population through mobile devices with unprecedented processing power, storage capacity, and access to knowledge. The next stage of the 4IR will constitute of Internet of Things (IoT), Artificial Intelligence (AI), robotics, and 3D printing. Therefore, Japan may help mediate the interdisciplinary knowledge to further train and educate individuals enabling them to identify the problems and associated solutions while developing any new innovation. The next cohort of people that should receive training and education are technical personnel allowing them to be well-versed in installation and maintenance of modern equipment. Lastly it is important to create an atmosphere where technological adoption is not opposed, but is welcomed with a friendly demeanour. For instance, individuals working in the service sector may feel threatened by technologies as it increases the likelihood of labour displacement. However, it should be emphasised that technologies are merely tools that exist to increase productivity, and that individuals are just as capable of working and completing their tasks even if the tools and machines used fail to work properly (Wolff, 1969).

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Complementarity Between Bangladesh and Japan as the Basis for the Partnership in the Next Development Journey A common saying in Bangladesh is that eating fish and rice makes you Bengali. Yet, the people of Japan coincidentally also have an appetite for fish and rice. Although it may seem that Bangladesh and Japan are completely different countries, the exposition in the preceding chapters has hinted at several important similarities between the two nations. Beyond the obvious resemblance of the design of their national flags, Bangladesh and Japan are also countries which are largely culturally homogeneous. Both nations have, in their own ways, managed to emerge as strong economies despite having natural resource constraints. Bangladesh and Japan are also common in their firm commitment towards upholding peace. Bangladesh’s location near the edge of the Indian plate of the Earth’s crust makes it prone to earthquakes, while its topography as a low-lying delta makes it vulnerable to floods and cyclones. Japan is also at a constant elevated risk of natural disasters due its location in the Pacific Ring of Fire, which makes it highly susceptible to earthquakes, volcanic eruptions, and tsunamis. Thus, it is no coincidence that Japan has developed some of the world’s most advanced technologies for monitoring the seismic activity of the Earth and for designing earthquake-proof buildings. As urbanisation is picking up pace all over Bangladesh, it is essential to ensure that buildings in burgeoning cities are designed and built appropriately so that they may be able to survive any unforeseen earthquakes in the future. In this regard, Japan’s knowledge and experience would be greatly beneficial for Bangladesh and would likely have the potential to save thousands of innocent lives in the event of an earthquake. Apart from the aforementioned areas, there exists substantial complementarity between Bangladesh and Japan in at least four aspects: (i) demography, (ii) investment, (iii) trade, and (iv) technology (Fig. 6.1). As mentioned earlier, nearly half of the population of Japan is above the age of 50 years, whereas nearly half of the population of Bangladesh is below the age of 25 years. As a result, there is strong demographic complementarity between Bangladesh and Japan which may be utilised by sending nurses and caregivers from Bangladesh to aid the elderly in Japan. Bangladesh provides an ideal platform for Japanese businesses which are looking to expand their international operations through diversifying their production bases and exploring new markets. Bangladesh’s large

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Bangladesh

50 Years of Friendship

Youth in need of jobs

Demography

Elderly in need of care

Ageing

Workforce

Labour intensive

Platform

Comparative advantage in labour intensive goods

Platform for accessing large domestic and regional markets

Investment

Trade

Companies looking to expand business

Comparative advantage in capital intensive goods

Investors

Capital intensive

Large young workforce in need of good technical skills

Technology

Legacy of world leading technical innovation

Win-Win Partnership for the Future

Young

Knowledge

Japan Fig. 6.1  Complementarity between Bangladesh and Japan. (Source: Authors’ illustration based on overall findings and analysis of the present study)

domestic market, close proximity to even larger markets in the South Asian and Southeast Asian regions, as well as friendly relations with the countries of the Middle East, make it an ideal investment spot for Japanese companies. As discussed earlier, Japanese FDI in Bangladesh will be beneficial for both countries, as Japan will be able to enter into new markets and Bangladesh will be able to generate employment and get access to new technology. Hence, there is a strong investment complementarity between Bangladesh and Japan which may be utilised if Japanese companies fully capitalise on the platform for investment offered by Bangladesh. As is well known, Bangladesh is a labour-abundant country which specialises in the production and export of labour-intensive goods, whereas Japan is a capital-abundant country which specialises in the production and export of capital-intensive goods. Therefore, there is strong trade complementarity between Bangladesh and Japan which may be utilised if both countries take advantage of the enormous untapped export potential in each other’s markets. As mentioned in some of the preceding chapters, Japan is one of the most technologically advanced countries of the world. On the other hand, Bangladesh is far behind Japan in terms of technological advancement and is currently in urgent need of empowering a vast pool of young workers

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with appropriate technical skills. Thus, there is a strong technological complementarity between Bangladesh and Japan which may be utilised by increasing the sharing of knowledge between the two countries.

References Alam, C. M. (2011, December 30). Environmental Education in Bangladesh and Japan: A Comparative Assessment. The Journal of Nagasaki University of Foreign Studies, 143–164. Retrieved March 7, 2022, from http://id.nii. ac.jp/1165/00000123/ Alam, M. J. (2016). Japan’s Transformation from the Meiji Era to Modern Age: A Politico-Economic Overview. Social Science Review, 33(1), 127–143. Retrieved March 15, 2022, from https://scholar.google.com/citations?view_op=view_ citation&hl=en&user=2lYPMvEAAAAJ&citation_for_view=2lYPMvEAAAAJ: Tyk-­4Ss8FVUC Alam, M. J. (2022). Japanese Trade and Investment in Bangladesh: Opportunities and Challenges. In M.  J. Alam (Ed.), Bangladesh-Japan Diplomatic Relations 1972–2022: A New Paradigm of Strategic Partnership (pp. 57–72). Retrieved December 26, 2022, from https://www.researchgate.net/publication/363011386_Bangladesh-­Japan_Diplomatic_Relations_1972-­2022_A_ New_Paradigm_of_Strategic_Partnership Akon, S., Rahman, M., & Bhuiyan, A. N. (2020). Japan’s Economic Cooperation with Bangladesh: An Appraisal. Social Science Review, 36(2). Retrieved June 7, 2023, from https://www.researchgate.net/publication/342347181_Japan’s_ Economic_Cooperation_with_Bangladesh_An_Appraisal BIDA. (2022). Post-COVID Investment Promotion Strategy for Bangladesh. Bangladesh Investment Development Authority. Brunet, A. P., & New, S. (2003). Kaizen in Japan: An Empirical Study. International Journal of Operations and Production Management, 23(12), 1426–1446. Retrieved February 26, 2022, from https://www.emerald.com/insight/content/doi/10.1108/01443570310506704/full/html Chowdhury, S.  R., Goktas, V., & Mahmud, A.  A. (2022). Internalization of Higher Education Policy in Japan: The Role of International Student Mobility. Journal of Higher Education Theory and Practise, 22(4). Retrieved June 20, 2022, from https://www.researchgate. ne t/p r ofile /S a e yd -­Ra sh ed -­C h o w d u r y / publ i c a ti on/ 360463684_ Internationalization_of_Higher_Education_Policy_in_Japan_The_Role_ of_International_Student_Mobility/links/6278cd7ab1ad9f66c8ad1289/ Internationalization-­of-­Higher-­Education-­Po Duckworth, J. (1969). The Role of Government. In Technological Innovation and the Economy (pp. 111–117). Wiley-Interscience.

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Economic Relations Division. (2021). Flow of External Resources into Bangladesh. Ministry of Finance. Retrieved February 6, 2022, from https://erd.portal.gov. b d / s i t e / p a g e / 7 f 1 9 2 f 9 6 -­1 4 4 2 -­4 8 b 4 -­a 9 4 7 -­2 e 0 9 c e 3 0 e c 5 4 / Flow-­of-­External-­Resources-­2020-­21-­(Golden-­Jubilee-­Special-­Edition) Goldman, J. (1969). Setting the Scene One: the United States. In M. Goldsmith (Ed.), Technological Innovation and the Economy (pp.  11–16). Wiley-Interscience. Goode, W. (2005). Negotiating Free-trade Agreements: A Guide. Department of Foreign Affairs and Trade. Canberra: APEC. Retrieved March 15, 2022, from https://www.apec.org/docs/default-­s ource/publications/2005/12/ negotiating-­free-­trade-­agreements-­a-­guide-­2005/2005_negotiating_free_ trade_agreement_a_guide.pdf?sfvrsn=f1e1cc6b_1 Islam, M.  S., & Fardosh, J. (2013). Primary Education in Bangladesh: Policy Transfer, External Influence and National Ownership. BRAC Institute of Governance and Development. Retrieved March 7, 2022, from http://dspace. bracu.ac.bd/xmlui/handle/10361/10996 JASSO. (2022). Result of International Student Survey in Japan, 2021. Japan Student Service Organization. Retrieved June 20, 2022, from https://www. studyinjapan.go.jp/en/_mt/2022/03/date2021z_e.pdf JDS. (n.d.). JDS-Bangladesh. Retrieved June 20, 2022, from JDS: https://jds-­ scholarship.org/country/bangladesh/ JETRO & JBCCI. (2022). Survey Result on FTA/EPA between Japan and Bangladesh. Dhaka, Bangladesh: Japan Bangladesh Chamber of Commerce and Industry (JBCCI) and Japan External Trade Organization (JETRO). JICA. (n.d.). B-JET: Bangladesh IT Engineer Training Program for Japanese Market. Retrieved June 21, 2022, from JICA: https://www.jica.go.jp/bangladesh/bangland/b-­jet.html Light Castle Partner. (2020, July 9). Bangladesh Automotive Industry: A Roadmap to the Future. Retrieved March 3, 2022, from https://www.lightcastlebd.com/ i n s i g h t s / 2 0 2 0 / 0 7 / b a n g l a d e s h -­a u t o m o t i v e -­in d u s t r y -­a-­r o a d m a p ­to-­the-­future/ Mencher, A.  G. (1969). International Interchange of Innovative Initiative. In Technological Innovation and the Economy (pp. 221–231). Wiley-Interscience. MoFA. (2022, April 17). Scholarships. Retrieved June 20, 2022, from Ministry of Foreign Affairs: https://mofa.gov.bd/site/page/4d3e5b27-­0827-­435f-­ b31f-­47917510962b/Scholarships Montabon, F. (2005). Using Kaizen Events for Back Office Processes: The Recruitment of Frontline Supervisor Co-ops. Total Quality Management and Business Excellence, 16(10), 1139–1147. Retrieved February 26, 2022, from https://www.tandfonline.com/doi/abs/10.1080/14783360500235876 Oshima, K. (1969). Setting the Scene Three: Japan. In Technological Innovation and the Economy (pp. 33–41). Wiley-Interscience.

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Peccei, A. (1969). Setting the Scene Two: Italy. In Technological Innovation and the Economy (pp. 17–31). Wiley-Interscience. pwc. (2021). Final Report- Pre Feasibility Study for Proposed Economic Zone at Araihazar, Bangladesh. PricewaterhouseCoopers Private Limited. Retrieved March 10, 2022, from https://www.beza.gov.bd/wp-­content/ uploads/2021/05/Pre-­Feasibility-­Study-­Report-­of-­Araihazar.pdf Rahman, S. A. (2021, September 17). Deepening Japan–Bangladesh relations. Retrieved February 20, 2022, from East Asia Forum: https://www.eastas i a f o r u m . o r g / 2 0 2 1 / 0 9 / 1 7 / d e e p e n i n g -­j a p a n -­b a n g l a d e s h -­ relations/#:~:text=Immediately%20after%20Bangladesh%20gained%20 independence,a%20fruitful%20and%20trustworthy%20relationship Raynor, J., & Wesson, k. (2006). The Girl’s Stipend Program in Bangladesh. Journal of Education for International Development. Retrieved March 7, 2022, from https://www.researchgate.net/ publication/254438465_The_girls’_stipend_program_in_Bangladesh SASEC. (2021, November 23). Japanese Economic Zone in Bangladesh Set to Raise $1 Billion Investment. Retrieved June 23, 2022, from South Asia Subregional Economic Cooperation: https://www.sasec.asia/index. php?page=news&nid=1332&url=jap-­economic-­zone-­bangladesh Smadi, S. A. (2009). Kaizen Strategy and the Drive for Competitiveness: Challenges and Opportunities. Competitiveness Review: An International Business Journal, 19(3), 203–211. Retrieved February 16, 2022, from https://www.emerald. com/insight/content/doi/10.1108/10595420910962070/full/html Sorin-George, T., Paul, M., & Catalin, G. (1980). The Japanese Management, a Key Element of Toyota’s Success. Retrieved February 26, 2022, from https:// www.utgjiu.ro/revista/ec/pdf/2012-­02/30_toma-­marinescu-­gradinaru.pdf Takashi, U., & Noriyoshi, F. (2021, June 21). Implications of Bangladesh’s Graduation from Least Developed Countries Status on Japanese Companies. Journal of Contemporary Research in Social Sciences, 3, 28–39. https://doi. org/10.33094/26410249.2021.32.28.39 UNDESA. (2020, March 3). Ex ante Assessment of the Impacts of the Graduation of Bangladesh from the Category of Least Developed Countries (LDCs). Revised. Retrieved December 9, 2021, from United Nations Department for Economic and Social Affairs (UNDESA): https://www.un.org/development/desa/ dpad/wp-­content/uploads/sites/45/Bangladesh.pdf Wolff, H. S. (1969). The Role of Education System. In Technological Innovation and the Economy (pp. 121–128). Wiley-Interscience.

CHAPTER 7

Conclusions and Recommendations

Abstract  This chapter concludes the book with a summary of some of the key findings from the study and a set of suggestions for the way forward. The chapter initially highlights the important issues discussed previously throughout the book and draws attention to the critical areas for improvements for Bangladesh which include better technology adaptation and adoption to facilitate Japanese investments, as well as improvement of trade and financial integration. Lastly, the chapter concludes with some policy recommendations in order to improve trade between Bangladesh and Japan, facilitate more foreign direct investment (FDI) from Japan, support the advent of the Fourth Industrial Revolution (4IR), and the development of the Japanese Economic Zone (JEZ). Keywords  Bangladesh • Japan • Trade • Aid • Investment • Technology

Conclusions The Bangladesh-Japan friendship has been a mutually beneficial and a win-­ win partnership over the past five decades. Bangladesh will need to diversify its economy, improve the skills of its workers, and enhance the efficiency of its production after graduating from the LDC status. To be more efficient and competitive, Bangladesh will need to accelerate © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 F. Khatun et al., Bangladesh-Japan Partnership, https://doi.org/10.1007/978-981-99-2568-1_7

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technology adaptation and adoption. Japan can partner with Bangladesh in its smooth transition beyond LDC graduation by increasing investment in technology, physical and soft infrastructure, and improving trade and financial integration. It is anticipated that Japan will continue to be an important and strategic partner for Bangladesh in its next development journey during the 4IR and beyond LDC graduation. The findings from this study show that Bangladesh has significant untapped potential for export of many products to Japan, such as knit-­ wear, RMG and textile items, shrimps, and frozen items. Japan also has untapped potential for export of many products to Bangladesh, including diesel-powered trucks, compression-ignition internal engine, iron and steel, and other machinery items. Japanese FDI in Bangladesh has the potential to become a vehicle for technology transfer. The JEZ has good prospects of employment generation in Bangladesh. Japan’s knowledge and skills, as one of the world’s most technologically sophisticated countries, may be valuable in laying out a roadmap for Bangladesh so that it may successfully harness technology to accomplish its development goals during the 4IR. The 50 years of friendship between Bangladesh and Japan may be taken forward as a win-win partnership in the next development journey by focusing on the strong demographic, investment, trade, and technological complementarities that exist between the two countries.

Recommendations In light of the findings of this study, it is important for policymakers, private sector representatives, and other relevant stakeholders from Bangladesh and Japan to work in collaboration to enhance trade and investment from Japan in Bangladesh. As previously discussed, Bangladesh needs to maintain Japanese standards in order to facilitate a greater volume of exports to Japan. Manufacturers from Bangladesh should strive to meet Japanese standards since there is a substantial opportunity for increasing Bangladesh’s exports to Japan. In consideration of the economic slowdown due to the COVID-19 pandemic, Bangladesh may contemplate negotiating for a three-year smooth transition period from 2026 to 2029, during which Japan will continue to offer LDC-specific support measures to Bangladesh. Bangladesh should also conduct trade talks with Japan and expeditiously sign a bilateral FTA in order to ensure that the trading relationship

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between the two countries is strengthened further. Furthermore, to improve the trade in services, besides FTA, a more comprehensive EPA, which covers human resource exchange, investment regulations, and intellectual property rights, may be considered. It is important for Bangladesh to create a business environment which is amicable for Japanese investors. Therefore, the time and cost of doing business in Bangladesh should be reduced by decreasing the amount of paperwork needed and using the internet and mobile financial services to complete most of the formalities required for starting a business. Furthermore, in order to facilitate FDI inflows from Japan, it is necessary to ensure clear incentives, a conducive investment environment, and completely transparent and streamlined procedures for exports and imports. Additionally, an adequate number of officials should be employed in customs for handling freight, and customs authorisation should be digitised. Moreover, to ensure uninterrupted broadband internet connectivity, it is imperative to reinforce the information and communication technology (ICT) infrastructure. Lastly, the process of repatriation of dividend remittance also needs to be simplified. Currently, the proposed Japanese Economic Zone (JEZ) is situated on a riverbank island with no road access. Therefore, constructing a bridge that connects to the mainland will facilitate the smooth circulation of people and materials. Also, the Dhaka-Chittagong highway does not have enough lanes to accommodate the expected increase in freight and passenger traffic on the route in the future. Thus, greater capacity will be needed to facilitate future traffic. Due to the expected increase in traffic in the Chittagong port, it is important to expand the capacity of rail-dependent supply chains between Dhaka and Chittagong to accommodate at least 12,000 wagons every day. This will decrease the time taken for the delivery of goods and materials and reduce the cost of logistics as well. Additionally, freight-forwarding facilities should be mechanised as it will reduce the shipment time for finished goods and raw materials. Furthermore, the development of a jetty will also allow efficient movement of materials to the JEZ. In consideration of the 4IR, it is critical for Bangladesh to move away from low-cost labour and focus on research and development (R&D) to remain competitive in the changing global market. Moreover, it is important to build knowledge capacity to ensure the adaptation of advanced technology introduced in Bangladesh through Japanese investments. Therefore, Bangladesh should reform its educational system by including

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the development of vocational skills which will further facilitate the adoption of specialised education needed for smooth transfer of technology. It is also important to integrate and upgrade the present educational infrastructure with a concentration on higher-education Science, Technology, Engineering, and Mathematics (STEM) subjects. Additionally, it is important to emphasise the exchange of knowledge through joint research between different universities from Bangladesh and Japan. Bangladesh may have the potential to adapt to or assimilate the technological and managerial systems of Japan on an intermediate level in accordance with the currently available resources and competencies. Bangladesh also needs to invest more in R&D and revise its guidelines for allocating resources in the disciplines of science and technology. Subsequently, it is crucial for Bangladesh to adopt more field-oriented research at the graduate level to better foster the adoption of knowledge and innovation in society.



Annex

Annex Table 1:  Non-Tariff Measures (NTM) imposed by Japan on Bangladesh and other countries Export related measures Regulation title, implementation date, and measure description Ordinance on the Conservation and Sustainable Use of Biological Diversity through Regulations on the Use of Living Modified Organisms (4/20/2007). An exporter of the living modified organisms to a country that is a party to the Cartagena Protocol on Biosafety shall notify the government authority of the importing country, according to the rules set in Article 8-1 of the Cartagena Protocol on Biosafety. Sanitary and Phytosanitary (SPS) Regulation title, implementation date, and measure description

Harmonised system (HS) code and product description HS0301, HS07 Living modified organisms (HS codes of the affected products must be HS codes for 1. human cells, 2. cells or the like which either have an ability to differentiate or have differentiated, and do not grow to an individual in natural conditions, 3. viruses, and 4. viroids). The coverage is partial.

HS code and product description (continued)

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 F. Khatun et al., Bangladesh-Japan Partnership, https://doi.org/10.1007/978-981-99-2568-1

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Annex Table 1:  (continued) Plant Protection Law (6/13/2014) Article 7 Paragraph 1 of the Law stipulates that any person shall not import (i) plants that are sent from areas provided for in the list of the import prohibited plants of the Ministerial Ordinance for Enforcement of the Plant Protection Law (Ordinance of the Ministry of Agriculture, Forestry and Fisheries (MAFF) No. 73 of 1950); (ii) plants provided for (list of the plants subject to the growing site inspection in the exporting countries) of the Ministerial Ordinance, except those that have been cultivated in the region; (iii) Quarantine Pests that are (Quarantine Pest list) of the Ministerial Ordinance; (iv) soil or plants to which the soil is attached; and (v) containers or packages of goods listed in each of the foregoing items. Among (i)-(v), (i), (ii), and (v) correspond to geographical restrictions of imports; and (iii), (iv), and (v) correspond to prohibitions of imports regardless of the country of origin. Plant Protection Law (6/13/2014) Article 6 Paragraph 1 of the Law stipulates that imported plants and their containers or packages shall be accompanied by a Phytosanitary Certificate, or its copy, issued by a governmental organization of the exporting country. The Phytosanitary Certificate shall state things to the effect that it is confirmed or believed that any Quarantine Pest is not attached to the plants (or their containers/packages) as a result of inspection by the organization.

HS392310, HS392321, HS481910 Affected products: plants that are sent from areas provided for in Row 6 of Annexed Table 2 of the Ministerial Ordinance; containers or packages of goods listed in each of the foregoing items. * The latest version of the Annexed Table 2 is available online in English: http://www.pps.go.jp/english/law/ list2.html.

HS060220, HS0804, HS0904, HS0910, HS10,1207, HS46 Affected products: plants—containers or packages of the plants. Details of the affected products: plants are defined as those that belong to flowering plants, pteridophytes, or bryophytes (including their parts, seeds, fruits, and processed goods such as straw mat or straw bale or other similar products).

(continued)

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Annex Table 1:  (continued) Plant Protection Law (6/13/2014) Article 7 Paragraph 1 of the Law stipulates that any person shall not import (i) plants that are sent from areas provided for in the list of the import prohibited plants of the Ministerial Ordinance for Enforcement of the Plant Protection Law (Ordinance of the MAFF No. 73 of 1950); (ii) plants provided for in list of the plants subject to the growing site inspection in the exporting countries of the Ministerial Ordinance, except those that have been cultivated in the region listed in the table; (iii) Quarantine Pests that are listed in Quarantine Pest list of the Ministerial Ordinance; (iv) soil or plants to which the soil is attached; and (v) containers or packages of goods listed in each of the foregoing items. Plant Protection Law (6/13/2014) Article 7 Paragraph 1 of the Law stipulates that any person shall not import (i) plants that are sent from areas provided for in the list of the import prohibited plants of the Ministerial Ordinance for Enforcement of the Plant Protection Law (Ordinance of the MAFF No. 73 of 1950); (ii) plants provided for in the list of the plants subject to the growing site inspection in the exporting countries of the Ministerial Ordinance, except those that have been cultivated in the region listed in the table; (iii) Quarantine Pests that are listed in Quarantine Pest list of the Ministerial Ordinance; (iv) soil or plants to which the soil is attached; and (v) containers or packages of goods listed in each of the foregoing items. Among (i)-(v), (i), (ii), and (v) correspond to geographical restrictions of imports; and (iii), (iv), and (v) correspond to prohibitions of imports regardless of the country of origin.

HS060220, HS392310, HS392321, HS392329, HS481910 Affected products: plants that are sent from areas provided for in Row 17 of Annexed Table 2 of the Ministerial Ordinance; containers or packages of goods listed in each of the foregoing items.

HS080410, HS392310, HS392321, HS392329, HS481910 Affected products: plants that are sent from areas provided for in Row 2 of Annexed Table 2 of the Ministerial Ordinance; containers or packages of goods listed in each of the foregoing items.

(continued)

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Annex Table 1:  (continued) Ministerial Ordinance for Enforcement of the Plant Protection Law (6/15/2015) Phytosanitary certificate must be endorsed with the following additional declaration: this is to further certify that the plants were grown on a farm(s) where Radopholus similis has not been recorded, and these plants were inspected on the field during the growing season and the growing medium of the growing site(s) and the underground parts of the plants were examined by an appropriate method(s) and found to be free from Radopholus similis. Ministerial Ordinance for Enforcement of the Plant Protection Law (6/15/2015) Phytosanitary certificate must be endorsed with the following additional declaration: this is to further certify that the plants were grown on a farm(s) where Radopholus similis has not been recorded, and these plants were inspected on the field during the growing season and the growing medium of the growing site(s) and the underground parts of the plants were examined by an appropriate method(s) and found to be free from Radopholus similis.

HS091011299, HS091030210, HS121293, HS392310, HS39232, HS481910 Affected products: plants provided for in Row 5 of Annexed Table 1-2 of the Ministerial Ordinance, except those that have been cultivated in the region listed in the table; and containers or packages of goods listed in each of the foregoing items. However, affected products exclude the following: dried turmeric and eucommia, dried almonds, cashew nuts, coconut, pepper, pistachios, Persian walnuts, and macadamia nuts.

HS392310, HS392321, HS392329, HS392330, HS392390, HS4415, HS481910 Affected products: plants provided for in Row 5 of Annexed Table 1-2 of the Ministerial Ordinance, except those that have been cultivated in the region listed in the table; and containers or packages of goods listed in each of the foregoing items. However, affected products exclude the following: dried turmeric and eucommia, dried almonds, cashew nuts, coconut, pepper, pistachios, Persian walnuts, and macadamia nuts.

(continued)

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Annex Table 1:  (continued) Ministerial Ordinance for Enforcement of the Plant Protection Law (6/15/2015) Phytosanitary certificate must be endorsed with the following additional declaration: this is to further certify that the plants were grown on a farm(s) where Radopholus similis has not been recorded, and these plants were inspected on the field during the growing season and the growing medium of the growing site(s) and the underground parts of the plants were examined by an appropriate method(s) and found to be free from Radopholus similis. Plant Protection Law (6/13/2014) Article 6 Paragraph 1 of the Law stipulates that, to obtain the Phytosanitary Certificate, it should be confirmed that any Quarantine Pest is not present on the plants (or their containers/packages).

HS091011299, HS091030210, HS121293, HS392310, HS392321, HS481910 Affected products: plants provided for in Row 5 of Annexed Table 1-2 of the Ministerial Ordinance, except those that have been cultivated in the region listed in the table; and containers or packages of goods listed in each of the foregoing items. However, affected products exclude the following: dried turmeric and eucommia, dried almonds, cashew nuts, coconut, pepper, pistachios, Persian walnuts, and macadamia nuts.

HS060220, HS0804, HS0904, HS0910, HS10, HS1207, HS46 Affected products: plants—containers or packages of the plants. Details of the affected products: plants are defined as those that belong to flowering plants, pteridophytes, or bryophytes (including their parts, seeds, fruits, and processed goods such as straw mat or straw bale or other similar products). (continued)

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Annex Table 1:  (continued) Plant Protection Law (6/13/2014) Article 7 Paragraph 1 of the Law stipulates that any person shall not import (i) plants that are sent from areas provided for in the list of the import prohibited plants) of the Ministerial Ordinance for Enforcement of the Plant Protection Law (Ordinance of the MAFF No. 73 of 1950); (ii) plants provided for in list of the plants subject to the growing site inspection in the exporting countries of the Ministerial Ordinance, except those that have been cultivated in the region listed in the table; (iii) Quarantine Pests that are listed in Quarantine Pest list of the Ministerial Ordinance; (iv) Soil or plants to which the soil is attached; and (v) containers or packages of goods listed in each of the foregoing items. Among (i)-(v), (i), (ii), and (v) correspond to geographical restrictions of imports; and (iii), (iv), and (v) correspond to prohibitions of imports regardless of the country of origin. Technical barriers to trade Regulation title, implementation date, and measure description

HS060220, HS 071333, HS392310, HS392321, HS392329, HS481910 Affected products: plants that are sent from areas provided for in Row 4 of Annexed Table 2 of the Ministerial Ordinance; containers or packages of goods listed in each of the foregoing items.

Product description (continued)

 ANNEX 

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Annex Table 1:  (continued) Public Announcement on the Items of Goods Subject to Import Quotas, the Places of Origin or Places of Shipment of Goods Requiring Approval for Import, and Other Necessary Matters Concerning Import of Goods (1/22/2016) Article 52 of the Act stipulates that an importer may be obliged to receive import approval pursuant to the provision of Cabinet Order. Cabinet Order and Public Announcement on the Items of Goods Subject to Import Quotas, the Places of Origin or Places of Shipment of Goods Requiring Approval for Import, and Other Necessary Matters Concerning Import of Goods stipulate that the product under Appendix II and III of the CITES must receive ministerial confirmation.

HS030192 1. Under Appendix II of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), Fauna except whales and preparation of whales, as well as Oceanic whitetip shark, scalloped hammerhead, Great hammerhead, Smooth hammerhead, Basking shark, Great white shark, Porbeagle shark, Whale shark and Hippocampus, 2. Under Appendix III of the CITES, live Fauna

Source: Authors’ compilation based on data from United Nations Conference on Trade and Development (UNCTAD) Trade Analysis Information System (TRAINS) Database (TRAINS, 2021)

Reference TRAINS. (2021). TRAINS NTMs database. Retrieved January 20, 2022, from UNCTAD https://trainsonline.unctad.org/home

Index

A Agreement, 5, 8, 11, 12, 22, 28, 32, 33, 58, 80–83 Agricultural, 33, 66, 67, 72, 83, 92 Augmented reality, 64 Automated machines, 72 Automation, 3, 71, 72, 87 Automobiles, 8, 21, 47, 66, 67, 80, 82, 83 B Bangladesh, xii, xv, xvi, 107, 108 Bangladeshi products, 80, 84 Bilateral relationship, v, 28, 32, 38, 95 Bilateral trade, 5, 17, 19, 21, 80, 83 C Capital, vi, xiii, 12, 20, 22, 33, 37, 45, 47, 51, 58, 66, 73, 88, 91, 95 Comparative advantage, 8, 19, 20, 66, 70 Connectivity, 39, 40, 52, 74, 88, 107

Customs, 82, 85, 88, 107 Cybersecurity, 64, 73, 74 D Data-driven, 64 Deep seaport, 39, 85 Development assistance, 4, 28–40, 83–89 Digital, 64, 71–74, 91 Doing business, 5, 54–60, 86, 87, 95, 107 E Economic growth, 31, 32, 45, 67–69, 73, 91 Economic zone (EZ), 5, 52, 53, 90 Education, v, 2, 11, 31, 73, 91–99, 108 Employment, 11, 40, 46, 53, 68, 71, 73, 86, 95, 97, 101, 106 Export, v, 2, 3, 8–21, 28, 39, 46, 52, 54, 58, 66, 70, 80–82, 84, 87, 101, 106, 107

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 F. Khatun et al., Bangladesh-Japan Partnership, https://doi.org/10.1007/978-981-99-2568-1

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INDEX

F Female stipend programme, 93 Feudal system, 65 Foreign aid, 4, 28–32, 35, 47, 95 G Global supply chains, 84 Graduation, v, vi, 2–4, 8, 12, 22, 80–84, 106 Grants, 2, 28–30, 32, 35–37, 95 H Higher education, 94, 96–99, 108 I Import, 2, 8–19, 22, 33, 37, 47, 52, 54, 58, 66, 81, 82, 88 Industrial revolution, 63–64, 71, 72 Industry, 19, 39, 47, 49, 51–53, 63, 66, 69, 70, 72, 73, 80, 81, 84, 85, 89–91 Industry 4.0, 64, 65, 71, 72 Information and communication technology (ICT), xv, xvi, 31, 88, 92, 95, 107 Infrastructure, v, vi, 2, 4, 30–33, 39, 40, 51, 65, 66, 69, 83, 88, 89, 92, 94, 98, 106–108 Innovation, 3, 64, 66, 70, 89–92, 98, 99, 108 Investment, 4, 5, 22, 28, 32, 35, 39, 46–52, 65–69, 80, 83–85, 87–89, 91, 97, 100, 101, 106, 107 J Japan, xii, xiii, xv, xvi, 108 Japanese aid, 4, 5, 28, 29, 80 Japanese companies, 46, 51, 54, 67, 81, 82, 84–87, 89–91, 96, 98, 101

Japanese culture, 81, 86 Japanese degrees, 96, 97 Japanese Economic Miracle, 67, 69 Japanese Economic Zone (JEZ), 39, 51–54, 70, 80, 85, 106, 107 Japanese investment, vi, 4, 5, 32, 48–50, 80, 107 Japanese projects, 85, 90 Japanese scholarships, 96 Jetty, 54, 107 K Kaizen, 69, 86, 87 Knowledge, vi, 11, 12, 17, 20, 66, 68, 69, 73, 84, 85, 90–93, 98–100, 102, 106–108 L Language, 2, 11, 81, 87, 92, 94, 95 Loans, 2, 11, 28–30, 32–35, 37, 38, 40, 46, 69, 88 M Manufacturing, 2, 12, 20–22, 33, 47, 52, 65, 68–70, 72, 83 Market, vi, 2, 3, 8, 10, 12, 16, 17, 19, 21, 22, 28, 32, 47, 71–73, 80, 81, 83–85, 87, 89, 90, 92, 100, 101, 107 Matarbari, 34, 35, 39, 85 Meiji Restoration, 65, 67, 92, 93 Metro Rail, 31, 35, 39 P Primary caregivers, 9 Primary education, 93, 94, 98 Production technique, 86 Professionals, 9, 10, 12, 85, 86, 88, 90, 92, 94

 INDEX 

R Research and development (R&D), 20, 21, 89, 91, 92, 107, 108 S Scholarships, 88, 93–98 Sewing robots, 72, 73 Skills, vi, 3, 11, 12, 69, 73, 85, 88, 90, 91, 93–95, 102, 105, 106, 108 Society 5.0, 64, 65 T Tariff, 3, 21–24, 51, 58, 81 Technology, vi, 3, 4, 12, 20–22, 39, 45, 64–73, 80, 81, 84, 85, 89, 91, 92, 94, 96–101, 106–108

119

Textile, 2, 8, 12, 15, 17–21, 48, 51, 72, 81, 82, 84, 106 Three-dimensional (3D) printing, 64, 71, 72, 99 Toyota Production System (TPS), xvii, 69, 86, 87 Transportation, 11, 20, 33, 37, 40, 52, 54, 65, 89 U University, 11, 92–94, 96, 98, 108 V Vehicle, 12, 15, 35, 47, 49, 106 W Westernisation, 65, 66