Bangladesh Eyes Investment Gain as Japanese Firms Exit China

Japan incentivizing its companies to shift manufacturing facilities out of China and adding Bangladesh to a list of preferred destinations for relocating the factories may give the South Asian nation s economy a boost.

 As the pandemic started in China_ Japanese companies needed to diversify their supply chains further_ Naoki Ito_ the Japanese ambassador to Bangladesh_ said in an interview.  This will provide an opportunity for Bangladesh.

The island nation s nudge to relocate companies comes at a time when a Special Economic Zone is in the making in Bangladesh to lure Japanese firms production facilities. The industrial zone sprawling on 1_000 acres in the Araihazar subdistrict_ 32 kilometers away (about 20 miles) from the nation s capital Dhaka_ is expected to bring in $20 billion in Japanese investments_ according to the Bangladesh Economic Zones Authority.

Japanese manufacturers have already been seeking lower labor costs and supply-chain diversification by moving some output out of China for years as wages rose and infrastructure in countries like Vietnam and Bangladesh improved. Over the last 10 years_ the number of Japanese companies operating in Bangladesh has tripled to about 300_ according to Ito.

Japan has allocated $350 million in special loans to develop the $1 billion industrial zone_ Ito said_ making it the largest such assistance for an SEZ in Asia.

The Araihazar industrial park_ which will be operational by 2022_ is seeking to draw new investments from automakers_ such as Suzuki Motor Corp. and Mitsubishi Corp._ according to Ito. Japan Tobacco Inc. and Honda Motor Co. are among the largest Japanese investors in the South Asian nation so far.

Bangladesh occupies a geographically strategic location linking South Asia and Southeast Asia and a 177.77 billion-taka ($2 billion) deep-sea port on the Matarbari Island is part of Japan s geopolitical strategy. One of the world s most populous countries_ Bangladesh has 160 million people residing in a land area that s just about 40% of Japan.

The South Asian economy_ which grew an estimated 5.2% in the year ended June_ sees 7.4% expansion in the current financial year. While that s slower than the 8.2% pace it previously forecast_ it still puts the nation ahead of regional peers on the growth metric.

The country nestled between India and the Bay of Bengal sea is a destination with  good and strong prospects for Japanese companies_ Ito said.  The pace of recovery is faster in Bangladesh_ compared to the neighboring countries. -bloomberg