Japanese Firms Double Down on Bangladesh Despite Political Uncertainty

Japanese investment interest in Bangladesh remains exceptionally strong despite the political transitions that followed the July 2024 Uprising, according to the Japan External Trade Organization (JETRO).

“The perception that foreign investors are waiting for political clarity during the interim government period is not true. Japanese companies are actively expanding their business footprint and showing strong enthusiasm for Bangladesh,” said Kazuiki Kataoka, JETRO’s Country Representative, in an interview with Bangladesh Sangbad Sangstha (BSS).

JETRO, a Japanese government agency that promotes trade and investment worldwide, has recorded a sharp rise in business inquiries from Japanese firms interested in operating in Bangladesh. “The JETRO Dhaka office is now regarded as one of the busiest overseas offices within our organisation, reflecting the high level of corporate interest,” Kataoka noted.

Providing concrete examples, he cited the NICCA Chemical Co. Ltd., which is constructing a bonded warehouse at the Bangladesh Special Economic Zone (BSEZ) in Araihazar, operated by Sumitomo Corporation. Likewise, Lion Corporation, in collaboration with Bangladesh’s Kallol Group, is establishing a new factory to produce dishwashing soap and toothpaste for the local market.

Referring to JETRO’s 2024 post-uprising survey, Kataoka said that 57.7 percent of Japanese companies operating in Bangladesh expressed their intention to expand business activities, marking the second-highest expansion intention in the Asia–Pacific region and the third-highest globally, following India.

“This strong intention directly translates to increased investment in Bangladesh,” he explained, adding that while manufacturing for export remains a major focus, a growing number of Japanese companies are targeting Bangladesh’s expanding domestic market.

“More firms are considering building local factories to serve the consumption market and to offset high import tariffs,” Kataoka said.

However, he cautioned that while investment sentiment remains positive, companies are still struggling with persistent operational challenges, including corruption, especially at the customs level, and lengthy bureaucratic procedures.

“Obtaining work permits and security clearances still takes far too long — usually between three and six months,” Kataoka remarked. “This delay causes financial strain, as foreign professionals cannot open bank accounts or access funds before receiving permits.”

He acknowledged ongoing efforts to improve the process, such as the introduction of a digitalised security clearance system, under which applications are automatically approved if no objection is raised within 21 days.

Nonetheless, Kataoka stressed that policy consistency is essential to strengthen investor confidence. “While foreign investors should not engage in politics, political stability inevitably affects the business climate,” he observed.

He also mentioned that investors are watching Bangladesh’s upcoming national election closely. “Investors would be pleased if the election takes place in February,” he said, emphasising the need for a free, fair, and credible electoral process.

“This is crucial because a new administration formed through a genuine public mandate is more likely to be stable and sustainable,” he added. “Once the new government announces its economic policy and investment incentives, many Japanese companies — currently conducting feasibility studies — are expected to move forward with projects.”

Kataoka concluded by reaffirming Japan’s confidence in Bangladesh’s economic potential. “Despite the challenges, Bangladesh remains highly attractive. The domestic market is becoming increasingly lucrative, and that is why JETRO continues to receive a growing number of investment inquiries from Japan,” he said.