Japanese companies doing business in Bangladesh face challenges during the coronavirus pandemic, including a lack of information and support from authorities, which could hamper the flow of investment, according to investors and a recent survey.
In addition, a culture of procedural delays in government offices and frequent policy changes discourages Japanese investors from starting a business in Bangladesh.
As of December 2019, around 310 Japanese companies were doing business in Bangladesh, with investments reaching $ 386 million.
Just ten years ago, there were only 82 Japanese companies operating in the country.
The latest information on foreign direct investment (FDI) from Japan is not yet available from the Bangladesh Bank and the Bangladesh Investment Development Authority (Bida).
The country office of the Japan Foreign Trade Organization (Jetro) recently surveyed 75 Japanese companies on the challenges they faced in conducting operations during the pandemic.
It showed that around 67% of Japanese companies faced problems due to the suspension or reduction of commercial flights, and 64% to the mandatory 14-day self-quarantine after arriving in Bangladesh.
Another 63 percent encountered difficulties in fighting coronavirus infections, 61 percent dealing with cases of infections (medical system and availability of beds) and 61 percent when inviting business travelers and technical instructors in Bangladesh.
Sixty percent of companies report having difficulty traveling outside of Bangladesh and 57 percent vaccinating Japanese expatriates in Bangladesh.
Half of respondents cited problems when checking for the latest information on government travel guidelines and business activities.
Thirty-one percent faced problems with delays in exports and imports, 24 percent mentioned cancellation and reduction of orders, 9 percent a shortage of working capital and 8 percent over settlement overdue letters of credit.
“Japanese companies that come to do business in Bangladesh initially face a lack of appropriate information on related fields,” said Prodip Das, Managing Director of Rohto-Mentholatum (Bangladesh).
Investors do not get any information from either government offices or private consulting firms, he said, adding that there are no private companies that can help build business-to-business relationships and partnerships.
For any business looking to start a business, all types of workers and employees are available except for an executive-level workforce, he said.
They don’t even get information on bank support, clearing and transfer agents, and distributors, although these are important to running the business, Das said.
Japanese companies have to provide various documents and go through bureaucratic complexities and complex rules to declare tax and calculate value added tax.
“Japanese companies are very compliant and expect transparency at every step,” Das said.
He believes there is considerable leeway to make improvements to attract more Japanese investors.
Shah Muhammad Ashequr Rahman, Finance and Trade Manager at Bangladesh Honda Private, said there was a need to improve the ease of doing business for smooth business operations.
“If we manage to maintain a minimum operational time and faster import clearance, the cost of doing business and the costs of raw materials and equipment will be competitive,” he said.
Hiroki Watanabe, managing director of Aishin International, said Japanese companies were facing problems in recovering profits at home.
“It is very easy to bring investments to Bangladesh, but it is difficult to repatriate the profits back to the country of origin, which is detrimental to the investment,” he noted.
Companies go through a lot of formal, time-consuming formalities to transfer profits, he said. “The government should tackle this problem.”
In addition, investors find it difficult to manage visas and work permits, and sometimes they have to endure long waiting periods, Watanabe said.
Md Sirazul Islam, executive chairman of Bida, said foreign investors and experts have no problem applying for visas through Bida’s one-stop service platform.
He also refuted findings that there was a lack of information available, claiming that Bida provided all kinds of information about the investment.
Paban Chowdhury, executive chairman of the Bangladesh Economic Zones Authority (Beza), said it was possible to improve the business environment in Bangladesh and relax some rules and regulations to attract more FDI.
The Bangladesh Bank, the National Board of Revenue and the Ministry of Commerce have already issued several circulars regarding the relaxation of investment rules, he said.
“However, it would take some time to meet all investor expectations as they are always concerned about their investment in any country.”
Chowdhury said Bangladesh is becoming a lucrative destination for FDI.
A Japanese investment of around $ 1.5 billion would be made in a dedicated Araihazar economic zone, Narayanganj, which would be ready to set up factories next year, he said.