Despite pandemic_ Japanese firms want to expand in Bangladesh

The Covid-19 pandemic is showing no signs of abating but still 41.8% of Japanese companies in Bangladesh during 2020 wanted to expand business in the next two years_ according to a survey by Japan External Trade Organization (Jetro).

However_ 70.3% had sought to do so in 2019.

In 2020_ another 49.3% believed that their operations will remain the same while 6% pondered over going for retrenching.

Besides_ 3% wanted to shift to another country withdrawing investments_ failing to bear the difficulties of the ongoing Covid-19 fallouts.

The "2019 JETRO Survey on Business Condition of Japanese Companies in Asia and Oceania" was released on March 2021.

Over 300 companies are doing business in Bangladesh and the number has been rising in recent years due to continuous economic growth in the last decade. 

Those expressing intent to expand business in Bangladesh cite growth potential and sales increases enabled through exports and the domestic market.

According to the Jetro report_ 9% of the companies in Bangladesh have already recovered from the pandemic's effects_ 31.3% expect to return to normalcy in the first half of 2021 and 34.3% in the second half.

The report said a change in the trading environments in Vietnam_ Bangladesh and India had a positive impact on business performance.

Many investors stated that the shift of production to Vietnam and Bangladesh_ caused by the US-China trade friction_ had a positive impact.

Jetro said further improvement of the business environment in Bangladesh was needed for more competitiveness and future investment.

Some 66.7% of Japanese companies stated that their major challenges were in local procurement of raw materials and components while 56.1% in customs procedures.

The report found that 48.9% expected to generate an operating profit in 2020_ down 16.7 percentage points from 65.6% in 2019.

In contrast_ 32.4% expect to incur an operating loss_ up 14.7 percentage points from 17.7% in 2019.

Yuji Ando_ country representative of Jetro_ said Bangladesh has the potential to develop businesses but needs to improve environment bottlenecks.

He said investors face different hassles like time consuming customs procedures_ difficulty in local procurement of raw materials and components_ power shortages and wage hikes.

According to him_ in recent years the wages of workers and employees have increased in Bangladesh.

Besides_ Japanese companies have no opportunity to borrow from local banks in Bangladesh_ for which they sometimes have to face a shortage of working capital.    

The survey took comments of 13_399 Japanese firms engaged in manufacturing and non-manufacturing sectors in 20 Asia and Oceania countries between August and September last year.

The report said business confidence had fallen to its lowest level due to the Covid-19 pandemic whereas the deterioration was mild in China.

Even the intentions towards business expansions in the next one or two years hit a new record low.

The impact of changes in trading environments such as the US-China conflict and a decline in demand due to the Covid-19 pandemic have had a negative impact on the companies' motivation to expand their business.

Even under such a harsh environment_ 50.9 per cent of the companies in India and 53.5 per cent in Pakistan are still motivated towards expanding business in the next one to two years.