Strengthening Economic Partnership: PM Sheikh Hasina’s Visit to Japan, 2023

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The relationship between Bangladesh and Japan is not just another case of amicable ties between two nations. It goes beyond the conventional definition of friendship and stands as a remarkable illustration of a steadfast and time-honoured partnership. Moreover, this relationship is a sterling example of how the synergy of global cooperation and economic diplomacy can foster remarkable developments. The bond between these two nations is a powerful manifestation of how countries can unite to overcome challenges and achieve shared objectives even when the world is facing a precarious time. Therefore, the unwavering alliance between Bangladesh and Japan continues to serve as a model for international partnerships and a beacon of hope for future collaborations.

This is precisely why the forthcoming state visit of Bangladeshi Prime Minister Sheikh Hasina to Japan, from April 25 to 28, holds such great significance. It aims to provide a new impetus to the economic cooperation between the two nations and help them navigate through these challenging times. The ties between Japan and Bangladesh date back to the latter’s independence, when Japan was one of the few countries that extended a helping hand to the fledgling nation. Since then, Japan has emerged as the single largest bilateral donor to Bangladesh, extending significant amounts of Official Development Assistance (ODA) to help rebuild the country’s infrastructure and fuel its social and economic growth. Japan’s assistance has been pivotal in the development of Bangladesh’s energy and power generation capabilities, as well as in the construction of both physical and intangible infrastructure.

In 2014, the two nations took their economic partnership to the next level with the launch of BIG-B, or Comprehensive Cooperation with Bangladesh. Since then, Japan’s financial assistance to Bangladesh has only increased, with the country being the largest donor in fiscal year 2020-2021, providing a staggering $2.63 billion in aid. The upcoming visit of Prime Minister Sheikh Hasina is, therefore, a seminal moment in the deepening of the economic ties between Bangladesh and Japan, as they look to forge a new path forward in their partnership.

As Sheikh Hasina begins her state visit to Japan, the aim is that the two countries can form an even closer link, working together to address future problems and create new chances for economic development and prosperity. The fraternity spirit that exists between these two nations gives a firm basis for greatness and lays the groundwork for an even greater future. Moreover, there are some key areas where two countries can shade lights in the upcoming visit.

Strategic collaboration

In a post-pandemic, war-torn global economy, structural political economy viewpoints between Bangladesh and Japan are critical. Bangladesh is an essential part of Japan’s South Asian strategic-diplomatic agenda. Furthermore, Bangladesh is one of the most free-market, trade-oriented nations in South Asia, and it is fast developing as one of the region’s most potentially lucrative markets. A market of 164 million consumers, a growing middle class, greater purchasing power, local demand, low labour costs, and rapid economic expansion will keep Japan in its geostrategic orbit.

Meanwhile, due to concerns about overdependence, supply chain instability, and the global economic crisis, Bangladesh may offer itself as an intriguing alternative destination for Japanese enterprises trying to diversify away from China and other actors. On the other hand, the numbers of Japanese company are also increasing in Bangladesh which also reflected the significant importance of upcoming visit.

Moreover, Bangladesh also acts as an Indo-Pacific gateway as well as a connection between the broader east and west. The visit might pave the way for Bangladesh-Japan structural development cooperation. Although Bangladesh maintains a cautious stance about joining the IPS or QUAD, Japanese investments and assistance in the critical infrastructure sector will eventually provide the framework for a large additional relationship. It is advisable for both parties to reduce strategic and political pressure while developing a strong economic relationship without taking sides.

Strengthening the BIG-B and major investments

Sheikh Hasina’s upcoming visit to Japan holds tremendous significance for the two nations to enhance their economic cooperation and take BIG-B to the next level. The BIG-B initiative, aimed at transforming South Asia’s economic outlook, can help Bangladesh become the center of the regional economy and a gateway between South Asia and Southeast Asia. During the visit, information about various ongoing Japanese projects in Bangladesh, such as the Dhaka MRT line, deep-sea port at Matarbari, Terminal 3 of Dhaka International Airport, and the Araihazar economic zone, will be shared. The JEZ will witness the development of several industries, including agro-food, light engineering, chemicals, pharmaceuticals, vehicle assembly, power, and energy. The visit will facilitate continued commercial and investment collaboration under the BIG-B program, propelling Bangladesh towards becoming South Asia’s industrial powerhouse in a favourable economic climate. It will also pave the way for the BIG-B program to extend to other initiatives.

Towards Signing (FTA), (DFQF) and Trade Diversification

Bangladesh’s major Asian export destination is Japan. Bangladesh’s exports to Japan have doubled over the last decade, but the nation still has a lot of untapped economic potential. Although Bangladesh mostly exports ready-made garments and leather goods to Japan. However, there is a “great potential” for selling pharmaceuticals, agricultural, and fisheries products.

As a result, in terms of trade partnerships, the planned visit will have a major influence on the establishment of the FTA and DFQF between Bangladesh and Japan. Because Bangladesh relies heavily on ready-made garment (RMG) items, the visit to Japan is critical for the country’s export industries. However, greater variety is required in this sector in order to minimise reliance and boost exports. Streamlining processes is also required to improve exports. For example, iron and steel, vehicles, and equipment are among the most important Japanese imports to Bangladesh. In fiscal year 2018-19, Bangladesh’s exports to Japan reached $1.3 billion, while imports totalled $1.8 billion. A free trade agreement (FTA) might help to reduce their present trade deficit.

Although Japanese imports have expanded over the last decade, the industries remain focused on equipment, electronics, and autos. The bulk of imported items in 2021-2022 were technical, such as machinery, nuclear reactors, boilers, non-railway and tramway vehicles, and electrical and electronic equipment. To reverse this tendency, Bangladesh and Japan must have meaningful negotiations. Bangladesh and Japan may boost trade by strengthening horizontal policies, improving educational attainment, and implementing structural improvements. The objective is to enhance Bangladesh-Japan commerce from $3 billion to $20 billion by 2030, with increased clothing exports to Japan’s far east playing a vital role in this expansion.

Getting Used to Post-Graduation Impacts

Bangladesh will become a developing country in 2026, after the recommendation of a UN commission that the country be allowed five years rather than three to prepare for the transition due to the economic impact of COVID-19. As a consequence, Bangladesh needs the assistance of a trusted friend to overcome the challenges and achieve the objective of being a developed country. In this regard, Japan has always been a friend of Bangladesh and will assist with berry eradication.

Furthermore, this is Bangladeshi Prime Minister Sheikh Hasina’s first visit since the nation was designated as a developing country. As a result, Bangladesh’s LDC graduation is heavily reliant on Japan’s help. In this regard, the planned visit is an important milestone for both nations in reorganising their economic and development institutions and establishing a strong cooperation strategy for ‘Smart Bangladesh,’ which may propel Bangladesh into the ranks of developed countries by 2041.

To summarize, the upcoming visit of Bangladesh Prime Minister Sheikh Hasina to Japan is crucial for the future of the economic cooperation between the two nations. With the aim of increasing assistance to Bangladesh’s crucial export sector, this visit also presents an opportunity for newer advances in the post-LDC graduation microeconomic growth of Bangladesh. As Bangladesh gears up for its retirement from LDC designation in 2026, this visit holds immense significance in harnessing its macroeconomic stability while addressing the challenges associated with LDC graduation. With the possibility of exploring new channels for collaboration and establishing a more hospitable business climate, this visit has the potential to be a game-changer for both countries, strengthening their economic links and accomplishing their shared objective of growing bilateral commerce.

– S. M. Saifee Islam is a Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA).

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