The JICA’s 2nd Highest ODA Loan Disbursement to Bangladesh: What Does It Mean for Bilateral Cooperation?

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The Japan International Cooperation Agency (THE JICA) has revealed that its commitment and distribution of official development assistance (ODA) loans in Bangladesh achieved the second-highest levels since March 1974 during the Japanese Fiscal Year 2022. The JICA committed a total of 331 billion Japanese Yen across five critical projects in the previous fiscal year (April 2022 to March 2023), further reinforcing its long-standing history of collaboration with Bangladesh. The JICA’s payout in the Japanese Fiscal Year 2022 was 261 billion Japanese Yen, somewhat less than the 264 billion Japanese Yen disbursement in the Japanese Fiscal Year 2021. The projects are as follows: the Dhaka Mass Rapid Transit Development Project Line-5 Northern Route (2nd Tranche) loan amount is approximately 133,399 million yen; the Southern Chattogram Regional Development Project loan amount is approximately 32,462 million yen; the Matarbari Port Development Project (2nd Tranche) loan amount is approximately 105.362 billion yen; the Chattogram-Cox’s Bazar Highway Improvement Project (1st Tranche) loan amount is 55.729. The continuing megaprojects’ steady progress is responsible for FY 2022’s record-breaking performance. Almost all the projects are linked with the Sustainable Development Goals (SDGs).

Figure 1: The JICA’s growing commitment to Bangladesh

The above-mentioned graph demonstrates that when Bangladesh and Japan’s relationship was elevated to a ‘Comprehensive Partnership’ in 2014, THE JICA’s financial and technical aid was greatly expanded. THE JICA’s overall support to Bangladesh has exceeded 96 billion yen in technical cooperation, 2.3 trillion yen in ODA loans, and 130 billion yen in grant aid during a 50-year period.

The JICA has steadily extended its involvement with Bangladesh over the last decade through ODA loans, grants, and technical cooperation initiatives to fulfill the country’s rising need for improved economic and social infrastructure. Bangladesh received 373 billion Japanese yen from THE JICA in the 2020 fiscal year, which ran from April 2020 to March 2021. Over the previous five decades, Bangladesh and Japan’s relationship has thrived and evolved into mutually beneficial and symbiotic cooperation, resulting in excellent consequences for both nations. Bangabandhu Sheikh Mujibur Rahman’s aim of constructing ‘Sonar Bangla’ or ‘Golden Bengal’ is being accomplished by Prime Minister Sheikh Hasina’s government. THE JICA’s financial and technical aid has expanded dramatically after her visit to Japan in 2014 when the partnership between Bangladesh and Japan was elevated to a “Comprehensive Partnership.” THE JICA’s assistance in infrastructure, transportation, electricity, and energy sectors, particularly under the Bay of Bengal Industrial Growth Belt (BIG-B) plan, complements the government’s efforts.

A Major Breakthrough in the Economy?

Japan has contributed $24.72 billion to Bangladesh since its independence, largely evenly between grants and loans. Japan assists Bangladesh in a variety of areas, including energy production, social and economic growth, and the construction of both tangible and intangible infrastructure. The JICA’s contribution can effectively satisfy the country’s rising demand for improved economic and social infrastructure. However, THE JICA regards its connections with Bangladesh as “extremely important” in the next five years, as it assists Bangladesh in reaching the next stage of development through the completion of a number of megaprojects. They intend to give assistance for the integrated development of the Moheshkhali-Matarbari area in order to make it a regional energy and power center which is very significant, especially against the growing energy demand of Bangladesh THE JICA’s work began in 1973 when three Japan Overseas Cooperation Volunteers were sent to Bangladesh.

THE JICA, Bangladesh’s leading bilateral development partner, is undertaking a wide spectrum of cooperation from urban to rural regions. Some of the transformative projects financed by THE JICA include the development of three lines of Mass Rapid Transit (MRT) in Dhaka and the Hazrat Shahjalal International Airport Terminal 3. Bangladesh and Japan have a strategic alliance. “The key to this partnership is mutual benefit, increased trade, and ensuring sustainable development. Bangladesh is strategically positioned in a critical region; therefore, the connection is critical. The JICA is supporting further strengthening connectivity in the region. The Moheshkhali-Matarbari region is the focal point of the BIG-B (Bay of Bengal Industrial Growth Belt) program, which includes a logistical, power, energy, and waterfront industry cluster. The government of Bangladesh and The JICA agreed on a 40 billion Japanese Yen initiative in November 2022, and 30 billion Japanese Yen were released in December 2021.

Reflection of Robust Collaboration and Support in the Future

Over the previous five decades, Bangladesh and Japan’s relationship has thrived and evolved into mutually beneficial and symbiotic cooperation, resulting in excellent consequences for both nations. The bilateral relationship has grown significantly, with commerce and investment playing important roles in this development. Japan has emerged as one of Bangladesh’s most important commercial partners. This cooperation can build a mutually beneficial alliance for their shared journey of advancement by exploiting the two nations’ significant demographic, investment, trade, and technical complementarities. During the covid-19 pandemic, Bangladesh remains among the top choices of Japanese companies for relocation to South Asia.

The establishment of a Japanese special economic zone (SEZ) in Araihazar in Narayanganj, is expected to result in billions of dollars in Japanese investment, as well as the employment of thousands of skilled and semi-skilled employees. The THE JICA official stated that improving procedures to create an acceptable environment for foreign enterprises is critical in order to further boost Foreign Direct Investment (FDI).

Figure 2: The JICA’s official disbursements in Bangladesh

Bangladesh has been an outstanding economic performer over the last decade in terms of GDP growth. The country has managed to retain its economic growth of more than 6 percent and has been putting relentless effort to keep the growth trajectory up in all areas of development. Bangladesh is expected to attract huge investments from Japan worth over US$ 1 billion- the largest Japanese economic zone in Asia. Japan is likely to continue to be an important and strategic partner for Bangladesh during its next developmental path, notably throughout the Fourth Industrial Revolution and beyond LDC graduation.

On the flip side, Bangladesh is a lucrative place for investment. Japanese private companies can invest in Bangladesh on a larger scale. Bangladesh’s economy, as one of South Asia’s most free-market and trade-oriented, is rapidly expanding into one of the region’s most promising and prosperous. Because of the country’s 164 million customers, rising middle class, increased buying power, local demand, inexpensive labor, and rapid economic expansion, Japan will keep Bangladesh in its geostrategic circle. Bangladesh, a nation of investment prospects, has shown to be a resilient economy. The administration looks forward to welcoming additional Japanese investors to make use of the country’s unrivaled advantages, where current Japanese companies have earned significant benefits from doing business here. Because of the country’s 170 million customers, rising middle class, frontier market, higher buying power, local demand, inexpensive labor, and rapid economic growth, Japan will keep Bangladesh in its geostrategic place.

Investment is the lifeblood of the economy, and investment promotion has been identified as one of the government’s priority projects. Bangladesh provides enormous domestic markets, cheap production costs, a key commercial hub, high profitability, a demographic dividend, and conductive legislative incentives, making it one of the world’s most favored investment locations. These have promoted greater private investment and resulted in considerable increases in both domestic and foreign direct investment in recent years, which will favorably support the country’s road to becoming Asia’s economic tiger by 2025. This disbursement, therefore, reveals that Japan is looking forward to collaborating closely with the government and people of Bangladesh to create a win-win cooperation for our flourishing future.

– Saume Saptaparna Nath is a Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA).

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