Steps for FTA with Japan underway
The Daily Star - 17 October 2022
Steps for FTA with Japan underway
By Refayet Ullah Mirdha
Bangladesh is working on getting either a free trade agreement (FTA) or economic partnership agreement (EPA) signed with Japan, the most promising export market in Asia, with the commerce ministry having already prepared a relevant memorandum of cooperation (MoC).
"Both Bangladesh and Japan are scheduled to sign the MoC in November this year," Senior Commerce Secretary Tapan Kanti Ghosh told The Daily Star over the phone yesterday.
This is the first step towards signing a trade deal with Japan for retaining zero-duty benefits once Bangladesh makes the United Nations status graduation from a least developed country (LDC) to a developing one in 2026.
Prime Minister Sheikh Hasina is scheduled to visit Japan next month, when negotiations for an FTA may begin, Ghosh said.
He said senior officials of both Bangladesh and Japan have already discussed the issue through a video conference recently.
Riding on preferential trade benefits as an LDC, Bangladesh’s exports to the island country in East Asia has been rising fast, especially apparel items, because of high demand.
Last fiscal year it was worth $1.35 billion, a year-on-year rise of 14.40 per cent, according to data from the Export Promotion Bureau (EPB). Of it, $1.10 billion was from garments.
Japan is the only Asian nation where Bangladesh’s export of garments crossed the $1 billion mark over the last few years.
Shipment of garment items to Japan from Bangladesh started leapfrogging since April 2011, when Japan relaxed its Rules of Origin for the LDCs and for knitwear sector.
Earlier, Japan did not allow zero-duty on shipment for knitwear to protect its indigenous knitwear sector.
Last week, Japanese Ambassador to Bangladesh ITO Naoki said the apparel shipments were expected to rise tenfold to reach $10 billion by 2030.
He, however, said Bangladesh would have to improve its investment and business climate to sign an FTA or EPA and attract more Japanese investment.
Addressing an annual general meeting of the Japan Bangladesh Chamber of Commerce and Industry in Dhaka, he said the number of Japanese companies in Bangladesh has tripled over the last decade, reaching 338 in 2022.
Most are desperate to expand their businesses and want an FTA to be signed, he said.
A lot of Japanese companies have been relocating their businesses to other countries from Japan and China, pointed out Naoki.
A Japanese Special Economic Zone at Araihazar at Nayaranganj will be the best in Asia in terms of facilities, infrastructures, labour industrial relations and business environment, said the ambassador.
Japan is implementing some mega projects in Bangladesh, including a deep sea port in Matarbari, a metro rail in Dhaka and a third terminal at Hazrat Shahjalal International Airport in Dhaka, which are expected to be completed within the next few years, he said.
According to the Ministry of Foreign Affairs of Japan, the nation currently has 21 operational FTAs or EPAs.
They are with Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia, Brunei, the Association of Southeast Asian Nations (Asean), the Philippines, Switzerland, Vietnam, India, Peru, Australia, Mongolia, TPP12 (Trans-Pacific Partnership), TPP11, European Union, US, UK and Regional Comprehensive Economic Partnership.
Another three FTAs are underway with Turkey, Colombia, Japan-China-Republic of Korea, the foreign ministry also said.
On the other hand, Bangladesh has just signed one preferential trade agreement with Bhutan in December 2020.
Initiatives at signing a comprehensive economic partnership agreement (Cepa) with India were taken last month.
Experts said Bangladesh would make much gains from the proposed FTA or EPA as Japan was a major export destination and there was no possibility of losing that much revenue from tariffs Bangladesh imposes on the import of Japanese goods.
However, it was the opposite in case of China and India.
The economic giants are major sources for Bangladesh’s imports. Bangladesh will lose a significant amount of revenue from import tariffs if an FTA with China and Cepa with India are signed.
Bangladesh imported goods worth more than $20 billion from China and earned nearly Tk 30,000 crore from import duties last fiscal year.
Another Tk 20,000 crore was earned as duty from goods worth more than $16 billion imported from India.
