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73.2% Japanese firms willing to expand their business in Bangladesh: JETRO

For low production cost Bangladesh is a lucrative destination for doing business

Bangladesh remains in the highest position in business expansion plans by Japanese companies in the next one or two years, according to the ‘2018 JETRO Survey on Business Conditions of Japanese Companies in Asia and Oceania’.

Japanese firms surveyed want 'expansion' in Bangladesh
Figure 1: JETRO study finds that 73.2% of Japanese firms surveyed want ‘expansion’ in Bangladesh.

The study finds that 73.2% of firms surveyed want ‘expansion’ in Bangladesh, whereas 72.8% want in India, 72.1% in Myanmar, and 69.8% in Vietnam.

The country gets the top position among Asian and Oceania regions despite problems in quality control, deregulation and securing labor force. The study shows the country’s position in operating profit forecast by the firms among the top three.

According to the World Bank, Bangladesh is one of the lowest performers on ease of doing business, it is 176 out of 190 countries. So, a question can be raised that why are the Japanese firms willing to expand their business in Bangladesh?

They are mainly willing to expand their business here in Bangladesh due to less production cost as Bangladesh is providing the lowest wage to their manufacturing workers among 19 countries were surveyed.

According to the study, a three years experienced manufacturing worker gets $109 wage per month in Bangladesh.

Manufacturing workers salary
Figure: Manufacturing workers in Bangladesh get the lowest salary among 19 surveyed countries.

The Japan External Trade Organization (JETRO) survey found the diffusion index higher in India, Laos, Vietnam, Bangladesh, and Cambodia, indicating the companies’ business confidence for 2018.

Over 5,073 out of total 13,415 affiliated companies with direct and indirect investment from 10 or greater in 20 countries responded in the 32nd JETRO survey.

In Bangladesh, 57 out of 140 Japanese firms were surveyed, of them, thirty of the firms belong to large groups and 27 small-and-medium enterprises.

According to the survey, 55.1% of the firms questioned from October 09 to November 09 in 2018 selected ‘expansion’ as their approach to future business challenges. This is up by 1.4 percentage point from 53.7% in the 2017 survey.

Although 4.2% of firms forecast ‘reduction’ or ‘transferring to a third country/region or withdrawal from current local markets’, there is no such firm in this group from Bangladesh.

But 26.8% of the companies responded to remain in the same position, meaning no expansion plan in the next one or two years.

“Business confidence of the Japanese-affiliated firms is continuing to improve,” the JETRO cited in the survey.

It said 61% of companies showed the reason for expansion as ‘high growth potential’ and ‘sales increase in local market’.

Some 41% of companies highlighted ‘sales increase for export expansion’ as the key reason.

But the firms reacted to reasons like high receptivity for high value-added products, reconsideration of production and distribution networks, cost cuts, deregulation and ease of securing labor force.

On the average rate of annual rise in wages for all industries for 2019, it was the highest 10% in Pakistan followed by 9.6% in Bangladesh and India, 8.1% in Sri Lanka.

The JETRO found that 62.5% of companies questioned the quality of employees, 58.9% of pay hike and 64.6% difficulty in quality control.

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