Japan-Bangladesh Economic Partnership: Will Strengthen Bilateral Ties

Japan and Bangladesh are set to negotiate an Economic Partnership Agreement by the end of 2025, ahead of Bangladesh’s scheduled 2026 graduation from the UN’s list of least developed countries and loss of exemption from developed nations’ tariffs. Despite the US government’s perception of Bangladesh as a faltering democracy, Japan sees the country as a strategically situated nation with a GDP larger than the combined GDPs of the Philippines, Vietnam, and Malaysia. Bangladesh’s substantial economic ties with China and Russia have sparked Western sanctions, but Japan is focusing on expanding trade and infrastructure development.

In March 2023, Japan’s International Cooperation Agency (JICA) agreed to provide Bangladesh with new loans of ¥165 billion for the Matarbari Port Development Project, the Chattogram-Cox’s Bazar Highway Improvement Project, and a railway construction project. JICA is also financing the construction and improvement of hundreds of kilometers of roads in northeastern India.

The Third India-Japan Intellectual Conclave in Agartala, India, discussed commercial potential in the region, including the Matarbari deep sea port project. The two leaders announced their decision to upgrade the “Comprehensive Partnership” between the two countries to a “Strategic Partnership” for the next 50 years. They emphasized the importance of high-quality infrastructure supported by transparent and fair finance for Bangladesh’s development, including logistic, energy, and industrial aspects of the Matarbari deep sea port project. They also expressed satisfaction with progress made under the Bay of Bengal Industrial Growth Belt initiative and the opening of Dhaka Mass Rapid Transit Line 6, the first electric train in Bangladesh.

In terms of national security, they welcomed frequent port calls by Japan Maritime Self-Defense Force vessels at Chattogram and the commencement of negotiations on an Agreement concerning the Transfer of Defense Equipment and Technology. Japan will provide cybersecurity expertise to Bangladesh, promoting a free Indo-Pacific based on rule of law and protecting rights. Bangladesh’s Prime Minister Sheikh Hasina won a fourth term in office after her Awami League won 234 out of 300 seats in parliament, following violent street demonstrations.

Diplomats from India, Singapore, the Philippines, China, and Russia visited Hasina to express their congratulations. However, the US government criticized the election as “not free and fair,” while the UK criticized the acts of intimidation and violence. The EU called for a timely and full investigation of all reported election irregularities. The US has imposed visa restrictions on Bangladeshi citizens accused of undermining the democratic process. The UK and EU have not yet done anything, but there is concern that they and the US might impose punitive barriers to trade. Most of Bangladesh’s exports, primarily clothing, go to Europe and the US.

On January 22, Japan’s Minister for Economy, Trade and Industry (METI) Yasutoshi Nishimura told Bangladeshi State Minister for Foreign Affairs Shahriar Alam that Japan would like to conclude an economic partnership agreement with Bangladesh to establish a mutually favorable tariff regime as Bangladesh becomes a middle-income country. Japan has been the largest provider of Overseas Development Assistance to Bangladesh since its independence in 1971. In May, the two countries reached an agreement on the Japan-Bangladesh Comprehensive Partnership at a summit meeting in Tokyo.

In September 2014, Japanese Prime Minister Abe visited Bangladesh to discuss bilateral security cooperation, development aid, trade, and investment. The country aimed to reduce dependence on textiles and move up the manufacturing value chain by upgrading port and water control facilities, roads, railways, bridges, power generation, and other infrastructure. Japan aimed to increase trade and win more infrastructure contracts by continuing its substantial foreign aid. Since then, the number of Japanese companies with operations in Bangladesh has roughly doubled to about 340.

Bangladesh has been a participant in China’s Belt and Road Initiative since 2016, with numerous projects undertaken, including the construction of roads, bridges, railways, seaports, airports, electric power plants, water and sewerage systems, and an industrial park. The Belt and Road Initiative in Bangladesh Exhibition in September 2023 was reported to have generated a positive response.

China is Bangladesh’s largest trade partner, with nearly 700 Chinese companies operating in the country. Huawei, which has been operating in Bangladesh since 1998, is now working with state-controlled mobile telecom operator Teletalk to upgrade 4G networks and introduce 5G. Russia supplies Bangladesh with grain, fertilizer, machinery, metals fuel oil, and uranium for the first of two nuclear reactors supplied by Rosatom. Bangladesh runs a constant trade deficit, with imports exceeding exports by about 60%. Cooperation with Japan reduces dependence on China while mollifying India, the US, and Europe. The balancing act becomes even more crucial as the country loses its protection from tariffs under least-developed country status.