Japanese FDI and Development Vision of Bangladesh: Lessons from Thailand

Abstract

Bangladesh is aspiring to become a developed country under the ‘Vision 2041’. However, materialization of this development vision requires huge amount of fund. Regrettably, country’s dependency on foreign aid is still more than 35%. Internal borrowing is also increasing considerably, where as Foreign Direct Investment (FDI) can make a significant contribution to the financial basket of the country. Nonetheless, government has set a target to increase the contribution of FDI to 3% of the GDP in the 8th Five Years Plan (FYP) which was 1% in 7th FYP. Being one of the most trusted friendly nations, Japan continued its support towards Bangladesh since the independence. Japan has the tendency to shift FDI to a country after improving the infrastructure through Official Development Assistance (ODA). The same trend is also appearing in Bangladesh. Bangladesh has become the number one recipient of Japanese ODA in 2020 and the amount of Japanese companies is also increasing in Bangladesh which is curtly around 320. With a view to mitigating the gap between aspiration and reality while succeeding to accomplish development goals, countries with limited resources like Bangladesh can be hugely benefited by the Japanese FDI. The ASEAN nation Thailand, with more than 6000 Japanese companies, is one of the economies that has been significantly benefited by the Japanese FDI. Therefore, this qualitative research investigates the case of Thailand based on key stakeholders’ interviews and analysis of documents. The major findings of this paper in terms of main challenges Bangladesh is facing to attract Japanese FDI are national image crisis, lack of infrastructure, skilled human resources, local procurement of raw materials, frequent change in law and policies, uncongenial regulations regarding VAT, tax and customs and port clearance. The main lessons Bangladesh can learn from Thailand to attract FDI from Japan includes lower corporate tax, port facilities, easier port clearance and participation in economic partnerships, such as RCEP. This paper contributes to the literature in the area of business studies, economics, development studies, international relations, public policy studies and Japanese Studies.