About 85% of local and Japanese companies operating in the two countries want their respective governments to sign a free trade agreement (FTA) so that they can continue to enjoy tariff advantages after Bangladesh is removed from the list. least developed countries in the UN in 2026, according to a survey.
Meanwhile, some 20%, or 26 Japanese companies, want to relocate from Bangladesh to more competitive countries in the Association of Southeast Asian Nations (ASEAN) if an FTA is not signed.
For all the latest news, follow the Daily Star’s Google News channel.
Only one company opposed signing an FTA because it would make incentives for garment factories located inside export processing zones redundant. Among the local companies surveyed, some 87%, or 26 multinational companies, want an FTA between the two countries.
Six companies did not respond while 8 percent of respondents had no particular opinion on the issue of signing an FTA.
The Japan External Trade Organization and the Japan-Bangladesh Chamber of Commerce and Industry jointly conducted the survey between August 5 and October 14 last year.
Survey agencies sent questions to 300 Bangladeshi and Japanese-based companies with operations in the two countries. However, some 142 companies responded to the questions.
The existing rules of origin (RO) in the GSP for apparel products should be maintained. Changes in standard tariff classification will come into play if Japan markets rules of origin, according to the survey.
There is also a need to simplify the process of issuing Certificates of Origin (COO) with less time. The introduction of self-certification could serve this purpose, he said.
Responding companies were in favor of the FTA between Bangladesh and Japan because companies will not be able to benefit from tariff advantages in Japanese markets after Bangladesh becomes a developing country.
However, the proposed signing of an FTA will help retain the duty advantage in Japanese markets. Japan is the only Asian country where Bangladeshi merchandise exports topped $1.0 billion for the first time since 2012 due to increased apparel exports.
Of the total exports from Bangladesh to Japan, 95% are garments.
Some local businesses claim that the country would lose its competitiveness without the GSP facility compared to other countries that have FTAs. The tariff will rise from 7.4% to 10.9% on garment exports to Japan if the GSP expires, according to the survey.
Similarly, shipments of leather shoes would be subject to a customs tax of around 30% to enter Japan, he added.
ITO Naoki, Japanese Ambassador to Bangladesh, said the two countries want to conduct a joint study on the feasibility of signing an FTA.
“We don’t have an option to extend the GSP. We have to sign agreements and an FTA could be an option for Japanese market access for Bangladesh,” Naoki said at a sharing event. Japan FTA/EPA survey results. and Bangladesh, held at the Lakeshore Hotel in Dhaka.
The Ministries of Foreign Affairs, Trade, Finance and Agriculture have already started discussions on signing an FTA between Bangladesh and Japan, Naoki said.
Trade Minister Tipu Munshi, various diplomats, senior government officials and businessmen from Bangladesh and Japan participated in the discussion.
“We are in favor of signing the FTA with Japan,” Munshi said in his speech.
Bangladesh has attempted to sign FTAs or Preferential Trade Agreements (PTAs) with some of its major trading partners, but so far only a PTA has been signed with Bhutan in December last year.
Recently, the Sub-Committee on Smooth Transition of LDCs recommended the signing of trade agreements with seven major trading partners like China, India, Japan and Russia, but only China and India have come forward. their interest in this regard.
“We need investment from Japan,” Munshi said.
Tapan Kanti Ghosh, Principal Secretary of the Ministry of Commerce, said the signing of FTAs, CPAs and Comprehensive Economic Partnership Agreements (CEPAs) depended on the willingness of partner countries.
Sometimes the signing of trade agreements does not take place due to political, strategic or purely economic factors. However, Japan is a very important country for Bangladesh.
“But, in the case of Bangladesh, import is a major source of income and the government also wants to save the domestic industries, which is a major factor in case the trade deals are signed,” Ghosh said.
Last week however, a draft was released which will serve as a guideline for signing trade agreements with trading partners and other regional trade pacts, he added.