Japan-Bangladesh Bilateral Economic Relation
Assignment (701)
Contents
Introduction 2
The economy of Bangladesh 2
The economy of Japan 3
Japan Bangladesh Bilateral Relation 3
· Diplomatic Relation 4
· Bilateral Treaties and Agreements 4
Performance and Shortcomings of Relations 5
· Political and diplomatic arenas 5
· Economic Performance 5
· Implementation constraints 6
Japan’s Economic Goals in Bangladesh 6
Japan’s ODA to Bangladesh 7
· Japan's ODA Disbursements to Bangladesh 8
Overall Picture of Japan’s ODA to Bangladesh 8
Brief history on bilateral relations 9
Total amount of assistance extended by Japan 12
Conclusion 12
Introduction
Bangladesh-Japanrelation was established in February 1972. The Government of Bangladesh reciprocated positively by establishing her embassy in Tokyo in July 1972. Exchange of High-level visits: After establishment of diplomatic relations the bilateral relations between the two countries began to grow steadily. There have been successive high level visits from both sides at political and official levels. Japan is a one of the richest and industrially developed countries of the world. On the contrary, Bangladesh is a developing country with backward economy. Since independence, Bangladesh has been struggling hard to over- come her crisis of development. She has been dependent on the industrially developed countries for aid and assistance to meet her challenging socio-economic problems. Of the industrially developed countries, Japan has become the major source of foreign aid for Bangladesh.Japan is Bangladesh's 11th-largest export market; imports from Bangladesh make up 26% of all Japanese imports from the least developed countries, second only to those from Cambodia. Common imports from Bangladesh to Japan include leather goods, ready-made garments, and shrimp. By 2004, Japan had become Bangladesh's fourth-largest source of foreign direct investment, behind the United States, United Kingdom, and Malaysia. Japan's political goals in its relationship with Bangladesh include gaining support for their bid to join the United Nations Security Council, and securing markets for their finished goods. Japan is a significant source of development aid to Bangladesh.
The economy of Bangladesh
The economy of Bangladesh is a rapidly developing market-based economy. Its per capita income in 2010 was est. US$1,700 (adjusted by purchasing power parity). According to the International Monetary Fund, Bangladesh ranked as the 43rdlargest economy in the world in 2010 in PPP terms and 57thlargest in nominal terms, among the Next Eleven or N-11 of Goldman Sachs and D-8 economies, with a gross domestic product of US$269.3 billion in PPP terms and US$104.9 billion in nominal terms. The economy has grown at the rate of 6-7% per annum over the past few years. More than half of the GDP is generated by the service sector; while nearly half of Bangladeshis are employed in the agriculture sector. Other goods produced are textiles, jute, fish, vegetables, fruit, leather and leather goods, ceramics, RMGs.[1]
Transportation, communication, water distribution, and energy infrastructure are rapidly developing. Bangladesh is limited in its reserves of oil, but recently there has been huge development in gas and coalmining. The service sector has expanded rapidly during last two decades and the country's industrial base remains very positive. The country's main endowments include its vast human resource base, rich agricultural land, relatively abundant water, and substantial reserves of natural gas, with the blessing of possessing the world’s only natural sea ports in Mongla and Chittagong, in addition to being the only central port linking two large burgeoning economic hub groupsSAARC and ASEAN.
The economy of Japan
The economy of Japan is the third largest[2] in the worldafter the United States and the People's Republic of China and is the world's second largest developed economy. According to the International Monetary Fund, the country's per capita GDP (PPP) was at $34,362or the 24thhighest in 2011.
Japan is the world's 2ndlargest automobile manufacturing country, has the largest electronics goods industry, and is often ranked among the world's most innovative countries leading several measures of global patent filings. Facing increasing competition from China and South Korea, manufacturing in Japan today now focuses primarily on high-tech and precision goods, such as optical equipment, hybrid cars, and robotics.
Japan is the world's largest creditor nation, generally running an annual trade surplus and having a considerable net international investment surplus. As of 2010, Japan possesses 13.7% of the world's private financial assets (the 2ndlargest in the world) at an estimated $14.6 trillion.[3]
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[Embassy of Bangladesh in Japan]
Bangladesh and Japan have shared views on many key international issues and closely worked for promoting global peace and stability. Both our countries have important contributions in the UN peace keeping operations. Bangladesh supports Japan’s permanent membership in UN Security Council and appreciates its role as an observer of SAARC that anchors it to the region as a bona fide partner. The relations with Japan are of priority for us and both countries are already engaged to exploit the high potentials for further deepening and widening cooperation.
Japan is also a major trading partner and source of foreign direct investment. Although the volume of bilateral trade and investment is yet to reach the full potentials, joint and new efforts may substantially raise the level for mutual gains. Bangladesh offers enhanced investment support services, incentives, large market, inexpensive workforce and quality export products as evidenced in JETRO studies recognizing the country with lowest cost of doing business and capable of supplying IT products for Japan. Big businesses like NTT Docomo, UNIQLO, SEIYU, Ito Yokado, NITORI, and Mitsubishi have started or negotiating for doing business inBangladesh. More such delegations also bear the testimony of the hard work and relentless efforts this mission has put in to motivate and encourage the big Japanese companies to invest and doing business in Bangladesh.
There are more than 10,000 Bangladesh nationals living in Japan and are engaged in various activities including business, employment, research and academic related pursuits. There are also good number of Japanese people living in Bangladesh who, too, are involved in various activities such as business, employment and voluntary services. These expatriate nationals are providing valuable contribution to the strengthening of people to people contact and are building a strong bridge of friendship betweenBangladesh and Japan. In order to harness the potentials and strength of Bangladesh businessmen living in Japan, this Missionhelped launch a Bangladesh Chamber of Commerce and Industry in Japan in 2007. The chamber has already started playing an important role towards increased bilateral trade and investment, between the two countries.[4]
Performance and Shortcomings of Relations
Political and diplomatic arenas
The relations between Japan and Bangladesh were shaped in the past three decades, to a considerable extent by economic assistance and trade orientations. Although historically political and strategic considerations also played an important role when ‘a solid foundation of lasting friendly relations’ in 1973 was laid down. Since then, the exchange of visits by heads of governments, ministers, parliamentary leaders, political missions and foreign policy managers contributed to the friendship and communication between the two countries. In this context, the contribution of late Mr. Takashi Hayakawya, the founding President of Bangladesh - Japan Friendship Society and a special envoy of the Japanese government was most noteworthy. He was an influential parliamentarian who developed “love and deep sympathy” for the people of Bangladesh and lobbied throughout his life for the cause of Bangladesh .
Economic Performance
As a country that renounced the goal of military supremacy and nuclear power, Japan has been trying to create a desirable international community mainly through economic cooperation and cultural bonds. Japan’s ODA policy towards nations in South Asia is based on a general perception about the region that centered on: high rate of population, low literacy, poor infrastructure, inequalities in income, and bad governance of the countries. It is in this context and encouraged by democratization of these countries in the 1990s that Japan began to give new priorities to Bangladesh. In fact, it was from 1992 that Japan became the largest donor for Bangladesh and is continuing to keep that position till today. The success of Japan-Bangladesh relations are symbolized by a series of monumental friendship bridges including the Jamuna, massive assistance in power and telecommunication, and establishment of fertilizer factories in addition to host of other social sector development contribution.
Implementation constraints
An evaluation was made on Japan’s development assistance over the past three decades in terms of respondent’s perception both in Bangladesh and Japan. Most of the respondents were happy over the performance of Japanese aid, technical assistance and cultural cooperation. But almost all people indicated that the impact of the vast aid was less than optimal. The reason was the lack of capability of the Bangladesh government’s institutions that handled or implemented the aid. The implementing agencies of the concerned ministries and the External Economic Relations Division suffer from complexities and weaknesses in aid coordination – from its inception to final implementation. The less competent organizational framework and weak project implementation process - to evaluate and monitor a large number of programs- often led to less optimal results. While Japan’s aid has been of high quality, the capacity of aid utilization needs substantial improvements in the future. In this context, the “medium-term” project and program formulations have to be increased and efficiently implemented.
Japan’s Economic Goals in Bangladesh
Japan is one of the important sources of foreign aid in Bangladesh and she is the important development partner of the country. By the early seventies, Japan’s post war diplomacy toward South East Asia as elsewhere had been labeled a “traders diplomacy.” It was, in the to words of one prominent Japanese scholar, “a diplomacy of the economy by the economy and for the economy.”[5]
Japan has some economic goals in Bangladesh. These economic goals are:
First of all, Japan is interested to secure supply of essential raw materials from Bangladesh. Being one if the most highly-industrialized countries and consequently, of the largest ex- porters of industrial goods, Japan needs to import huge quantities of raw materials from Bangladesh.
Second of all , Japan is interested to have continued access to markets in Bangladesh for its finished goods. In order to preserve its prosperity and employment levels, Japan must export a
tremendous amount of industrial goods of very high quality with modest price.
Third of all, Japan would like to protect and promote the presentinternational trade regime that includes, by and large, thepreservation of the present monetary order, institution of aid and
free trade. The Japanese can be expected to lend a helping hand inpreserving the present world economic order and if requires moreaid, the Japanese will come up with it. Their political democracyand peace orientation powerfully reinforces this priority. But theobverse is also true. If the world economic order fails to sustain freetrade, both raw materials and industrial goods with a reasonabledegree of expansion every year the whole apple cart will be upset. Kuranari’s said, “I also believe important to make active contributions,co-operating with other peace loving nations in Asia, to the realization of tensions and peaceful settlement of conflicts, by promoting dialogue. Needless to say, one must take into account the situation in South Asia when considering the peace and stability of the whole Asia. From this point of view, Japan wishes to
further strengthen if efforts for promoting political dialogue with countries in South Asia.[6]
Fourth of all, Bangladesh is an important place of Japanese product. The cost of production is less than that of any other countries of the world. “Ample scope and opportunities also exist in
Bangladeshfor marketing their (Japan’s) products.” The South Asian free trade arrangement (SAFTA) will have ample scope to provide the willing Japanese entrepreneurs to invest in Bangladesh.[7]
Japan’s ODA to Bangladesh
Government of Japan provides Official Development Assistance (ODA) based on requests made by the Government of Bangladesh. Japan has developed the country assistance program in cooperation and agreement with the Government of Bangladesh.
Japan's ODA is classified into three types: Grant Aid, Technical Cooperation and ODA Loan Aid. Given the fact that Bangladesh is a Less Least Developed Country (LLDC), Japanese aid is basically be grant aid and technical cooperation.
Japan's ODA is classified into three types: Grant Aid, Technical Cooperation and ODA Loan Aid. Given the fact that Bangladesh is a Less Least Developed Country (LLDC), Japanese aid is basically be grant aid and technical cooperation.
Japan’s aid relationship with Bangladesh has roughly developed in the following three stages since diplomatic ties were established in February 1972. In the first phase of the early̍ 1970s, Japanese aid has been insignificant, mainly food and commodity aid, showing 4.2% and 4.6% respectively of the total aid received by Bangladesh 84% of the Japanese food aid was then provided as loan, with an interest rate of 2% service charge of 3% and a repayment period of 20 years, including a grace period of 10 years, whereas the commodity aid contained bigger share of grant component (37.1%). During this period, there was no project aid, and Japan was indeed not yet a major donor to Bangladesh, and then it was not very distinctive from its global-wise status as a donor. In the second phase, from the mid- 1970s to the mid-1980s, there has been a typical upturn of Japanese external resource flows into Bangladesh, with higher disbursement of commodity aid and emergence of project aid, marginally supplemented by food aid. During the decade, although there were ups and downs of aid flows, Japan’s aid partnership with Bangladesh was consolidated.
The current figures of donor-wise aid flows in Bangladesh show that Japan heads the list of around 50 donors covering the member countries of Development Assistance Committee (DAC) within the Organization for Economic Co-operation and Development (OECD) and the UN-led multilateral organizations including the World Bank that are providing aid to the country. Based on cumulative disbursement of Japan’s ODA to Bangladesh up to fiscal 2000-2001, the country ranked 6th among the world’s ‘top 10’ recipient nations of its ODA, and Japanese development assistance to Bangladesh totaled almost US$ 6,050 million (Embassy of Japan 2003,p. 3). Even so, no improvement of foreign aid flows from Japan to Bangladesh was noticed after 1999. Since 1994, the consistency in aid flows of the Japan Bank for International Cooperation (JBIC) was actually fluctuating, and in recent years, JBIC’s assistance has declined due to a lack of viable infrastructure-related project proposals from the government of Bangladesh. In this connection, it may be enumerated that the reality of aid decline, occurred several phases throughout the duration of the entire course of Japan’s aid relationship with Bangladesh as mentioned above, had somehow been depressing in the sense that such a situation increased county’s financial vulnerability to performance failure of the economic system.
Japan's ODA Disbursements to Bangladesh (million US $)[8]
Year
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Grant
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Loan aid
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Total
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Grant aid
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TechnicalCooperation
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Total
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Gross
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Net
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Total
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1996
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184.77
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30.52
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215.28
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105.56
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-41.25
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174.03
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1997
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169.60
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26.83
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196.44
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75.99
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-66.45
|
129.98
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1998
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216.35
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22.83
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239.19
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93.32
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-50.14
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189.05
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1999
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204.43
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25.04
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226.47
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77.68
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-102.81
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123.66
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2000
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201.96
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40.55
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242.52
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161.06
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-40.90
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201.62
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Total
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2,845.27
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341.10
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3,276.39
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3,258.16
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1,619.60
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4,859.95
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Overall Picture of Japan’s ODA to Bangladesh
Bangladesh as a newborn state had to face multidimensional challenges with tremendous food, foreign exchange crises for which she had to depend heavily on the Foreign Food Aid from Japan and USA and other international community. The relation between Bangladesh and Japan has been characterized by mutual trust, cordial friendship especially in the areas of economic assistance and cooperation. When we look at the Aid commitment and disbursement position of Japan’s ODA to Bangladesh, it reveals a vivid picture of Japan’s leading trend of providing ODA to Bangladesh, initially more in the form of Food Aid, Commodity Aid and Project Aid. Among the 20 major international donors providing donations to Bangladesh, Japan stands just after IDA (International Development Association) but bilaterally the largest donor to and development partner of Bangladesh. Japan, the second largest economy and technologically the most advanced nation in the world, has been able to project its positive image as the leading donor globally. Over the years, the relationship and economic cooperation between these two Asian Countries have been growing stronger and stronger. Since 1985 Bangladesh has ranked first as the recipient of Japan’s Grant Aid (roughly 10% of Japan’s total grant aid) with a moderate rate of increase annually.
(In US$ million)
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Type
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Grant Aid
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Loan
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Total
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Food Aid
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245.265
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163.210
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408.475
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Commodity Aid
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2268.220
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1377.468
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3645.688
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Project Aid
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706.984
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1898.821
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2605.805
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Total
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3220.50
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3439.50
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6660.00
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Fig: Flow of Japan ODA to Bangladesh over the period of 1971/72-June 2004.[9]
Brief history on bilateral relations betweenJapan and People's Republic of Bangladesh
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Total amount of assistance extended by Japan
Since the independence of Bangladesh, Japan has contributed a total amount of approximately 403 billion yen (approximately Tk 170 billion) in grant assistance and more then 35 billion yen (approximately Tk. 14.7 billion) in technical assistance up to 2000 respectively as well as approximately 591 billion yen (approximately Tk. 248 billion) in soft loans up to 2001 (E/n base). The total amount of 1.029 Trillion yen (approximately Tk. 432.7 billion) has been extended bilaterally from Japan to Bangladesh since independence in 1971. 762 JOCV (Japan Overseas Cooperation Volunteers) members have been sent to Bangladesh.[10]
Conclusion
In conclusion, we can say that Japan is one of the richest countries in the world and important development partner of Bangladesh. She is the significant source of foreign aid to Bangladeshand a member of G-8 countries. Bangladesh is an important source of raw materials and trade partner of Japan and significant Place of investment. Japan and Bangladesh has beenmaintaining cordial relationships in an atmosphere of goodwill andcooperation during the last three decades and a half. Thisrelationship is being strengthened and reinforced through bilateralrelations between- the two countries.Despite asymmetry in status and economic power, Japan-Bangladesh relations illustrate successful and harmonious relations between a developed and a developing country. It is unique that during the past three decades, Japan and Bangladesh have consistently maintained friendly and productive relations despite regime changes in both countries.
[1] http://en.wikipedia.org/wiki/Economy_of_bangladesh
[2]Kyung Lah (February 14, 2011). "Japan: Economy slips to third in world". CNN.com.
[3] http://en.wikipedia.org/wiki/Economy_of_Japan
[4]Embassy of Japan in Bangladesh, http://www.bdembassy.jp/top/bdJpRelation
[5]Yonosuke Nagai, “End of Trader’s Diplomacy.” Japan Economic Journal. March-3, 1981.p. 20.
[6]TadshiKuranari, “Japan Relations with South Asia: A Golden Chance” Speech delivered at a seminar organized by BIISS. Dhaka, 4 August, s1987.
[7] JAPAN’S POLITICAL AND ECONO GOALS IN BANGLADESH, Asian Affairs, Vol. 27, No. 4 : 41-50, October - December, 2005
[8]Embassy of Japan in Bangladesh, http://www.bd.emb-japan.go.jp/en/bilateral/overview.html
[9] Embassy of Bangladesh in Japan, http://www.bdembassy.jp/top/economicWing
[10] http://www.bdsdf.org/forum/index.php?showtopic=3601&st=0
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