Japan Urges Bangladesh to Sign EPA, Ease Business Rules

Japan Urges Bangladesh to Sign EPA, Ease Business Rules

Japan has urged Bangladesh to sign the Economic Partnership Agreement (EPA) within this year and accelerate key reforms aimed at attracting greater Japanese investment. Tokyo emphasised the need for simpler business regulations, smoother customs procedures, and stable, transparent tax policies to enhance investor confidence.

During the Japan–Bangladesh Public–Private Joint Economic Dialogue (PPED) held in Tokyo in April, Japanese officials identified persistent barriers to investment, including inconsistent incentives in economic zones, lengthy visa and work permit approvals, outdated banking practices, and shortages of skilled workers and infrastructure.

The dialogue took place ahead of Chief Adviser Muhammad Yunus’s visit to Japan in May. Meeting minutes circulated this week among government ministries outlined Japan’s expectations and Bangladesh’s commitments to move forward.

EPA Crucial After LDC Graduation

The EPA is viewed as vital for sustaining Bangladesh’s trade relationship with Japan once the country graduates from Least Developed Country (LDC) status in 2026. The seventh round of negotiations concluded in Tokyo in September, covering goods, services, investment, e-commerce, and intellectual property.

Commerce Secretary Mahbubur Rahman said the final negotiations were completed and both sides had exchanged tariff and service schedules. “The documents are aligned. We hope to complete legal formalities by November and aim to sign in December, depending on Japan’s readiness,” he said.

Currently, Bangladesh enjoys duty-free access to Japan under its LDC privileges, which will expire after graduation, imposing an 18% tariff on exports. The EPA aims to maintain duty-free access and expand cooperation in 17 key sectors.

Bangladesh’s exports to Japan stood at $1.41 billion in FY25, accounting for 2.9% of total exports. Japanese FDI reached $500 million in 2024, with 330 companies operating in the country—nearly 58% of which plan to expand. Major firms such as Lion Corporation, ONODA, and NICCA Chemical Co. Ltd have already acquired land in the Bangladesh Special Economic Zone.

Japan Calls for Reforms and Stability

At the Tokyo dialogue, Japanese officials and business leaders pressed for swift signing of the EPA and reforms to improve the investment climate.

Gaku Yoda, Deputy Director General at Japan’s Ministry of Economy, Trade and Industry (METI), called for urgent completion of the EPA, stressing its role in Bangladesh’s post-LDC transition. “Both governments must listen to businesses and cooperate to build a smoother investment environment,” he said.

Kukubu Fumiya, Chairman of the Japan–Bangladesh Committee for Commercial and Economic Cooperation, said 85% of Japanese companies in Dhaka expect the EPA to be signed this year.

JETRO’s Country Representative Ando Yuji said despite changes in government, Japanese firms remain optimistic about Bangladesh’s prospects, especially in chemical fibre and export-oriented industries. However, he cited major challenges such as visa and work permit delays of up to 14 months, sudden policy changes, and non-compliant banking systems.

JICA’s South Asia Director General Yamada Tetsuya noted that Bangladesh’s FDI-to-GDP ratio remains just 0.3%, far below potential, due to regulatory complexity and inadequate infrastructure. He said JICA continues to assist reforms aimed at improving productivity and investment readiness.

Bangladesh Pledges Action

Responding to Japan’s concerns, Principal Secretary to the Chief Adviser Siraz Uddin Miah assured that the government would sign the EPA this year and address obstacles faced by Japanese investors. He said initiatives were underway to streamline visa processing, customs procedures, and work permit approvals.

Bangladesh’s Ambassador to Japan, Md Daud Ali, said the interim government led by Chief Adviser Yunus was committed to strengthening the rule of law and investor confidence. He identified the language barrier as a key issue and proposed setting up Japanese language and technical training centres in Bangladesh. He also expressed interest in expanding agricultural exports, including vegetables, to Japan.

BIDA Director General Md Ariful Hoque said efforts were ongoing to raise FDI from 0.3% to 3% of GDP through policy consistency, anti-corruption measures, and stable resource supplies.

Bangladesh Bank official Abu Saleh Mohammed Shahab Uddin said payment issues had been resolved and that foreign reserves and exchange rates were now stable. Meanwhile, NBR Member Md Moazzem Hossain stated that customs and tax reforms were progressing, with the National Single Window nearing completion and the new Customs Bond Management System launched in early 2025 to reduce clearance times and improve transparency.