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Rise Up, the Next Industry after Sewing! JICA’s Challenge to Diversify Industries in Bangladesh | News & Media

Posted on 2023-06-302023-06-30 by Editor in Chief

In 2022, the year that marks the 50th anniversary of the establishment of friendship between Bangladesh and Japan, an industrial park that will change the country’s industrial structure will open,” said Taro Kawachi, President of Bangladesh SEZ Ltd (BSEZ). The Bangladesh Special Economic Zone (BSEZ) held a grand opening ceremony on December 6, 2022.

JICA has been supporting the development of the BSEZ, which has been under preparation with Japanese assistance for many years as a symbol of Japan-Bangladesh friendship and the first international-level special economic zone (industrial park) in Bangladesh. The following is an overview of JICA’s comprehensive cooperation with the BSEZ.

BSEZ opening ceremony (BSEZ President Kawachi is in the front left)

JICA’s Efforts Toward Industrial Diversification, a Top Priority Issue

Bangladesh continues to enjoy stable and high economic growth in the Corona Disaster. With a population of 170 million, Bangladesh is the world’s eighth most populous country, and with an average age of 27.6 years, the country’s young population is attracting significant attention for its abundant labor force and potential as a consumer market, even in fast-growing Asia. Meanwhile, the garment industry accounts for about 40% of Bangladesh’s industrial sector and more than 80% of the country’s exports. The sewing industry has maintained its competitiveness with other countries thanks to low labor costs. However, Bangladesh is experiencing rapid economic growth, and the soaring cost of labor is looming in the near future, so a shift in the industry is required.

Mr. Ichiguchi, Director of JICA Bangladesh Office, says, “Industrial diversification and high value-adding through the promotion of FDI (Foreign Direct Investment) are the most important themes of our future support to Bangladesh. The BSEZ, Bangladesh’s first industrial park of international standards, has been the focus of the most focused efforts. This is because in Bangladesh, where various uncertainties (risks) exist, the most important factor in attracting FDI is to create a business environment in which private companies can invest in the manufacturing industry with peace of mind.

In developing the BSEZ, JICA’s unprecedented and comprehensive cooperation makes the BSEZ an attractive investment.

The one and only comprehensive cooperation unprecedented in JICA history

A major attraction of BSEZs is the infrastructure development system of BSEZs. The BSEZ in Bangladesh, which is prone to flooding and requires a large initial investment just to develop the land, utilizes public funds to reduce the initial investment by private companies. It is being developed as Bangladesh’s first high-standard industrial park of international standard.

The Bangladesh government is providing the infrastructure around the BSEZ (access roads to the industrial park, etc.) and the infrastructure for the lower structures (land development for the industrial park, etc.) with government funds, and BSEZ is providing the infrastructure inside the BSEZ (access roads inside the industrial park, etc.) JICA is supporting the Bangladesh government’s infrastructure development fund with a yen loan. JICA supports the Bangladesh government’s infrastructure development through yen loans, and Japanese companies have great trust in BSEZ, which is being developed through the combined efforts of the Japanese public and private sectors. President Kawachi says, “We have received inquiries from about 40 companies, mainly Japanese companies, and sales have been strong since the opening of BSEZ.

BSEZ maintenance system

Second, BSEZ’s investment structure is also unique: JICA supports BSEZ’s operations through (1) equity-backed finance provided by the Bangladesh government through yen loans and (2) direct investment in BSEZ through overseas investments and loans. BSEZ is also backed by the governments of Japan and Bangladesh.

BSEZ Ownership Structure

In addition, to promote the entry of companies into the BSEZ, the company is also providing technical assistance in establishing a one-stop service (OSS) system to simplify the cumbersome administrative procedures for investment permits and approvals in the SEZ, as well as in establishing an OSS office in the BSEZ. Mr. Ichiguchi feels that the investment environment has steadily improved: “Investment permits in the SEZ before the start of construction, which used to take six months to a year, have been expedited with the establishment of the OSS, and construction can now begin in about three months. JICA also provides low-interest loans denominated in taka(*) to companies in the BSEZ through yen loans to promote the entry of Japanese companies into the area. This project is the only one of JICA’s many initiatives to provide such multifaceted and comprehensive support, from development to operation.

Note: Bangladeshi currency

JICA Support for BSEZ Tenants

Expanding Industrial Value Chains! Future JICA Cooperation for Industrial Diversification

Among the Bangladesh government’s ambitious plan to develop approximately 100 special economic zones in Bangladesh, three areas in particular are expected to be developed to international standards: the BSEZ, the Mirsholai area in northern Chittagong, and the Matabari-Moheshkhali area in southern Bangladesh. The Mirsholai and Matabari areas are expected to attract heavy industries that will replace the garment industry, and are positioned as priority areas and sectors for the Bay of Bengal Growth Zone (BIG-B) concept mentioned at the 2014 Japan-Bangladesh Summit.

Director Ichiguchi says, “Taking advantage of the geographical advantage of Bangladesh’s only deep-water port, we expect upstream companies in the industrial value chain to move into the Matabari region in the next 20 years. In the Matabari region, the company is implementing the Matabari Port Development Project, a yen loan project, etc., with the aim of attracting investments worth 1 trillion yen in the future, and plans to provide further comprehensive cooperation ranging from the formulation of a comprehensive development plan to cooperation in infrastructure development in various sectors, including power, energy, ports, and roads.

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