A Study on Japan-Bangladesh Economic Relations

Abstract

After the Second World War, organizations for economic co-operations, such as EEC, ASEAN, NAFTA emerged in the world. Bilateral economic co-operations between the two states (Bangladesh and Japan) also gained importance with regional co-operations. One of the objectives of these regional and bilateral co-operations was to enhance the mutual benefits and economic development. Japan-Bangladesh economic relations started during the liberation struggle of Bangladesh and it began to increase after 1975 with the change of first regime in Bangladesh. In fact, with the change of first government, economic relations of Bangladesh began to cement with Western countries and Middle East. The main objective of this change was to obtain more foreign aid and extend bilateral trade relations with all other countries for attaining economic development of the country. Pro-western economic and industrial policies helped to establish closer economic relations between Bangladesh and Japan. In spite of economic dissimilarities, between Japan and Bangladesh, Japan extended her cooperation and assistan.ce to Bangladesh in the forms of foreign aid, foreign direct investment and bilateral trade. During the last three decades (1971-2002) Bangladesh's relations with Japan were developed mainly in economic fields. Since 1986, Japanese foreign aid has been growing to the highest position among all the bilateral donors. From independence to November 2003, Bangladesh received 16.15 percent of total aid as Japanese aid. Japanese grant, aid and loan supports contributed to the development of Bangladesh in her different sectors like energy and power generation, infrastructure, communications and transport sectors including construction of major bridges, health and family planning, telecommunication and mass media and agriculture. She has been the major investor in Bangladesh from the first half of 1990s. Volume of Japanese investment in Bangladesh increases slowly with a lower growth rate than that of foreign aid to Bangladesh. Ii'ijection of investment started in 1977. It is contributing mainly in the low and middle range of industries. The share of Japanese direct investment increases over the years. In the bilateral trade, Japan is not a significant export partner of Bangladesh. Though the volume of export is increasing gradually, the relative share is also declining. She has a very low share (1.60 % in 2001-02) of total export of Bangladesh. On the other hand, import from Japan is increasing day by day. As a result, the trade gap between the two countries is widening and the balance of trade is always in favor of Japan. In spite of unfavorable Bangladesh's trade balance with Japan, Japanese cooperation in the economic field is augmenting over the years. In fact, overall economic relation between the two countries is excellent. The extent of economic cooperation between Japan and Bangladesh is measured by the amount of aid, she offered for the economic development of Bangladesh. Investment in the industry and other sectors of Bangladesh economy and also the volume of bilateral trade between the two countries are increasing over the years. By this time, both the countries gained the experiences of good economic relations for more than three decades. Except a few journal articles, no in-depth study was done as yet to examine and evaluate the bilateral economic relations of these two friendly countries. There was a lack of academic interest. No research in Bangladesh was done earlier on the Japanese contribution to the development of Bangladesh. Scholars of Bangladesh have mostly confined their interests in political and cultural matters or at best in some peripher':11 economic aspect analyzing and evaluating the gradual development of bilateral economic relations between the two friendly countries. It includes Japanese bilateral ODA, FD! and bilateral trade relations. Structurally and content-wise this research work is divided into nine chapters. Introductory chapter discusses the problem, objectives, methods, justifications and definitions of different concepts. The second chapter explains evolution of foreign aid and its relevance in the context of economic development of Bangladesh. The third chapter analyses the changing trends and patterns of Japanese aid policy in general and in relations to Bangladesh in particular. The fourth chapter examines the growth trend of Japanese aid flows in Bangladesh since her independence and focuses on the Japan's status as a development partner of Bangladesh. The fihh chapter reviews the impact of Japanese aid on the economic development of Bangladesh. The sixth chapter analyses the limitations and constraints to receiving and utilization of Japanese aid. The chapter seven analyses the flow of Japanese investment and its implications for Bangladesh. The chapter eight analyses Japan-Bangladesh bilateral trade relation and its impact on the economic development of the country. The chapter nine sums up the overall findings of the study and offers a number of policy recommendations. Empirical analysis indicates that as a priority field of bilateral economic relations, foreign aid has a positive contribution to the economic development of Bangladesh. Investment has also positive impact. But as a part of economic cooperation, trade with Japan has less influence on her economic development. High proportion of import from Japan, affected the trade balance between the two countries. In addition to this, trade imbalance with Japan has adverse effect on her balance of payments. It is found that aid and investment have positive influence on the economy. Through those, transfer of capital and technology, increase of export-import and employment generation were possible at a limited scale. To overcome the problems that are hindering the growth of economic cooperation between the two countries, a set of suggestions were offered in the concluding chapter. To make meaningful bilateral economic relations, Bangladesh should give emphasis on the strengthening of balance of trade with Japan. In this context, Joint Committee for Commercial and Economic Cooperation between Japan and Bangladesh should be made for more active and effective actions. In fact, the Japan-Bangladesh Joint Committee for Commercial and Economic Cooperation (JBCCEC) can play a very effective role in the development of economic relation between the two countries. Moreover, continuity and consistency of Bangladesh's economic policies and strategies are necessary for making more cordial economic relations between the two friendly countries.