Japanese companies operating in Bangladesh continue to face difficulties in doing business due to procedural complexities even after the change of government.
They pointed out complexities in tax systems, customs clearance, financial regulation and inconsistent policies, according to a survey conducted among the companies during September 19-29 last.
Suggesting reforms in these areas, the survey report says taxation and customs are the most complicated procedures for the companies, followed by visa and work permit, financial and banking regulation, administrative procedure, inconsistent policies, corruption, and institutional problems.
According to Japan External Trade Organisation (JETRO), the percentage of Japanese companies which considered business expansion in the country in 2023 dropped to 61.2 from 71.6 in 2022.
The JETRO’s last year findings have also been reflected in the quick study conducted in September by the Japanese Commerce and Industry Association in Dhaka (JCIAD) or Shokorai on its members.
It showed 18 per cent of respondent companies identified taxation as a major problem while 11.9 per cent pointed out customs, visa and work permit, and financial and banking regulations.
They found these problems were due to complicated conditions and procedures for expatriates to work locally and delay in opening LCs and settlement, overseas remittances and overseas borrowing, among others.
Some 6.8 per cent responded also referred to complicated and time-consuming procedures to get approval from the Office of Registrar of Joint Stock Companies and Firms (RJSC). Procedure to get approval of development projects and licensing and permit procedures for electricity, water, gas, etc. is also not easy.
Some 5.0 per cent Japanese companies pointed out corruption as a problem due to demand for speed money at different stages and demanded reform of the institutions like RJSC and customs.
“Approval and clearance time for Japanese companies takes more time as Japan does not practice speed money in getting their work done,” said an investor.
President of Japan Bangladesh Chamber of Commerce and Industry (JBCCI) Sugawara Manabu said the Japanese companies have mixed feeling of expectations and concerns in the changed scenario, and said expectation is because lots of reforms are coming, but concerns is there due to being unable to know the timeline or roadmap to be announced and implemented.
JBCCI Director Tareq Rafi Bhuiya said that as a nation, Japan is neutral and tries to do business following rules in a country.
The JCIAD also pointed out that a lack of transparency in tax procedures and incentives persists for not simplifying administrative procedures and called for reducing paper work while keeping scope of mutual information sharing among ministries and agencies concerned.
The number of Japanese companies increased to around 350 as of June 2023 from 183 in 2014 due to their involvement in development activities like deep seaport, metro rail, physical infrastructure and special economic zones.
Though there is no such case of withdrawing investment by any Japanese company, the JETRO surveys pointed out a risky business environment compared with neighbouring countries as Bangladesh was topped as the worst performer in the case of efficiency in administrative procedure and tax system procedure in 2022.
JETRO Country Representative Yuji Ando said many investment incentives declared by the past government have been changed by the new government either through SROs or setting new conditions.
According to JETRO, the government declared 100 per cent duty free import of capital machinery and construction materials for developers and unit investors but it was changed suddenly with imposing one per cent customs duty in June last.
Though it was later withdrawn, another incentive on income tax exemption for 10 years for industries established in private and government economic zones and Hi-1Tech Park was restored but imposing a good number of conditions on investors.
JBCCI, JCIAD and JETRO met separately with the National Board of Revenue, Bangladesh Investment Development Authority, Bangladesh Bank and secretaries of different ministries to raise their concerns and placed reform proposals in entire foreign direct investment-related sectors.
The JETRO also shared its reform proposals with the White Paper committee.
After the fall of Sheikh Hasina’s government, the Japanese funded projects, including metro rail and Matarbari Deep Sea port, have faced uncertainty due to high costs. However, the council of advisers later gave green signals to these projects.
The JETRO suggested 3Cs of reform for foreign direct investment and 3Os for smooth execution. The 3Cs are consistency in policies, financial sectors and tax system, corruption free and comparison with other nations to improve ranking.
The 3Os – one stop, online and once only – are proposed to save time and cost in business, simplify the system and procedures and stop submission of the same information to the government bodies.
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