Japan adds Bangladesh to ‘China exit’ subsidy destinations

In a major development, Japan has added Bangladesh to the ‘China exit’ subsidy destinations list.

Japanese manufacturers will now be eligible for subsidies if they shift production out of China to Bangladesh, in an expansion of a government programme aimed at diversifying the country's supply chains, according to the Nikkei Asian Review.

The Japan government's supplementary budget for fiscal 2020 earmarked 23.5 billion yen ($221 million) for companies that move production to Southeast Asian nations.

When the Ministry of Economy, Trade and Industry opened up a second round of applications on Thursday, it added "projects that contribute to the resilience of the Japan-ASEAN supply chain" to the list of qualifying moves, eyeing relocations to countries such as India and Bangladesh.

Manufacturers can receive subsidies for feasibility studies and pilot programs. The total amount granted is expected to run into the tens of millions of dollars, Nikkei said.

The programme aims to reduce Japan's reliance on a handful of links in its supply chains, particularly China, and ensure a steady flow of such products as medical supplies and electrical components in an emergency.

This issue came to the forefront with China's shutdown in the early days of the pandemic.

The first round of subsidies announced in July granted more than 10 billion yen to 30 companies relocating manufacturing to Southeast Asia, such as Hoya, which is moving production of electronic components to Vietnam and Laos.

Another 57 are receiving support for shifting production facilities to Japan.

Bangladesh has been trying to woo foreign investors by creating special economic zones.

Bangladeshi products enjoy duty-free and quota-free access to almost all the developed countries.

This access to the global market is further helped by the fact that the policy regime of Bangladesh for foreign direct investment is by far the best in South Asia.

Most Bangladeshi products enjoy complete duty and quota free access to EU, Canada, Australia and Norway.

Though on a limited scale, Bangladesh products already found their access with lower duty in the markets of Thailand, India and China.

Bangladesh’s skilled labor cost base is still less than the other major cities. Dhaka’s management grades are 2-3 times less than Singapore, Shanghai, and Bangkok, according to the Bangladesh Investment Development Authority (BIDA).

Industrial estate rent in Dhaka is cost effective than Shanghai, Jakarta, Bangkok. Office rents are also very competitive with other international cities. Dhaka’s housing rent for foreigners is less expensive than Singapore, Mumbai, Karachi, and Hanoi, according to BIDA.

Cost of diesel in Dhaka is found to be more competitively priced than most other large cities. Vehicles increasingly use LPG as Dhaka gasoline costs are competitive with most other cities.

Bangladesh offers some of the world’s most competitive fiscal non-fiscal incentives. BIDA can advise further on this matter. In summary and in most cases, these amount to the following:

The government also offers repatriation facilities of dividend and capital at exit. Besides, investors can avail permanent resident permit on investing $75,000 and citizenship on investing $ 500,000.