Economy
“Boosting Bilateral Trade: Bangladesh and Japan Exchange 11 MoUs”
Bangladesh and Japan have exchanged 11 Memorandums of Understanding (MoUs) to boost bilateral trade during the investment conference “The Rise of Bengal Tiger: Trade and Investment Opportunities between Bangladesh and Japan” held in Tokyo on Thursday, April 27th. The MoUs were signed between private companies from both countries and included the participation of JICA and JBIC. The Chairman of the BCCI, Professor Shibli Rubayat-Ul-Islam, gave a presentation at the event.
11 Memorandum of Understanding (MoUs)
1. Japan Chamber of Commerce and Industry (JCCI) and Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) have signed a memorandum of understanding aimed at fostering closer and more productive cooperation between the two countries in the fields of bilateral trade, economic cooperation, and participation in events. The agreement seeks to identify and address the various impediments to trade and investment between the two countries and establish a reliable and fruitful communication channel between the two business groups to facilitate collaboration and mutual support.
2. Lion Kallol Limited (LKL) in Bangladesh aims to expand its business further and has signed an agreement with Lion and BSEJ (Bangladesh SEZ Authority) for the allocation of land.
3. The development, construction, and operation of a high-performance 700-megawatt combined cycle gas-fired power plant in Anowara, Chattogram, is set to be enhanced through a contract signed by Japan’s ITOCHU and Bangladesh’s KEPCO and AKH PPP Project.
4. A new solar power project will be jointly invested in and developed by Marubeni of Japan and the Dorin Group of Bangladesh, as they have signed an agreement. The goal is to form a business and capital partnership, and undertake a collaborative initiative.
5. Marubeni and the Bangladeshi business conglomerate BIIT have signed a pact to establish a joint venture with the aim of promoting investment and development.
6. Medina Dental Company of Japan and AICHI Health Care Group of Bangladesh have signed an agreement to jointly establish a Japanese standard dental laboratory in Bangladesh.
7. Sumitomo Corporation of Japan and Parka Bangladesh Limited of Bangladesh have signed a pact to collaborate on the development of a 200 megawatt solar power plant in Bangladesh, both on the surface and on the ground.
8. The objective is to establish a new cyber security training center in Bangladesh, and for this purpose, a collaboration agreement has been signed between Japan’s Pipeline and Bangladesh’s Euro Vigil.
9. As part of a joint venture to construct a thermal power plant in Bangladesh, a partnership agreement has been signed between Japan’s JERA and Bangladesh’s Summit Group.
10. An exchange of letters (EOL) has been signed between the Financial Services Agency (FSA) of Japan and the Bangladesh Securities and Exchange Commission (BSEC) to enhance mutual cooperation in financial services.
11. Furthermore, in order to promote knowledge exchange, business collaboration, and mutual cooperation in the IT industry between the two countries, Japan Information Technology Services Industry Association (JISA) and Bangladesh Association of Software & Information Services (BASIS) have signed an agreement.
On Thursday, April 27, according to local time in Tokyo, Prime Minister Sheikh Hasina exchanged views with selected Japanese business leaders at a hotel. During the meeting, she stated that Bangladesh will continue to prioritize the development of a conducive business environment and ensure equal opportunities and facilities for everyone in the field of business.
She highlighted the growing Japanese businesses and investments in Bangladesh, even amidst the pressure of the COVID-19 pandemic. Their bilateral trade has surpassed the milestone of $4 billion for the first time in the fiscal year 2021-22.
The Prime Minister mentioned that the number of Japanese companies working in Bangladesh has gradually increased over the past few years, especially since 2014 when they entered into “comprehensive partnership” and the Big-B Initiative.
She expressed hope that Japanese business leaders will continue to follow this positive trend and expand their existing businesses and establish new ones in Bangladesh.
The World Bank reported that approximately $3.15 billion is illicitly transferred out of Bangladesh each year through offshore accounts.
Citing the State of the Tax Justice Report 2020, the World Bank stated that the offshore financial wealth of Bangladeshis is estimated at 0.7% of the nation’s GDP.
“Including losses from corporate abuse and offshore tax evasion, tax revenue losses are estimated at over $700 million,” the World Bank stated in its latest Bangladesh Development Update report published on 2 April. This amount equals 2.2% of the country’s total revenue income in fiscal year (FY) 2019-20.
In the Development Update report, the World Bank noted that illicit capital flows into offshore accounts from Bangladesh have been increasing.
Referring to the latest Global Financial Integrity Report 2021, the bank mentioned: “Between 2009 and 2018, as much as $3.6 billion on average per year has been laundered from Bangladesh through trade mis-invoicing.”
The World Bank highlighted that Bangladesh’s illicit capital outflow through offshore accounts is high compared to some of the country’s peer nations in its Development Update report.
Currently, Bangladesh ranks 54th among 133 countries in the Financial Secrecy Index, which assesses the extent to which a country’s tax and financial systems facilitate individuals in concealing their finances from the rule of law, according to the World Bank.
The bank further stated that Bangladesh ranked 44th globally and 3rd in South Asia in terms of illicit outflows through trade mis-invoicing.
The International Monetary Fund (IMF) has once again lowered its growth forecast for Bangladesh’s economy to 5.7 percent for the current fiscal year of 2023-24. This revision was outlined in the IMF’s World Economic Outlook released on Tuesday, April 16.
The IMF’s revised projection highlights various global and local challenges, including persistent high inflation, unemployment, reduced remittance inflow, and a decline in industrial investment targets.
This marks the second time the IMF has reduced its economic growth forecast for Bangladesh. In October of last year, it initially projected a 6 percent growth rate, down from its previous prediction of 6.5 percent for the FY2023-24 period.
The IMF’s growth forecast follows a recent announcement by the Asian Development Bank (ADB), which stated that Bangladesh’s GDP is expected to expand by 6.1 percent in FY 2023-24, driven by export growth.
Earlier this month, the World Bank also weighed in, stating that Bangladesh’s growth will be subdued due to reduced private consumption affected by high inflation. It forecasted a GDP expansion of 5.6 percent in FY 2023-24, below the average annual growth rate of 6.6 percent recorded over the decade preceding the Covid-19 pandemic.
China’s economy grew faster-than-expected in the first quarter, data showed on Tuesday, offering some relief to officials as they try to shore up growth in the face of protracted weakness in the property sector and mounting local government debt.
However, a raft of March indicators released alongside the GDP data – including property investment, retail sales and industrial output – showed that demand at home remains frail and is retarding overall momentum.
The government has unveiled a raft of fiscal and monetary policy measures in a bid to achieve what analysts have described as an ambitious 2024 GDP growth target of around 5%, noting that last year’s growth rate of 5.2% was likely flattered by a rebound from a COVID-hit 2022.
Gross domestic product (GDP) grew 5.3% in January-March from the year earlier, data released by the National Bureau of Statistics showed, comfortably above analysts’ expectations in a Reuters poll for a 4.6% increase and slightly faster than the 5.2% expansion in the previous three months.
“The strong first-quarter growth figure goes a long way in achieving China’s ‘around 5%’ target for the year,” said Harry Murphy Cruise, economist at Moody’s Analytics.
“Industrial production also supported through the quarter, but weak March data is cause for some concern. Similarly concerning, China’s households continue to keep their wallets closed.”
On a quarter-by-quarter basis, GDP grew 1.6% in the first quarter, above the forecast for growth of 1.4%.
The world’s second-largest economy has struggled to mount a strong and sustainable post-COVID bounce, burdened by a protracted property downturn, mounting local government debts and weak private-sector spending.
Fitch cut its outlook on China’s sovereign credit rating to negative last week, citing risks to public finances as Beijing channels more spending towards infrastructure and high-tech manufacturing.
The government is drawing on infrastructure work – a well-used playbook- to help lift the economy as consumers are wary of spending and businesses lack confidence to expand.
WEAK MARCH DATA
The economy was off to a solid start this year, but March data on exports, consumer inflation, producer prices and bank lending showed that momentum could falter again and reinforced calls for more stimulus to shore up growth.
Indeed, separate data on factory output and retail sales, released alongside the GDP report, underlined the persistent weakness in domestic demand.
Industrial output in March grew 4.5% from a year earlier, compared with a forecast increase of 6.0% and a gain of 7.0% for the January-February period.
Growth of retail sales, a gauge of consumption, rose 3.1% year-on-year in March, against a forecast increase of 4.6% and slowing from a 5.5% gain in the January-February period.
Fixed asset investment grew an annual 4.5% over the first three months of 2024, versus expectations for a 4.1% rise. It expanded 4.2% in the January-February period.
“On the face of it, the headline number looks good… but I think the momentum is actually quite weak at the end,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Singapore.
Prior to the data release, analysts polled by Reuters expected China’s economy to grow 4.6% in 2024, below the official target.
Following the improved first-quarter GDP outcome, economists at ANZ raised their 2024 China growth forecast to 4.9% from 4.2% previously, while BBVA maintained their 4.8% growth projection.
Most investors appeared to take the headline GDP surprise with a pinch of salt given the weakness of the March data.
Traders said China’s state-owned banks were selling dollars to steady the yuan in the onshore market. China stocks .CSI300 were tracking broader markets lower as geopolitical tensions in the Middle East sapped risk sentiment.
CHALLENGES
The crisis in the property sector has been a major drag on China’s economy as it has rippled across business and consumer confidence, investment plans, hiring decisions and stock prices.
The March data highlighted the depth of the troubles in the sector, with investor confidence and demand still at a low ebb.
China’s new home prices fell at their fastest pace in more than eight years last month as debt troubles among property developers hurt demand.
Property investment slumped 16.8% year-on-year in March, worse than a 9.0% drop in January-February, while sales tumbled 23.7%, compared with a 20.5% fall in the first two months of the year.
With the Federal Reserve and other developed economies showing no urgency to start cutting interest rates, China may also face a longer period of subpar export growth in a further blow to policymakers’ hopes of engineering a strong economic recovery.
Adding to the challenge for China, authorities also have to contend with ongoing tensions with the United States over trade, technology and geopolitics.
Investors are looking to an expected Politburo meeting in April for clues on policy direction, though few analysts expect any major stimulus.
The People’s Bank of China (PBOC) has pledged to step up policy support for the economy this year, with markets betting on further cuts in banks’ reserve requirement ratio and interest rates.
Some analysts believe the central bank faces a challenge as more credit is flowing to production than into consumption, exposing structural flaws in the economy and reducing the effectiveness of its monetary policy tools.
Looking ahead, Jinyue Dong, senior economist at BBVA research, said he believes the “recovery has not got a solid foundation yet as the deep adjustment of real estate market and local government debt overhang still remain the main risks.”
“In addition, geopolitics risks mostly due to China-US confrontations before the US president elections will persist in the foreseeable future.”
