Bangladesh new magnet for Japanese producers

Cheaper labour, growing domestic market lure companies hit by rising costs in China

TOKYO • As wage hikes in China push away manufacturers, Japanese companies are on the hunt for cheaper production bases elsewhere in Asia.

One country where they are landing is Bangladesh, which offers them the lowest labour costs in the Asia-Pacific region.

The number of Japanese companies with operations in Bangladesh has more than tripled since 2008, reaching 253 as of May this year, according to the Japan External Trade Organisation (Jetro).

That is still far fewer than the number in China or Thailand, but their presence in Bangladesh is increasing at a much faster pace.

"Bangladesh has been traditionally known as Asia's poorest country," said Ms Mari Tanaka, an official at Jetro's Overseas Research Department. "Labour costs there are lower compared with Japan and other East Asian countries, while it's possible to hire a large number of young labourers."

Among workers in 19 Asia-Pacific countries, those in Bangladesh received the lowest average monthly wage from Japanese companies, less than their counterparts in Sri Lanka, Laos and Myanmar, according to a survey by Jetro.

Some firms are establishing a presence in Bangladesh with an eye on its promising domestic market, Jetro said. Major companies such as Honda Motor, Rohto Pharmaceutical and Ajinomoto are betting on growth there.

With a population of 158 million and a median age of 26.3 years, the country's gross domestic product has more than doubled over the past five years.

"Larger companies are expanding with the expectation that the domestic market will grow," Ms Tanaka said.

Uniqlo operator Fast Retailing played a role in Japanese companies starting to move to Bangladesh a decade ago, Ms Tanaka said.

Its decision to outsource production there in 2008 triggered a jump in Japanese arrivals, while rising labour costs in China and worsening relations between China and Japan in 2010 and 2012 sparked another burst, she added.

Among the 253 companies operating in Bangladesh, about 30 are in the clothing or leather industries, 15 or so are in clothing parts and inspection, 10 in logistics and about 15 in the IT services industry.

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A version of this article appeared in the print edition of The Straits Times on September 21, 2017, with the headline 'Bangladesh new magnet for Japanese producers'. Print Edition | Subscribe