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Japan's South Asia focus: Growing association with Bangladesh
Posted:Apr 15, 2016
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By Aniket Bhavthankar
After the creation of Bangladesh on December 16, 1971, Japan and Bangladesh established diplomatic relations in 1972. Since then, Japan has been generously donating through Overseas Development Assistance (a provision established by the OECD countries for assisting developing and under-developed countries to accelerate their economic growth and social development) to Bangladesh. At the turn of the century, economic diplomacy has played an important role in the development of relationships between the two countries driven partly by Japan’s eagerness to expand its influence from East Asia to South Asia.
Solid bilateral economic relationships between the two nations can be regarded as a testimony of Japan’s influence in Bangladesh. While Bangladesh has been keen to exploit its economic potential and diversify its relationship with Japan, it has also used it to as an option to balance Beijing’s increasing influence in the region.
Development Aid
Japan is the biggest bilateral donor, accounting for almost 13.51 per cent of the total aid to Bangladesh, almost evenly split between loans and grants. The current volume of the trade relationship between the two countries is pegged at USD 2.5 billion and is expected to grow to USD 4 billion in the coming 3-4 years. Of late, Japan has been making concerted efforts to woo Bangladesh for the latter’s strategic importance in the former’s regional and international priorities.
The year 2014 was very eventful in the context of this bilateral relationship as the leaders of Bangladesh and Japan paid visits to each other’s country. It is a well-known fact that Japan is the largest development partner of Bangladesh. Japan is keen to have continued access to the markets of Bangladesh for its finished products. During the visit of Sheikh Hasina, both countries jointly launched Japan-Bangladesh Comprehensive Partnership and Japan assured Bangladesh to provide the financial assistance worth USD 6 Billion over the next five years. 
Japan has also launched its ‘Partnership for Quality Infrastructure’ plan, under which, in association with Asian Development Bank, Japan will provide USD 110 billion for quality infrastructure in Asia in the coming five years. Japan is keen to invest in Bangladesh. 
Japan will provide this assistance under the concept ‘Bay of Bengal Industrial Growth Belt’ (BIG-B) which has emerged as an important pillar in the Japanese strategy in Bangladesh. BIG-B, a grand design to promote industrial agglomeration along the Dhaka-Chittagong-Cox's Bazar belt area, BIG-B has three main pillars. The first pillar is industry and trade. This pillar mainly consists of constructing a long-awaited deep sea port at Matarbari Island. This will offer Bangladesh an important trade gateway to the rest of Asia and beyond.
The second pillar is energy. Matarbari Island can be developed into a massive supply base of primary energy (such as coal, LNG, and oil), and Japan recognizes this potential and is keen to harness it for the good of the relations it maintains with Bangladesh. The electricity produced from such sources can support a quantum leap in industry and trade.
Transportation is the third pillar. To enable greater industry, trade and energy production, the Dhaka-Chittagong - Cox's Bazar transport artery needs to be strengthened and even extended to neighboring countries. BIG-B primarily focuses on improvement of physical infrastructure, creating better environment for economic investment and improving solidarity and connectedness.  These announcements have brought relief for the violence and crisis ridden Bangladesh.
BIG-B is also an appropriate strategy for Bangladesh in the sense that the country is now poised to capitalize on three promising economic opportunities. The first opportunity is the still-competitive Bangladeshi labor in the global marketplace. The second opportunity is the current trend of regional integration. Regional Comprehensive Economic Partnership, or RCEP, which is currently being negotiated among ten ASEAN countries, Japan, China, South Korea, Australia, New Zealand and India, and is one manifestation of this trend. Bangladesh could benefit more by joining it. The third opportunity is the strategic location of Bangladesh; a country between the Indian Ocean and the Indian sub-continent and a country between Southeast Asia and South Asia.
In September 2014, Shinzo Abe Japanese Prime Minister travelled to Dhaka. Abe was the first Japanese Prime Minister to visit Bangladesh since Yoshiro Mori in 2000. Japan has already approved USD 1.18 billion to build the Matarbari ultra super critical coal-fired power project.  
Dhaka also understands value of its relationship with Tokyo and demonstrated it by withdrawing its candidacy for non-permanent seat for United Nations Security Council for 2016-17 and instead backed Japan’s bid; a sign of its gratitude for Japan’s continued assistance.
According to a research published by Pew Research Centre, Bangladesh is the most free-market, trade-oriented country in South Asia. This is one of the major reasons for China’s interest in Bangladesh. China is Bangladesh’s top source for importing goods and material.  Dhaka is also looking to diversify its economic relationship and reduce its overdependence on Beijing.  To woo Japan, Bangladesh also offered several incentives to Japanese businessmen for investing in Bangladesh including the promise of an exclusive industrial park and special allocations in existing export processing zones (EPZs).
Maritime domain is also an area of interest for both Bangladesh and Japan. In the context of China’s increasing assertiveness, both countries have reaffirmed their commitment for freedom of navigation and peacefully resolving conflicts in accordance with the international law.   China is investing heavily in Chittagong port of Bangladesh. Recently, China has unveiled plans for the Maritime silk route and development of port infrastructure in Bangladesh is part of this plan. Given the status of Japan’s relations with China, Beijing plays an important role in the bilateral relationship between Japan and Bangladesh. 
Sonadia Saga
Recent news reports suggest that Bangladesh may shelve a USD 8 billion 18-meter-deep port -water port project it has been negotiating with China, as it looks to pursue a nearby facility financed by the Japanese instead. This could be a big setback for China’s One Belt One Road initiative. Dhaka has cleared Japan's proposal to finance and build a seaport in Matarbari, located some 25 km from Sonadia, where Beijing had offered to construct the country's first deep water port. Matarbari Island is hardly 16km off the tourist-resort city of Cox’s Bazaar.
Increasing influence of hard line Islamic groups in Bangladesh is a cause of worry for Japan given its growing investment in the country. Last year, the Islamic State claimed responsibility for killing Kunio Hoshi, a Japanese national, involved in an agricultural project in Bangladesh. Hoshi’s death puts pressure on Abe government’s plans to give Japan a more prominent role in the global security affairs. This incident has also pushed Japan to work closely with link minded countries on the issue of counterterrorism. 
Japan is looking to increase its influence in South Asia. India is an important strategic partner of Japan in this region. If Japan has to compete strategically with China in this region, it has to go beyond New Delhi and develop stronger relations with other South Asian countries.  China’s friendship with Pakistan is “higher than Himalaya and deeper than Oceans”. In such time, Bangladesh, geo-strategically located at the junction of East Asia and South Asia, may emerge as the most important country apart from India for Japan.
(Aniket Bhavthankar is a Senior Research Associate at the Society for Policy Studies, New Delhi. He can be reached at: aniketb@spsindia.in)
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