Phasing out tax holidays in EZs a violation of deals, says Japanese ambassador

The Japanese ambassador to Bangladesh claims that carrying out the budgetary proposal to gradually remove a tax break for investors and developers of private economic zones (EZs) would be against the agreements made when creating the zones.

“If the tax benefits and investment incentives of BSEZ (Bangladesh Special Economic Zone) were reduced or abolished, it would be a violation of the contractual provisions set out in the development agreement,” said the ambassador, Iwama Kiminori.

He said such a contract violation cannot be ignored by either Government, which values following the law.

In a letter sent to Finance Minister Abul Hassan Mahmood Ali who had on 6^th June, proposed the national budget for the next fiscal year the Japanese ambassador conveyed these concerns.

Additionally, the budget had suggested eliminating the FY ’25 zero-duty advantage on the import of capital machines, parts, and building supplies. Businesses based in the industrial enclaves will thus be required to pay a 1 per cent customs levy.

“We express strong concern that the recent proposed removal of incentives to EZs is incompatible with medium-term to long-term economic growth policies,” Kiminori said.

In recent years, Bangladesh has drawn interest from Japanese businesses as a potential place to invest. However, he noted that there is significant worry that this action may erode confidence in the industrial and economic policies of the Bangladeshi Government. He added that it would cause the nation to be taken off the list of attractive places for foreign investors that are put up by these businesses.

According to Kiminori, raising tax revenue is a pressing issue as Bangladesh is set to transition from its current status as a least-developed country to an upper middle-income country by 2031 and a developed country by 2041.

“However, we must emphasise the importance of foreign direct investment to bring industrial diversification, macroeconomic stabilisation, and job creation,” he said.

He urged the Government to take action to preserve the investment incentives for the Japanese economic zone (JEZ) located at Araihazar, Narayanganj. He claims that eight foreign businesses have already invested in the BSEZ, and several more have expressed interest since it was opened.

According to Kiminori, Japanese businesses in particular place a high value on consistent policies, long-term commitments, and contributions to the community.

The letter stated that as a flagship initiative of the Governments of Bangladesh and Japan, Sumitomo Corporation, Japan International Cooperation Agency, and Bangladesh Economic Zones Authority (Beza) inked a joint venture agreement to form a firm named BSEZ to construct and run the zone.