Honda plans to form joint venture in Bangladesh: official
By Refayet Ullah Mirdha, The Daily Star/Asia News Network
September 3, 2012, 12:12 pm TWN
The Japanese Honda Motor Co. plans to form a joint venture (JV) company in Bangladesh to assemble motorcycles, as production cost had increased in other countries, said a senior official of the industries ministry yesterday.
Within five years of operation here, the company would go for full-scale motorbike manufacturing, said ABM Khorshed Alam, an additional secretary of the industries ministry.
Honda would form the JV plant with the state-owned Bangladesh Steel and Engineering Corporation (BSEC) soon, he said.
"On Wednesday, after vetting from the law ministry, I sent the summary of the deal for forming the joint venture company to the Prime Minister's Office for approval," said Alam.
After the go-ahead from Prime Minister Sheikh Hasina, the initial 70-crore taka joint venture company will soon start operation at a rented abandoned garment factory at Maona in Gazipur. The company will increase investment after two years of operation (one crore equals 10 million).
Alam said the chief of Honda Motor would visit Bangladesh within 15 days of the approval for finalising the JV plant.
"We are trying to purchase a suitable piece of land for setting up the permanent plant," he added.
Of the total investment, BSEC will own 30 percent stake, while Honda will own 70 percent in the project, he informed.
The Japanese company was looking for a local partner over the last few years, but they were not convinced with the private sector. In 2009, they had proposed to the government for setting up a JV, he said.
He said the company was coming to Bangladesh as the demand for motorcycles in the country was increasing.
Generally, Honda sets up a plant in a country where 50,000 motorcycles are sold annually. But, in Bangladesh the annual sale of motorcycle is more than two lakh, he added.
The local light engineering sector would be immensely benefited if the company is set up. Some other motorcycle companies were also contacting the industries ministry for setting up their plants, the official added.
"I know Honda is negotiating with a state-owned company for setting up a joint venture plant," said a senior official of the Japan External Trade Organisation in Dhaka asking not to be named.
Rashed Ahmad Ali, president of Japan-Bangladesh Chamber of Commerce and Industry, said Honda was coming to Bangladesh for the government's "China + one policy" (a policy adopted by the Japanese government to reduce dependency on China).
"The cost of production in China has gone high. That is one of the major reasons for shifting the production base to other countries," he added.
"The motorcycles will be built for the local market and with the components shipped from India and Pakistan," reports Reuters news agency.
After selling 26 percent stake in the JV Hero-Honda Company at a cost of US$2 billion, Honda set up two manufacturing plants in India and the company is currently operating two other manufacturing plants in Pakistan as well, said media reports.