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Single biggest FDI in Bangladesh
« on: August 07, 2018, 07:16:47 AM »
Single biggest FDI in Bangladesh
Japan Tobacco snaps up Akij's tobacco business for $1.47 billion
Staff Correspondent
Japan Tobacco Inc., one of the five largest tobacco companies in the world, yesterday acquired Akij Group's tobacco business for $1.47 billion (about Tk 12,430 crore), in what would be the biggest ever single foreign direct investment in Bangladesh.

United Dhaka Tobacco Company Limited, the Akij concern, holds about 20 percent share of Bangladesh's cigarette market, making it the second biggest player after British American Tobacco.

Japan Tobacco would buy shares of Dhaka Tobacco at $1.09 billion and pay $386 million for trademarks and design rights.

For the last three years, Dhaka Tobacco has been acting as a contract manufacturer and distributor of Japan Tobacco's Winston brand and Philip Morris's Marlboro brand.

“This is the biggest FDI in the private sector,” Kazi M Aminul Islam, executive chairman of Bangladesh Investment Development Authority, told The Daily Star.

He went on to term Japan Tobacco's investment plan as a good example of FDI. If the Tokyo-based company's investment is successful, it would add at least $100 million to export receipts, he added.

The purchase is straight out of central casting for Japan Tobacco as it looks to offset shrinking sales in its traditional markets, brought about by tighter smoking regulations and growing awareness of the hazards of tobacco consumption.

In the past 12 months, the company snapped up companies in Russia, Indonesia and the Philippines, all three amongst the top ten tobacco markets in the world.

Bangladesh is the eighth largest cigarette market in the world, with volumes exceeding 86 billion units and growing by about 2 percent year-on year.

“With this investment, we continue to accelerate our expansion in emerging markets that matter,” said Mutsuo Iwai, executive vice-president and president of the Tobacco Business.

The transaction, which is expected to be complete in the third quarter of 2018 following regulatory clearance, will also support the company's sustainable profit growth objectives in the mid- to long-term, he added.

“Bangladesh is one of the fastest growing economies in the world with a pro-business mindset, which is why we are keen to expand our presence in the country,” said Eddy Pirard, president and chief executive of Japan Tobacco International.

The tobacco business of Akij is profitable, has state-of-the-art manufacturing facilities and a strong distribution network and workforce, according to Pirard.

“With our strong track record of integration, we can accelerate operational efficiencies and introduce some of our global flagship brands alongside Akij's well-established portfolio,” he added.

PROGGA, a platform of anti-tobacco campaigners, criticised the deal.

Japan Tobacco will introduce new products to penetrate the market that local companies cannot, said ABM Zubair, executive director of PROGGA.

Industry insiders said the entry of Japan Tobacco is likely to increase competition and compliance in the Tk 33,000 crore annual cigarette market, where British American Tobacco enjoys 60 percent share.

Cigarette is the biggest source of value-added tax for the National Board of Revenue.

Contacted, Sk Bashir Uddin, managing director of Akij Group, declined to comment on the landmark deal and instead referred The Daily Star to the firm that handles Akij's PR.