Bangladesh is likely to continue to attract increasing investment, despite severe economic headwinds created by the global outbreak of Covid-19, says the United States.
The US sees the sustained economic growth over the past decade, a large, young, and hard-working workforce, Bangladesh's strategic location between the large South and Southeast Asian markets, and vibrant private sector as some positive things to attract investment.
Bangladesh has made gradual progress in reducing some constraints on investment, including taking steps to better ensure reliable electricity but still there are issues that hinder foreign investment, said the US government in its latest report.
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The US Department of State’s Investment Climate Statements noted that inadequate infrastructure, limited financing instruments, bureaucratic delays, lax enforcement of labour laws, and corruption continue to hinder foreign investment.
Bangladesh’s Foreign Direct Investment (FDI) stock was $20.87 billion through the end of September 2021, with the United States being the top investing country with $4.1 billion in accumulated investments.
Bangladesh received $2.56 billion FDI in 2020, according to data from the United Nations Conference on Trade and Development (UNCTAD).
The rate of FDI inflows was only 0.77 per cent of GDP, one of the lowest rates in Asia.
The government of Bangladesh actively seeks foreign investment.
Sectors with active investments from overseas include agribusiness, garment/textiles, leather/leather goods, light manufacturing, power and energy, electronics, light engineering, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, ship building, and infrastructure.
Bangladesh offers a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors, says the US government.
The US government says Bangladesh's efforts to improve the business environment in recent years show promise but implementation has yet to materialise.
Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes, according to the executive summary of Bangladesh chapter.
The US Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world.
They analyse a variety of economies that are or could be markets for US businesses.
The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labour, human rights, responsible business conduct, and steps taken to combat corruption.
The reports cover topics including openness to investment, legal and regulatory systems, protection of real and intellectual property rights, the financial sector, state-owned enterprises, responsible business conduct, and corruption.
Buoyed by a young workforce and a growing consumer base, Bangladesh has enjoyed consistent annual GDP growth of more than six per cent over the past decade, with the exception of the Covid-induced economic slowdown in 2020.
Much of this growth continues to be driven by the ready-made garment (RMG) industry, which exported $35.81 billion of apparel products in fiscal year 2021, second only to China, and continued remittance inflows, reaching a record $24.77 billion in FY2021.
As a traditionally moderate, secular, peaceful, and stable country, Bangladesh experienced a decrease in terrorist activity in recent years, accompanied by an increase in terrorism-related investigations and arrests following the Holey Artisan Bakery terrorist attack in 2016, says the US report.
Rohingya issue
Bangladesh continues to host one of the world’s largest refugee populations.
According to the UN High Commission for Refugees, more than 923,000 Rohingyas from Burma were in Bangladesh as of February 2022.
This humanitarian crisis is likely to require notable financial and political support until a return to Myanmar in a voluntary and sustainable manner is possible, says the US government.
Workers’ rights
International retail brands selling Bangladesh-made products and the international community continue to press the government of Bangladesh to meaningfully address workers’ rights and factory safety problems in Bangladesh, says the US government.
With unprecedented support from the international community and the private sector, the Bangladesh garment sector has made significant progress on fire and structural safety, it said.
Critical work remains on safeguarding workers’ rights to freely associate and bargain collectively, including in export processing zones (EPZs), according to the US government.
The Bangladeshi government has limited resources devoted to intellectual property rights (IPR) protection and counterfeit goods are readily available in Bangladesh. The government policies in the ICT sector are still under development.
Current policies grant the government broad powers to intervene in that sector.
Capital markets in Bangladesh are still developing, and the financial sector is still highly dependent on banks.
