Bangladesh will likely continue to attract increasing investments due to its sustained economic growth, vibrant private sector, strategic location between South and Southeast Asia, as well as a large, hard-working and young workforce, despite severe economic headwinds related to the pandemic, said a new US report.
Bangladesh has enjoyed consistent annual GDP growth of more than six percent over the past decade, with the exception of the Covid-induced economic slowdown in 2020, it said.
The 2022 Investment Climate Statement released by the US State Department on Thursday is meant to help US companies make informed decisions about doing business in Bangladesh and 160 other countries.
It noted that Bangladesh’s major export is from the RMG industry, which exported $35.81 billion of apparel products, and remittance inflows reached a record $24.77 billion in fiscal 2021-22.
Bangladesh government actively seeks foreign investment and 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.
Bangladesh’s Foreign Direct Investment (FDI) stock was $20.87 billion till the end of September 2021, with the US being the top investing country with $4.1 billion in accumulated investments.
The report said Bangladesh has made gradual progress in reducing some constraints on investment — including taking steps to better ensure reliable electricity, but inadequate infrastructure, limited financing instruments, bureaucratic delays, lax enforcement of labour laws — and corruption continues to hinder foreign investment.
Government 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.
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.
A December 2018 national election was marred by irregularities, violence, and intimidation, said the report. This allowed the government to adopt legislation and policies diminishing space for the political opposition, undermining judicial independence, and threatening freedom of the media and NGOs.
With unprecedented support from the international community and the private sector, Bangladesh’s garment sector has made significant progress on fire and structural safety. Yet, international retail brands and the international community continue to press Bangladesh to meaningfully address worker rights and factory safety problems.
“Critical work remains on safeguarding workers’ rights to freely associate and bargain collectively, including in Export Processing Zones,” it stated.
On market challenges, the US report said investment climate constraints, deficiencies in energy and transportation infrastructure, and an opaque regulatory environment have prevented Bangladesh from achieving higher growth.
Electricity generation capacity has grown significantly over the last decade, but transmission and distribution systems need additional work to ensure more reliable and inclusive access to electricity. Corruption is also widely perceived to be endemic at all levels of society, discouraging investments and inhibiting economic growth, the report added.
It said although extremist attacks remain a concern for the country, relatively high and steady GDP growth over the last decade has shown the resilience of Bangladesh’s economy in weathering these challenges.
The report said economic weaknesses also include an undeveloped and undercapitalised financial sector, an inefficient and chronically loss-making public sector, and a decision-averse bureaucracy that often resists measures to improve the business climate.