Bangladesh will continue to attract growing investment despite problems, says US government

Bangladesh is likely to continue to attract growing investment, despite severe economic headwinds created by the global Covid-19 outbreak, according to the United States.

The United States sees sustained economic growth over the past decade, a large, young and hard-working workforce, Bangladesh’s strategic location between major markets in South and Southeast Asia, and a dynamic private sector as positive elements to attract investment.

Bangladesh has made incremental progress in reducing some investment constraints, including taking steps to better ensure reliable electricity, but there are still issues that hamper foreign investment, the US government said in its last report.

The US State Department’s investment climate statement noted that inadequate infrastructure, limited financing instruments, bureaucratic delays, lax enforcement of labor laws and corruption continue to hamper foreign investment, reports the UNB.

Bangladesh’s foreign direct investment (FDI) stock was $20.87 billion at the end of September 2021, with the United States being the top investing country with $4.1 billion in cumulative investments.

Bangladesh received $2.56 billion in FDI in 2020, according to data from the United Nations Conference on Trade and Development (UNCTAD).

The FDI inflow rate was only 0.77% of GDP, one of the lowest rates in Asia.

The government of Bangladesh is actively seeking foreign investment.

Sectors with active investment from abroad include agro-industry, apparel/textiles, leather/leather goods, light manufacturing, power and energy, electronics, light engineering, information and communication technologies (ICT), plastics, healthcare, medical equipment, pharmaceuticals, shipbuilding, and infrastructure.

Bangladesh offers a range of investment incentives as part of its industrial policy and export-led growth strategy, with few formal distinctions between foreign and domestic private investors, the US government says.

The US government says Bangladesh’s efforts in recent years to improve the business environment show promise, but implementation has yet to materialize.

The slow adoption of alternative dispute resolution mechanisms and the slowness of court proceedings hamper the enforcement of contracts and the resolution of commercial disputes, according to the executive summary of the chapter on Bangladesh.

The US State Department’s Investment Climate Statements provide information on the business climate of more than 170 economies and are prepared by economic officers stationed at embassies and missions around the world.

They analyze a variety of economies that are or could be markets for American companies.

Investment climate statements are also benchmarks for working with partner governments to create enabling business environments that are not only economically sound, but address labor issues, human rights, responsible conduct companies and measures taken to fight corruption.

The reports cover topics such as 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 seen steady annual GDP growth of over 6% over the past decade, barring the COVID-induced economic downturn in 2020.

Much of this growth continues to be driven by the ready-to-wear (RMG) industry, which exported $35.81 billion in apparel products in fiscal 2021, second only to China. and continued remittances, reaching a record $24.77 billion in Fiscal Year 2021.

As a traditionally moderate, secular, peaceful and stable country, Bangladesh has seen a decrease in terrorist activities in recent years, accompanied by an increase in terrorism-related investigations and arrests following the Holey Artisan terrorist attack. Bakery in 2016, according to the US report.

Rohingya issue:

Bangladesh continues to host one of the largest refugee populations in the world.

According to the United Nations High Commissioner for Refugees, more than 923,000 Rohingya from Burma were in Bangladesh as of February 2022.

This humanitarian crisis will likely require significant financial and political support until voluntary and sustainable return to Myanmar is possible, the US government says.

Workers’ rights:

International retail brands selling products made in Bangladesh and the international community continue to pressure the government of Bangladesh to meaningfully address workers’ rights and factory safety issues in Bangladesh, says the US government.

Thanks to unprecedented support from the international community and the private sector, Bangladesh’s garment sector has made significant progress in fire and structural safety, he said.

According to the US government, critical work remains to be done to protect the rights of workers to freely associate and bargain collectively, including in export processing zones (EPZs).

The Bangladeshi government has limited resources devoted to intellectual property rights (IPR) protection and counterfeit products are readily available in Bangladesh. Government policies in the ICT sector are still being developed.

Current policies grant the government broad powers of intervention in this sector.

Capital markets in Bangladesh are still developing and the financial sector is still heavily dependent on banks.