FDI in Bangladesh

Inadequate infra, corruption still hinder inflow: US report

Staff Correspondent | Published: 23:24, Oct 02,2020


Inadequate infrastructure, limited financing instruments, bureaucratic delays, lax enforcement of labour laws, and corruption continue to hinder foreign direct investment in Bangladesh, according to a recent report of the US government.

Bangladesh has made gradual progress in reducing some constraints on investment, including taking steps to better ensure reliable electricity, said the report titled ‘2020 Investment Climate Statements: Bangladesh’ released by the US Department of State on September 11.

Corruption remains a serious impediment to investment and economic growth in Bangladesh, it said, adding that corruption was common in public procurement, tax and customs collection, and among regulatory authorities.

Corruption, including bribery, raises the costs and risks of doing business.

By some estimates, off-the-record payments by firms may result in an annual reduction of 2 to 3 per cent of GDP, it said.

Regarding political and security environment, the report observed that the ruling Awami League won 289 out of 300 parliamentary seats in the December 2018 election, marred by wide-spread vote-rigging, ballotbox stuffing and intimidation.

Harassment, intimidation and violence during the pre-election period made it difficult for many opposition candidates and their supporters to meet, hold rallies, and/or campaign freely, it said.

The clashes between rival political parties and general strikes that previously characterised the political environment in Bangladesh have become far less frequent in the wake of the Awami League’s increasing dominance of the country and crackdown on dissent, the report said.

Many civil society groups have expressed concern about the apparent trend toward a one-party state and the marginalisation of all political opposition groups, it added.

According to the report, corruption has a corrosive impact on the broader business climate market and opportunities for US companies in Bangladesh.

It also deters investment, stifles economic growth and development, distorts prices, and undermines the rule of law.

While the government has established legislation to combat bribery, embezzlement, and other forms of corruption, enforcement is inconsistent.

The report, however, predicted that Bangladesh would likely to attract increasing investment in coming months.

‘With sustained economic growth over the past decade, a large, young, and hard-working workforce, strategic location between the large South and Southeast Asian markets, and vibrant private sector, Bangladesh would likely attract increasing foreign direct investment, despite severe economic headwinds faced by the global outbreak of COVID-19,’ the report said.

Bangladesh received $3.6 billion in foreign direct investment in 2018, a 67.9 per cent increase from the previous year.

However, the rate of FDI inflows is only slightly above one per cent of GDP, one of the lowest of rates in Asia.

According to the report, Bangladesh has limited resources to devote to intellectual property rights protection and counterfeit goods are readily available in Bangladesh and industry estimates that 90 per cent of business software is pirated.

A number of US firms, including film studios, manufacturers of consumer goods, and software firms, have reported violations of their IPR.

‘Investors note police are willing to investigate counterfeit goods producers when informed, but are unlikely to initiate independent investigations,’ it said.

According to the report, Bangladesh actively seeks foreign investment, particularly in the agri-business, textiles, leather, light manufacturing, power and energy, information and communications technology, healthcare, medical equipment, pharmaceutical and infrastructure sectors.

New government efforts to improve the business environment show promise but implementation has yet to materialise, it said.

Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes, it added.

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