The question that arises is how Bangladesh can take advantage of conditions and what the opportunities for US investors here are
In a recent development, the US government has shown keen interest in expanding its economic partnership with Bangladesh.
Foreign Direct Investment (FDI) is the key to attaining the goal of widening trade ties, while a larger consumer base and increased domestic market of consumer goods are encouraging US investors.
The Bangladesh and US governments have agreed to a deepening of trade ties. The matter was broadly discussed at the first ever High Level Economic Partnership Consultation meeting between the two countries held virtually on September 30.
Prime Minister's Private Industry and Investment Adviser Salman F Rahman led the Bangladesh side while Under Secretary of State for Economic Growth, Energy and the Environment Keith Krach led the US team at the meeting.
The question that arises is how Bangladesh can take advantage of conditions and what the opportunities for US investors here are.
Identifying potential sectors
To accelerate economic growth, Bangladesh needs to boost investment not only in existing manufacturing sectors but also in those which remain unexplored.
“Blue economy is very important for Bangladesh, which is yet to be explored and it needs advanced technology,” Dr Zahid Hussain, former lead economist at the World Bank, Bangladesh office, told Dhaka Tribune.
The US has two advantages: technology and adequate fund flow, which enables them to invest in Bangladesh's blue economy for commercializing resources found in the bay, said the economist.
On the other hand, agriculture and agro-processing had bright prospects for Bangladesh but lack of cold chain and certification remained challenges.
For global acceptance, it was very crucial to have international certification. US investors had the experience and quality and so partnering with them would give Bangladesh a chance to improve its standards and enter the global market, said Zahid.
Secondly, US investment would create space for lobbyists to gain from their trade policies. For their domestic market, investors will lobby for tariff benefits and it would help Bangladesh to gain more, he added.
However, recent business talks and interest in making investment could create space for the future. It also reflected the US attitude towards Bangladesh as part of an Indo-Pacific strategy.
“US interest in widening trade ties will create opportunities for future trade. It reflects the US government’s attitude towards Bangladesh as part of the Indo-Pacific strategy,” Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), told Dhaka Tribune.
Information and technology could be another area, where Bangladesh could be benefited through preparing itself for the industrial revolution, said the economist.
On the other hand, renewable energy was another sector where Bangladesh needed more investment to produce sustainable energy as the country has technology and experience, said Moazzem.
Since the government is thinking of mechanizing agriculture, investment in the sector can help to acquire technical knowhow, he added.
According to Bangladesh Bank data, Bangladesh received $197.52 million as foreign direct investment in 2019. The quantum was $174 million in 2018.
Of the total investment, the gas and petroleum sector received $100 million, while the software and IT sector got $18 million.
What are the barriers?
Talking about the challenges in making investment, US embassy officials said that to attract Foreign Direct Investment (FDI), ease of doing business was more important as progress depended on improved infrastructure and shipping costs.
On the other hand, transparency of decision-making in awarding business deals remained unclear and corruption in getting services prevailed, which were barriers for investment, the officials stated.
In addition, a lack of proper infrastructure and protection for intellectual property rights was crucial for attracting foreign investors, they added.
Meanwhile, economists have also stressed ensuring a level-playing field and transparency so that investors felt safe in doing business.
They also urged an improvement in infrastructure for Bangladesh to take further advantage from the situation.
Bangladesh’s trade with the United States rose to $4.42 billion during the first seven months of 2020, according to the latest US Census Bureau data.
US exports to Bangladesh increased 10.15% to $1.08 billion while Bangladesh‘s exports US fell 16.94% to $3.34 billion in the same period. US trade deficit with Bangladesh was $2.27 billion.