A US Department of State report finds Bangladesh lucrative for FDI despite pandemic-induced economic downturn across the globe
Bangladesh will continue to be resilient and attract foreign direct investments (FDI) to live up to its image as a favourite place for global investors, despite the Covid-induced economic downturn, according to a new report released by the US Department of State.
The report, titled “2021 Investment Climate Statements” and released on Wednesday, mentioned Bangladesh's 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 the presence of a vibrant private sector.
The Bangladesh government's efforts to improve the business environment in recent years show promise, but implementation has yet to materialize, according to the report, which analyzes the investment climate in more than 170 global economies that are current or potential markets for US companies.
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 continue to hinder foreign investment, the report stated.
Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes, as per the report.
Buoyed by a young workforce and a growing consumer base, Bangladesh has enjoyed consistent annual GDP growth of more than 6% over the past decade, with the exception of the Covid-induced economic slowdown in 2020, the report mentioned.
Much of this growth continues to be driven by the ready-made garment (RMG) industry, which exported $28 billion of apparel products in FY20, and continued remittance inflows, reaching a record $18.2 billion in FY20, as per the US report.
However, the country's RMG exports dropped more than 18% year-on-year in FY20 as Covid depressed the global demand for apparel products.
The Bangladesh government actively seeks foreign investment in sectors like agri-business, textile, leather goods, light manufacturing, power and energy, electronics, light engineering, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, shipbuilding, 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, as per the report.
Bangladesh's Foreign Direct Investment (FDI) stock was $16.9 billion in 2019, with the United States being the top investing country with $3.5 billion in accumulated investments.
Bangladesh received $1.6 billion FDI in 2019. The rate of FDI inflows was only 0.53% of its GDP, one of the lowest rates in Asia, according to the US report.
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As a traditionally moderate, secular, peaceful, and stable country, Bangladesh experienced a decrease in "terrorist activity" in 2020, accompanied by an increase in terrorism-related investigations and arrests, the US government said.
The report, however, highlighted the "diminishing space for the political opposition, undermining judicial independence, and threatening freedom" of the media and NGOs.
Bangladesh continues to host one of the world's largest refugee populations, more than one million Rohingya from Myanmar, in what is expected to be a humanitarian crisis requiring notable financial and political support for years to come.
International retail brands selling Bangladesh-made products and the international community continue to press the Bangladesh government to meaningfully address worker rights and factory safety problems in Bangladesh, according to the report.
With unprecedented support from the international community and the private sector, the Bangladesh RMG sector has made significant progress on fire and structural safety, the US government noted.
Critical work remains on safeguarding workers' rights to freely associate and bargain collectively, including in Export Processing Zones (EPZs), it said.
The Bangladesh government has limited resources devoted to intellectual property rights (IPR) protection, and counterfeit goods are readily available in Bangladesh, as per the report.
Government policies in the ICT sector are still under development. Current policies grant the government broad powers to intervene in that sector, it mentioned.
Capital markets in Bangladesh are still developing, and the financial sector is still highly dependent on banks, said the US report.