Policy uncertainty major barrier to investment in Bangladesh: World Bank

Policy uncertainty remains one of the key barriers hindering both local and foreign direct investment, which are essential for economic growth and job creation in Bangladesh.

“The number one reason over the past few years has been policy uncertainty,” said Dhruv Sharma while delivering the keynote presentation titled ‘Bangladesh Development Update: Special Focus – A Business Environment that Delivers Jobs’.

“One cannot make a long-term decision about what to do with his or her firm without knowing the direction of policy,” he said, adding that the national election held last February had removed political uncertainty, which he described as another major barrier to attracting investment.

He noted that the high cost of capital, distorted tax incentives, lack of transparency, and supply chain and infrastructure challenges — including access to power, electricity and water — were among the other major obstacles.

Sharma said the government would release its five-year strategic framework soon, while the national budget is expected within the next couple of weeks.

“So hopefully there will be some level of specificity regarding the direction in which the government wants to proceed,” he added while presenting the report at a dissemination event organised by the Policy Research Institute and the World Bank at PRI’s conference room in the capital.

The event was chaired by PRI Chairman Zaidi Sattar. Among others, Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), TIM Nurul Kabir, Executive Director of the Foreign Investors' Chamber of Commerce and Industry (FICCI), and PRI Principal Economist Ashikur Rahman also spoke.

Describing fiscal and taxation policies as “unpredictable”, Mr Kabir said foreign investors wanted to see predictable long-term policies extending at least 10 years ahead to plan their business operations.

“When investors see a new policy being changed within two years, they lose confidence,” he said, explaining one of the key reasons behind the country’s low level of foreign direct investment.

Citing an example of declining investor confidence, he said foreign investors at headquarters often question why they should invest if the country itself does not fully understand its own growth potential.

According to the World Bank findings, key constraints to creating a business environment that delivers jobs include a heavy regulatory burden, with senior managers spending around 13 per cent of their time complying with regulations.

The report suggested smart deregulation, creating a level playing field, enabling private capital, and enhancing productivity for SMEs and informal firms as the way forward.

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