China urges Bangladesh to improve investment climate

China has sought a better investment climate in Bangladesh as its businesses are ready to set up establishments here, officials said on Tuesday.

They said many Chinese businesses at a working-group meeting in Dhaka last week expressed their willingness to invest in Bangladesh and stressed the need to improve the business climate

The 'impoverished business climate' has long been preventing them from moving ahead with their plans, they pointed out at the meeting of the joint Bangladesh-China Working Group (WG) on economic cooperation and investment.

The meeting was held after a six-year hiatus.

Representatives from the Chinese Ministry of Commerce, the Chinese Embassy in Dhaka, and the Economic Relations Division (ERD) of Bangladesh were present at the meeting.

Presided over by ERD Additional Secretary Mirana Mahrukh, the WG discussed details on the prospects of investment and economic cooperation between Beijing and Dhaka.

The meeting was held ahead of the Bangladesh-China Joint Economic Commission (JEC) meeting which is expected to be held in Dhaka on June 1.

China is the largest trading partner of Bangladesh. In the last fiscal year (FY 2023-24), Bangladesh imported goods worth US$16.637 billion, 26.40 per cent of the country's total imports, showing higher demand for Chinese products in Bangladesh.

According to Bangladesh Bank data, China, including Hong Kong, has emerged as a significant investor in Bangladesh, with FDI reaching $2.789 billion as of December 2024, making it the country's second-largest investor.

Chinese enterprises are actively involved in various sectors such as textiles, energy, manufacturing, and infrastructure projects like the Padma Bridge and Karnaphuli Tunnel in Chattogram.

Many Chinese companies are also looking to diversify their production bases, particularly due to rising production costs and geopolitical tensions, making Bangladesh a potential destination for their "China Plus One" strategy.

Meanwhile, a leader of the Bangladesh-China Chamber of Commerce and Industry (BCCCI) said that while Bangladesh actively seeks to attract foreign direct investment (FDI), particularly from China, a number of persistent challenges in its business climate are making Chinese companies reluctant to fully commit to the investment.

Despite Bangladesh's strategic location, competitive labour costs, and ongoing efforts to establish economic zones, concerns over bureaucratic hurdles, infrastructural deficiencies, policy inconsistencies, and a lack of transparency continue to deter substantial inflow of Chinese capital, he said, requesting anonymity.

An official, who attended the Working Group meeting at ERD last week, told the FE that the Chinese investors are contemplating to invest in Bangladesh, but the country's impoverished business climate is discouraging them.

The Chinese side urged the Bangladesh side to improve the business climate that included simplification of the licencing system, easy access to land and energy, stable government policy on investment, and repatriation of profits, said the official.

"We have apprised the Chinese side of the government's initiatives to improve the business climate," he added.

The enthusiasm of the Chinese investors is often met with significant operational difficulties on the ground.

Key concerns frequently voiced by the Chinese businesses and acknowledged by analysts include bureaucratic complexities and administrative inefficiency, lengthy approval procedures, convoluted customs processes, and a general lack of efficiency in the government agencies.

These concerns are leading to significant delays and increased costs for investors.

Obtaining necessary permits and licences can be a time-consuming and complicated ordeal, they said.

Despite progress in some areas, Bangladesh still faces an infrastructure deficit. Unstable electricity and gas supplies, port congestion, and underdeveloped transport networks contribute to higher production costs and reduced investor confidence, analysts say.

The slow pace of economic zone implementation-including the one proposed for Chinese investors in Anwara-further illustrates these difficulties, insiders said.

Meanwhile, the Bangladesh Investment Development Authority (BIDA) has taken steps to improve the situation.

The Bangladesh government has initiated the development of large-scale economic zones and is working on merging its regional investment promotion agencies to streamline the FDI process.

The interim government has also expressed a strong desire to attract more Chinese investment, especially in sectors like healthcare, solar panel manufacturing, and high-value textiles.

However, for Bangladesh to fully capitalise on China's industrial relocation and attract a higher volume of Chinese investment, fundamental reforms are crucial.

Addressing the core issues of administrative inefficiency, corruption, infrastructure gaps, and policy instability will be key to fostering a truly investment-friendly environment and building long-term trust with Chinese and other foreign investors.

Without these systemic improvements, Bangladesh risks falling behind regional competitors in the race for crucial FDI, analysts said.

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