The inflow of foreign direct investment (FDI) in Bangladesh is one of the lowest in Asia, according to a latest US government report.
The country received FDI amounting to US$3.6 billion in 2018 which was slightly more than one per cent of the country's gross domestic product (GDP) and one of the lowest rates in Asia, said the report released last week.
The US Department of State's "2020 Investment Climate Statements: Bangladesh" report identified that inadequate infrastructure, limited financing instruments, bureaucratic delays, lax enforcement of labour laws, and corruption continued to hinder foreign investment in Bangladesh.
"New government efforts to improve the business environment show promise but implementation is yet to materialise," reads the report, adding that slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes.
"Corruption remains a serious impediment to investment and economic growth in Bangladesh," said the report. "While the government has established legislation to combat bribery, embezzlement, and other forms of corruption, enforcement is inconsistent."
The report has mentioned that the current Awami League-led government has publicly underscored its commitment to anticorruption efforts and reaffirmed the need for a strong Anti-Corruption Commission (ACC), "but opposition parties claim that the ACC is used by the government to harass political opponents."
The US state department report also alleges that corruption is common in public procurement, tax and customs collection, and among regulatory authorities. "Corruption, including bribery, raises the costs and risks of doing business," it said.
By some estimates, according to the report, off-the-record payments by firms might result in an annual reduction of two to three per cent of GDP.
The report continued that 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," the report added.
It, however, acknowledged that Bangladesh has made gradual progress in reducing some investment constraints including taking steps to better ensure reliable electricity.
The report has also pointed out that 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 will likely attract increasing investment, despite severe economic headwinds faced by the global outbreak of the Covid-19.
The US investment climate statement, which has covered 165 foreign markets, appreciates that Bangladesh offers a range of investment incentives under its industrial policy and export-oriented growth strategy.
It has also listed that Bangladesh is actively seeking foreign investment, particularly in the agribusiness, garment/textiles, leather/leather goods, light manufacturing, power and energy, electronics, light engineering, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, ship building, and infrastructure sectors.