With its sustained economic growth over the past decade and a vibrant private sector, Bangladesh is expected to attract increasing investment in the coming months, says the US State Department’s Investment Climate Statement for 2019.
The report, however, also says that the rate of foreign direct investment (FDI) inflows is only around one percent of GDP, one of the lowest rates in Asia.
Bangladesh received USD 3.0 billion in FDI in FY 2017-18, up from USD 2.45 billion the previous year.
The report says 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, and corruption continue to hinder foreign investment.
“New government efforts to improve the business environment show promise but implementation has yet to be seen,” it says, adding, “Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes.”
The Investment Climate Statements provide country-specific information on the business climates of more than 170 countries and are prepared by economic officers stationed in embassies and posts around the world. They analyse a variety of economies that are or could be markets for U.S. businesses of all sizes.
The report points out that the terrorist attacks in 2015-17, political violence during the 2018 elections, and the influx of more than 700,000 Rohingya refugees since August 2017 has raised security concerns regarding the investment climate.
It says that much of the GDP growth continues to be driven by the ready-made garments industry and continued remittance inflows.
“Forecasts based on the first nine months of the 2018-19 fiscal year estimate Bangladesh is on track to reach USD 40 billion in garment exports for the fiscal year,” says the State Department report.
Referring to safety concerns in factories and worker rights, the report underlines significant progress but suggests additional steps for meaningful impact.
“Critical work remains on safeguarding workers’ rights to freely associate and bargain collectively, including in the Export Processing Zones (EPZs),” it says.
The Investment Climate Statement is considered an important reference tool to help US companies make informed business decisions. It also highlights a variety of challenges and barriers, such as local content requirements, lack of adequate transparency, problems with corruption, and sectors closed to foreign businesses.