Corruption is a major obstacle to foreign investments in Bangladesh, said a report by the US Department of State, adding that the country has made gradual progress in reducing some constraints on investment.
"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," said the State Department's Investment Climate Statement released on Thursday.
The US State Department report said the sectors with active investments from overseas include agribusiness, garment, leather goods, light manufacturing, power and energy, electronics, light engineering, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, shipbuilding, and infrastructure.
The Bangladesh government 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, the report said.
It added that the government's efforts to improve the business environment in recent years show promise but implementation has yet to materialise, saying, "Corruption is also widely perceived to be endemic at all levels of society, discouraging investments and inhibiting economic growth.
"Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes," the report said, adding "Scarcity of land, depleting natural gas reserves, and inadequate power distribution remain major impediments to investment."
It also said security challenges are also hindering investment and trade opportunities in the country in some areas.
"Political unrest, largely stemming from local or national elections, has in the past shut down business operations and impacted supply chains, though not since 2014. Security challenges have hampered some investment and trade opportunities. Although extremist attacks remain a concern for the country, relatively high and steady GDP growth over the last decade has shown the resilience of Bangladesh's economy in weathering these challenges," it added.
Deeming Bangladesh as a moderate, secular, peaceful, and stable country, the US State Department report said the country saw a decrease in terrorist activity in recent years, accompanied by an increase in terrorism-related investigations and arrests following the Holey Artisan Bakery terrorist attack in 2016.
Land disputes are also acting as major barriers to investment, the US State Department report said.
"Bangladesh continues to host one of the world's largest refugee populations. According to UN High Commission for Refugees, more than 923,000 Rohingya from Burma were in Bangladesh as of February 2022. This humanitarian crisis will likely require notable financial and political support until a return to Burma in a voluntary and sustainable manner is possible," the report said.
The report states that Bangladesh's garment sector has made significant progress on fire and structural safety due to unprecedented support from the international community and the private sector.
"The Bangladeshi government has limited resources devoted to intellectual property rights (IPR) protection and counterfeit goods are readily available in Bangladesh. Government policies in the ICT sector are still under development. Current policies grant the government broad powers to intervene in that sector," the report said.
According to the report, electricity generation capacity has grown significantly over the last decade, but transmission and distribution systems need additional work to ensure more reliable and inclusive access to electricity.
"Reputable companies have complained the Bangladesh National Board of Revenue (NBR) has inconsistently subjected businesses' prior-year tax returns to renewed scrutiny. While this process is taking place, normal business activities such as banking, immigration procedures for foreign staff, and branch office licensing permissions may be slowed or stopped entirely," the Investment Climate Statement said.
Stating that the country's financial sector is still highly dependent on banks, it further said capital markets in Bangladesh are still developing.
"Economic weaknesses also include an undeveloped and undercapitalised financial sector, an inefficient and chronically loss-making public sector, and a decision-averse bureaucracy that often resists measures to improve the business climate," the US State Department added.