Tuesday, 4 October, 2022

US lauds Bangladesh’s economic growth

Calls for improving dispute resolution mechanisms

  • Diplomatic Correspondent
  • 30 July, 2022 12:00 AM
  • Print news

Lauding Bangladesh’s impressive economic growth over the past decade, the US has said Bangladesh is expected to continue to attract increasing investment despite severe economic headwinds created by the global coronavirus pandemic.

“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 to continue to attract increasing investment,” reads the US Department of State’s Investment Climate Statements released on Thursday.

The report provides information on the business climates of over 160 economies and is 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 US businesses.

Buoyed by a young workforce and a growing consumer base, Bangladesh has enjoyed consistent annual GDP growth of more than six percent over the past decade with the exception of the coronavirus-induced economic slowdown in 2020.

Much of this growth continues to be driven by the ready-made garment (RMG) industry, which exported $35.81 billion of apparel products in 2021 fiscal year (FY), second only to China, and continued remittance inflows, reaching a record $24.77 billion in FY 2021, according to the report.

“The country’s RMG exports increased more than 30 percent year-over-year in FY 2021 as the global demand for apparel products accelerated after the Covid shock,” it said.        The US in its Bangladesh country statement said the government of Bangladesh actively seeks foreign investment. “Sectors with active investments from overseas include 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.”

It also said the government of Bangladesh 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.

“Bangladesh’s Foreign Direct Investment (FDI) stock was $20.87 billion through the end of September 2021, with the United States being the top investing country with $4.1 billion in accumulated investments,” the report reads.

Bangladesh received $2.56 billion FDI in 2020, according to data from the United Nations Conference on Trade and Development (UNCTAD). 

However, the report said the rate of FDI inflows was only 0.77 percent of GDP, one of the lowest rates in Asia. “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,” the report said.

It said the government efforts to improve the business environment in recent years show promise but implementation is yet to materialise and identified slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes.

As a traditionally moderate, secular, peaceful and stable country, the US State Department statement said, Bangladesh experienced 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.  

It also noted that the December 2018 national election marred by “irregularities, violence and intimidation” consolidated the power of Prime Minister Sheikh Hasina and her ruling party Awami League. 

“This allowed the government to adopt legislation and policies diminishing space for the political opposition, undermining judicial independence and threatening freedom of the media and NGOs,” the report said.

It said Bangladesh continues to host one of the world’s largest refugee populations.

Speaking about the nearly one million Myanmar’s Rohingya population in Bangladesh, the US said this humanitarian crisis will likely require notable financial and political support until a return to Myanmar in a voluntary and sustainable manner is possible.

It said the international retail brands selling Bangladesh-made products and the international community continue to press the government of Bangladesh to meaningfully address worker rights and factory safety problems in Bangladesh.

With unprecedented support from the international community and the private sector, the Bangladesh garment sector has made significant progress on fire and structural safety. “Critical work remains on safeguarding workers’ rights to freely associate and bargain collectively, including in Export Processing Zones (EPZs).”

The report said 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, added the statement.

Capital markets in Bangladesh are still developing and the financial sector is still highly dependent on banks.