Corruption in public offices is to blame first for foreign direct investment (FDI) shying away from Bangladesh so long as, according to World Bank findings, nearly one-fourth of the firms were forced to give bribe to start business.
"Bureaucratic delays and frequent changes in foreign direct investment law and regulations are also the top regulatory challenges for the foreign investors here in Bangladesh," says the Country Private Sector Diagnostic (CPSD) report of the World Bank Group.
Economists say cutting the discretionary powers and scope of their exercise by the civil servants could unblock FDI follow into the country, now that the interim government has launched a drive for investment promotion with a summit meet.
"One in four Bangladeshi firms (23 per cent) report having experienced at least one request for bribes, 35 per cent of firms expect to give gifts to obtain an electrical connection or an operating licence, 72 per cent of firms expect to give gifts to get an import licence, and 19 per cent of firms expect to give gifts in meetings with tax officials," reads the WBG's CPSD, unveiled recently.
The International Finance Corporation, the World Bank and MIGA of the WBG early this month prepared the Bangladesh CPSD aimed at tracking the obstructions to investments and ways of recovery.
The WBG report says the incidence of corruption is about 50-percent higher than the South Asia regional average.
Bangladesh has anti-corruption policies and regulations, but their enforcement has been lacking, it says about reasons for such venal practices.
There are reports that the Anti-Corruption Commission (ACC), the main government agency investigating briberies and corruption, has been used politically, according to the CPSD report.
According to the Worldwide Governance Indicators, Bangladesh is ranked 182nd out of 213 countries, and is in the 15th percentile globally, for "control of corruption."
Bangladesh's FDI fell to just 0.5 per cent of GDP from 2018-2022, the lowest among other peer countries in the world.
According to the WB, Vietnam is the highest FDI attractor in the globe with 4.2 per cent of its GDP, while the Philippines 2.5 per cent, India 1.7 per cent and Turkey 1.2 per cent of their respective GDP sizes.
A steady rise in inflows since the late 1990s, peaking at 1.7 per cent of GDP in 2013, was followed by a slowdown that began in 2015, owing to political instability and regulatory uncertainty, the diagnosis report says.
Most FDI to Bangladesh in the last decade was in the energy sector. Much of the FDI was in the form of reinvestments by existing foreign affiliates operating in Bangladesh.
The Washington-based lending group's CPSD report further says foreign investors frequently cited access to foreign exchange, energy shortages, and limited access to finance or high borrowing costs as constraints to more FDIs to come in.
"Many investors cite bureaucratic delays as the top constraint to expanding operations, ahead of frequent changes in FDI laws and regulations, and governance challenges".
Regulations to restrict electricity for businesses established outside economic zones were found to be further impeding much-sought-after foreign investment in the country.
Former World Bank Lead Economist Dr Zahid Hussain also thinks corruption in government offices and bureaucratic tangles are the major setbacks for the FDI inflow to Bangladesh.
"Bangladesh has offered so much discretionary power to the civil servants as creates a big obstruction on the way to FDI. If this power is not cut and human dealings are not reduced in the public offices, the investors would not be attracted," he told The Financial Express.
Citing the failure in establishing the online VAT system by the NBR, Dr Hussain deplores that different types of automation in public offices had been going on over the last 30 years which are yet to be finished.
"If you fail to ensure true automation and human dealing-less system in the investment board instead of present half-hearted automations, the investors will not be attracted," says the senior economist.
Meanwhile, Bangladesh Investment Development Authority (BIDA) early this month arranged an international investment summit in Dhaka with the participation of hundreds o foreign investors in a bid to attract investment.
Executive Chairman of the BIDA Chowdhury Ashik Mahmud Bin Harun at the investment summit said they were trying to bring all the relevant government offices under single window so that the foreign investors are attracted to invest here.
Acknowledging the problems, cited in the WBG's CPSD report, he said that they informed the investors about Bangladesh's "current and future steps to remove the obstructions on the way to investment".
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