The United States (US) has said Bangladesh offers opportunities for investment but corruption remains a serious impediment to its investment and economic growth.
Bangladesh has made gradual progress in reducing some constraints on investment, but inadequate infrastructure, financial constraints, bureaucratic delays, corruption and political violence continue to hinder foreign investment.
The US made the observation in its Investment Climate Statement 2015 on Bangladesh mentioning that Bangladesh witnessed over six per cent annual growth sustained over the past two and a half decades having a large, young and hard-working workforce, and vibrant private sector.
It said lack of effective alternative dispute resolution mechanisms and slow judicial processes impede the enforcement of contracts and the resolution of business disputes.
Bureau of Economic and Business Affairs under the US Department of the State issued the first of its Investment Climate Statements 2015 later last month, providing country-specific information and assessments on investment-related laws and other important factors for doing business abroad.
US embassies and consulates prepare these public documents, which cover more than 175 foreign markets, to assist US companies to make informed decisions relating to investment in foreign markets.
The investment climate statement said the Bangladeshi government actively sought foreign investment, particularly in the apparel industry, energy, power, and infrastructure projects offering a range of incentives under its industrial policy and export-oriented growth strategy.
The report said an important impediment to investment in Bangladesh is a weak and slow legal system in which the enforceability of contracts is uncertain and the judicial system does not provide for interest to be charged in tort judgments, which means there is no penalty for delaying proceedings.
Citing data of Bangladesh Bank, it said the country received US$ 1.5 billion in foreign direct investment (FDI) in FY (fiscal year) 2013-14, up from US$ 990 million in the previous year.
"This is a nominal amount of investment compared to the total foreign investment that the entire South Asia region attracted, as India continues to dominate FDI inflows for the region," the statement said.
Bangladesh has made gradual progress in reducing some constraints on investment, but inadequate infrastructure, financial constraints, bureaucratic delays, and corruption continue to hinder foreign investment, it said.
Political turmoil in the aftermath of the January 2014 elections and subsequent one year anniversary in January 2015 has resulted in some investment delays or cancellations, it said, adding that the state policies are generally in favour of increased economic growth, but are hampered by slow and incomplete implementation issues involving the regulatory and rule of law environment.
While discrimination against foreign investors is not widespread, the government frequently promotes local industries and some discriminatory policies and regulations exist. For example, the government closely controls approvals for imported medicines that compete with domestically-manufactured pharmaceutical products and it has required majority local ownership of new shipping companies, albeit with exemptions for existing foreign-owned firms, following a prime ministerial directive.
Land registration has historically been prone to disputes over competing titles, and scarcity of land is a significant investment constraint, according to the report.
It said while the government has improved the efficiency of the main seaport in Chittagong, the construction of a four-lane highway to connect Chittagong with the capital city of Dhaka is making only slow progress.
Bangladesh allows private investment in power generation and natural gas exploration, but efforts to allow full foreign participation in petroleum marketing and gas distribution have stalled.
Dispute settlement is also hampered by shortcomings in accounting practices and in the registration of real property. With the exception of those conducted by a few internationally affiliated accounting firms, audits of balance sheets and profit and loss statements often follow clients' instructions and fail to conform to international standards, it said.
"The timeframe for dispute resolution is unpredictable. It can be done as quickly as a few months, but often depending on the type of dispute it can take years," it said.
"Corruption remains a serious impediment to investment and economic growth in Bangladesh although the government has established legislation to combat bribery, embezzlement and other forms of corruption, but enforcement is inconsistent," it said.
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