The United States fears that political and security situation in Bangladesh might become volatile centring the next general election.
"Bangladesh is historically moderate, secular, peaceful and stable, but as the country nears general elections in late 2023/early 2024, the political and security situation may become volatile", the US Bureau of Economic Affairs said in its Investment Climate Statements: Bangladesh, posted on the US Embassy website on Thursday.
The Bureau claimed that the last election in December 2018 was marred by "irregularities, violence and intimidation".
Dwelling on the economic situation, the statement said rising commodity prices and surge in imports in 2022 resulted in a widening balance of payments (BoP) deficit. Foreign currency reserves declined to USD32.2 billion in January 2023 from USD 48 billion in August 2021 and the government responded with the delay in foreign currency payment, it noted.
"The foreign currency shortage also coincided with a banking scandal in which several major Bangladeshi banks made large, questionable loans to companies that then defaulted on the loans. In September 2022, non-performing loans in the banking system reportedly surged to a record USD 12.8 billion, much of which the government has been unable to trace", the statement said.
While admitting that Bangladesh has made gradual progress over the past decade in reducing some constraints on investment, such as taking steps to better ensure reliable electricity, the Bureau said inadequate infrastructures, limited financing instrument, bureaucratic delays and lax enforcement of labour laws and corruption continue to hinder foreign investment.
"The government has made efforts to improve the business environment, but the full implementation of the foreign investment policies is yet to materialize", it noted.
The statement has found the Bangladesh capital market still in a developing one and financial sector is highly dependent on banks, which suffered a major scandal in 2022in which 11 banks faced a collective shortfall of USD 3.1 billion.
The statement noted that a 'corrupt' judicial process and limits on alternative dispute resolution mechanisms are impeding the enforcement of contracts and resolution of business disputes.
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