Monday, March 23, 2020

Foreign Investment in Bangladesh

Bangladesh is now trying to establish itself as the next rising star in South Asia for foreign investment. The government has implemented a number of policy reforms designed to create a more open and competitive climate for private investment, both foreign and local.

The country has a genuine democratic system of government and enjoys political stability seen as a ‘sine qua non’ for ensuring a favourable climate for investment and sustained development.

Bangladesh has been quick to undertake major restructuring for establishing a market economy, with the major thrust coming from the private sector. The country enjoys modest but steady economic growth. Its current development strategy is based on the premise that the creation and distribution of wealth occurs through the acceleration of growth driven by competitive market forces, with the government facilitating growth and making a clean break from the practices of a controlled economy where private investment is constrained. The government has been gradually withdrawing its involvement in industrial and infrastructure sectors and promoting private sector participation.

The government has moved speedily to translate its policy pronouncements into specific reforms. It has been consistently pursuing an open-door investment policy and playing a catalytic rather than a regulatory role. Regulatory controls and constraints have been reduced to a minimum. The government has steadily liberalized its trade regime. Significant progress has been achieved in reducing nontariff restrictions on trade, rationalising tariff rates and improving export incentives. The introduction of VAT has helped rationalisation of the import tariff and domestic tax structures. The tariff structure and the import policy are kept under constant review to identify areas where further improvements are needed.

On the legal and administrative front, the government has initiated measures to give greater autonomy and independence to the judiciary – a pre-requisite, as viewed by investors, for the restoration of confidence in the judicial system. A permanent Law Reform Commission has already been set up to ensure greater transparency and predictability in the way rules and regulations are made and implemented. Motivated by the simple realisation that state-owned enterprises are a drain on its scarce resources and that these are generally inefficient, costly and slow in responding to changing markets and consumer desires, the country has embarked on a privatisation program, offering substantial opportunities for international investors.

Foreign investment is particularly welcome in the export-oriented industries such as textiles, leather goods, electronic products and components, chemicals and petrochemicals, agro-based industries, green jute pulp, paper, rayon products, frozen foods (dominated by shrimp farming), tourism, agriculture, light industries, software and data processing. Foreign investment is also desired in high-technology products which will help import substitution or industries which will be labour-, as well as technology intensive. 

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