A deeper analysis of the country’s investment climate reveals some fault-lines, which are proving a dampener for investor optimism. The country’s low rankings in the annual investment climate assessment reports reveal some stark challenges potentially damaging for the country’s medium term growth prospects. The World Bank’s publication Doing Business 2020: Training for Reform—Bangladesh ranked 168 out of 190 countries in terms of operating businesses in Bangladesh. The ranking went eight steps up from the previous ranking in 2018-19. According to a recent World Bank report, Bangladesh carried out three business reforms since the last publication and would need to accelerate the reform pace to further improve its regional and global competitiveness.
A major challenge impeding improvement in business climate include perennial red tapes and bureaucracy, which are stunting prospects of obtaining company documents, permits and licenses in a timely manner. Other bottlenecks include difficulty in accessing credit, lack of protection for minority investors and infrastructure deficiencies.
According to Global Competitiveness Index 4.0, published by World Economic Forum (WEF), Bangladesh ranked 103 out of 140 countries. World Economic Forum’s Executive Opinion Survey-2017 ranked corruption (15.7 out of 16), inadequate infrastructure (14.4 out of 16) and inefficient government bureaucracy (11.7 out of 16) as the major challenges for operating in Bangladesh. These challenges are inherent to the most least developed countries and are gradually being superseded by the urgency of higher foreign investment in Bangladesh. Since the business confidence in the economic climate has improved post-election, the government is taking remedial measures to deter bureaucracy and corruption and facilitate investment processes. BIDA’s plan to implement a one-step-online solution, the OSS site, is one such step taken in the process.
The government has identified the importance of infrastructure for attracting investments. Taking lessons from the Chinese economic success story, the government is promoting industrialization by setting up Special Economic Zones across the country, while attracting investments through investment friendly policies like tax holidays. Bangladesh Economic Zone Authority (BEZA), a semi-autonomous body under the Prime Minister’s office, is primarily responsible for managing development of these zones, with the mandate to eliminate any bureaucratic bottlenecks hindering the flow of incoming investments. Inspite of the goodwill from the top policymakers, implementation of some of these zones have slowed down considerably due to red tapes and external challenges like difficulty in acquiring required land
The government is investing heavily in power and electrification rate, which has gone up from 50.5% in 2006 to 75.9% in 2016. The time required for businesses to obtain new electricity connections has come down from 400 days in 2014 to less than 150 days in 2018, according to a World Bank publication. However, considering galloping demand for power for an energy hungry economy like Bangladesh, continuous investments are required for meeting energy demand of 30,000 MW in 2030 (Source: PSMP). PPP based investments and greater private sector participations are imperative for scaling up the sector further, apart from infusion of G2G based investments and more power and natural gas import.
Infrastructure development of the country has been driven by both national and international (G2G and multilateral agencies) funding. Recently, both China and India have committed to investing in Bangladesh to the tune of USD 24 billion and USD 4.5 billion respectively. Majority of these investments have been earmarked for road, rail and port infrastructure development, as part of implementing China’s “One belt, one road” initiative and India’s bid for securing transit through Bangladesh. However, further investments are required in terms of building and repairing new highways and expanding existing port capacities as well as building a deep sea port and new power plants.
For averting red-tapism and corruption while registering a company, BIDA is in the process of setting up a One Stop Service (OSS) online portal for foreign investors, with a mandate to securing all necessary documentation for setting up a company within 45 working days. Investors can track progress of the registration process using the online portal. While it’s too early to assess the impact of this initiative, even a moderate improvement in lead time for obtaining necessary documents can improve the likelihood for obtaining more foreign investments.