A weak and slow legal system along with the lack of enforcement of regulations in Bangladesh is a major impediment to foreign direct investment (FDI), according to a new United States government report.
“Some investors cited government laws, regulations, and the lack of implementation as impediments to investment,” the US Department of State said in a report titled “2020 Investment Climate Statements: Bangladesh”.
The report revealed that an important impediment to investment in Bangladesh is a weak and slow legal system in which the enforceability of contracts is uncertain.
The judicial system does not provide for interest to be charged in tort judgments, which means delays in proceedings carry no penalties, it said.
The country does not have a separate court or division of a court dedicated solely to hearing commercial cases. The Joint District Judge court (a civil court) is responsible for enforcing contracts, the report noted.
Saying that the country has achieved incremental progress in using information technology to improve the transparency and efficiency of some government services and to develop independent agencies to regulate the energy and telecommunication sectors, the report argued the government has historically limited opportunities for the private sector to comment on proposed regulations.
In 2009, Bangladesh adopted the Right to Information Act that provides for multilevel stakeholder consultations through workshops or media outreach. Although the consultation process exists, it is still weak and in need of further improvement, the report said.
Since 1989, the government has gradually moved to decrease regulatory obstruction of private business. The chambers of commerce have called for a greater voice for the private sector in government decisions and for privatisation, but at the same time many support protectionism and subsidies for their own industries, the US report mentioned.
Even policy and regulations in Bangladesh are often not clear, consistent, or publicised, the report said, adding registration and regulatory processes are alleged to be frequently used as rent-seeking opportunities.
The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) aims to integrate regional regulatory systems among Bangladesh, India, Burma, Sri Lanka, Thailand, Nepal, and Bhutan.
However, efforts to advance regional cooperation measures have stalled in recent years and regulatory systems remain uncoordinated, it said.
Local law is based on the English common law system but most fall short of international standards. The country’s regulatory system remains weak and many of the laws and regulations are not enforced and standards are not maintained, the report stated.
It, however, acknowledged that Bangladesh has made gradual progress in reducing some investment constraints, including taking steps to better ensure reliable electricity.
The report has pointed out that with sustained economic growth over the past decade, a large, young, and hard-working workforce, strategic location between the large South and Southeast Asian markets, and vibrant private sector, Bangladesh will likely attract increasing investment, despite severe economic headwinds faced by the global outbreak of Covid-19.
The US investment climate report, which has covered 165 foreign markets, appreciated that Bangladesh offers a range of investment incentives under its industrial policy and export-oriented growth strategy.
It has also praised Bangladesh for actively seeking foreign investment, particularly in the agribusiness, garment/textiles, leather/leather goods, light manufacturing, power and energy, electronics, light engineering, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, shipbuilding, and infrastructure sectors.