The United States has cautioned that the political and security situation in Bangladesh may turn volatile as the country nears general elections in late 2023, or early 2024.
In its latest investment climate statement, the US said Bangladesh is historically a moderate, secular, peaceful and stable nation. But the situation may become volatile centering the upcoming national polls.
The report also noted that the last election in December 2018 was marred by irregularities, violence, and intimidation. Prime minister Sheikh Hasina and her ruling party, the Awami League, adopted legislation and policies that diminished space for the political opposition, undermined judicial independence, and threatened freedom of the media and civil society.
The Bureau of Economic and Business Affairs of the US State Department prepared the report titled “2023 Investment Climate Statements” providing up-to-date information on the investment climates of more than 165 countries and economies.
The report said, “The last election in December 2018 was marred by irregularities, violence, and intimidation. Prime minister Sheikh Hasina and her ruling party, the Awami League, adopted legislation and policies that diminished space for the political opposition, undermined judicial independence, and threatened freedom of the media and civil society.”
“Bangladesh had annual GDP growth of over six percent between 2010-2020. Its strategic location between the emergent South and Southeast Asian markets and its large workforce were reasons for US companies to invest. The Covid-19 pandemic and Russia’s war in Ukraine impacted Bangladesh by reducing demand for its main export—ready-made garments—while contributing to a sharp rise in the prices of energy and food.”
The report further states, “Bangladesh’s rising commodity prices and a surge in imports in 2022 resulted in a widening balance of payments deficit. Foreign currency reserves declined from USD 48 billion in August 2021 to under USD 32.2 billion in January 2023. The Government responded with measures to delay foreign currency payments. 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, nonperforming loans (NPL) in the banking system reportedly surged to a record USD 12.8 billion, much of which the Government has been unable to trace.”
In 2023, Bangladesh obtained an International Monetary Fund (IMF) loan to bolster its foreign currency reserves. The 42-month program “will help preserve macroeconomic stability, protect the vulnerable, and foster inclusive and green growth,” the report said quoting the lending agency.
The report highlighted both positive and negative sides. It said, “Bangladesh has made gradual progress over the past decade in reducing some constraints on investment, such as taking steps to better ensure reliable electricity, but inadequate infrastructure, limited financing instruments, bureaucratic delays, 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 its foreign investment policies has yet to materialise.”
“Capital markets in Bangladesh are still developing and the financial sector is highly dependent on banks, which suffered a major scandal in 2022 in which 11 banks faced a collective shortfall of USD 3.1 billion. A sluggish and reportedly corrupt judicial process and limits on alternative dispute resolution mechanisms impede the enforcement of contracts and the resolution of business disputes,” the report read.
“In the areas of labor, intellectual property rights (IPR), and environment, the Government has passed various modern laws but does not effectively enforce many of them. It devotes limited resources to IPR protection. Although Bangladesh has made measurable progress over the past decade to improve fire and building safety standards, workers’ rights to associate freely and bargain collectively are limited. Despite the many environmental conventions Bangladesh joined, Dhaka is among the world’s worst cities for air pollution,” the report said.