US STATE DEPARTMENT: 'Corruption key barrier for FDI in Bangladesh'

[Black_cats]

US STATE DEPARTMENT: 'Corruption key barrier for FDI in Bangladesh'

Scarcity of land, depleting natural gas reserves, and inadequate power distribution remained major impediments to investment

Mehedi Hasan/Dhaka Tribune
Tribune Desk
July 31, 2022 7:02 AM

A recent report by the US Department of State said that corruption was a major obstacle for obtaining foreign investments in Bangladesh, despite gradual progress in reducing some constraints.

Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes, the report said, adding that scarcity of land, depleting natural gas reserves, and inadequate power distribution remained major impediments to investment as well.

Bangladesh has made gradual progress in reducing some constraints on investment, including taking steps to better ensure reliable electricity, but inadequate infrastructure, limited financing instruments, bureaucratic delays, lax enforcement of labor laws, and corruption continue to hinder foreign investment, said "The 2022 Investment Climate Statement" released on Thursday.

The report also said that the sectors with active investments from overseas included agribusiness, garment, leather goods, light manufacturing, power and energy, electronics, light engineering, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, shipbuilding, and infrastructure.

Despite unease of doing business in Bangladesh, its government offered a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors, it further said.
It added that the government's efforts to improve the business environment in recent years show promise but implementation has yet to materialize.

Corruption was also widely perceived to be endemic at all levels of society, discouraging investments and inhibiting economic growth, the report stated.

It also said that security challenges were also hindering investment and trade opportunities in the country in some areas.

Land disputes were also acting as major barriers to investment, the US State Department report said.

The report also stated that Bangladesh's garment sector has made significant progress on fire and structural safety due to unprecedented support from the international community and the private sector.

The Bangladeshi government has limited resources devoted to intellectual property rights (IPR) protection and counterfeit goods are readily available in Bangladesh. Government policies in the ICT sector are still under development. Current policies grant the government broad powers to intervene in that sector, the report said.

According to the report, electricity generation capacity had grown significantly over the last decade, but transmission and distribution systems needed additional work to ensure more reliable and inclusive access to electricity.

Reputable companies have complained the Bangladesh National Board of Revenue (NBR) has inconsistently subjected businesses' prior-year tax returns to renewed scrutiny. While this process is taking place, normal business activities such as banking, immigration procedures for foreign staff, and branch office licensing permissions may be slowed or stopped entirely, the statement said.

Stating that the country's financial sector is still highly dependent on banks, capital markets in Bangladesh are still developing, the report further said.

Economic weaknesses also include an undeveloped and undercapitalized financial sector, an inefficient and chronically loss-making public sector, and a decision-averse bureaucracy that often resists measures to improve the business climate, the US State Department added.

Regent's Shahed gets bail in 2.75C embezzlement case

Shahed, who was arrested in several other criminal cases, cannot be released from jail, says lawyer

www.dhakatribune.com

 

[BananaRepublicUK]

US STATE DEPARTMENT: 'Corruption key barrier for FDI in Bangladesh'

Scarcity of land, depleting natural gas reserves, and inadequate power distribution remained major impediments to investment

Mehedi Hasan/Dhaka Tribune
Tribune Desk
July 31, 2022 7:02 AM

A recent report by the US Department of State said that corruption was a major obstacle for obtaining foreign investments in Bangladesh, despite gradual progress in reducing some constraints.

Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes, the report said, adding that scarcity of land, depleting natural gas reserves, and inadequate power distribution remained major impediments to investment as well.

Bangladesh has made gradual progress in reducing some constraints on investment, including taking steps to better ensure reliable electricity, but inadequate infrastructure, limited financing instruments, bureaucratic delays, lax enforcement of labor laws, and corruption continue to hinder foreign investment, said "The 2022 Investment Climate Statement" released on Thursday.

The report also said that the sectors with active investments from overseas included agribusiness, garment, leather goods, light manufacturing, power and energy, electronics, light engineering, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, shipbuilding, and infrastructure.

Despite unease of doing business in Bangladesh, its government offered a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors, it further said.
It added that the government's efforts to improve the business environment in recent years show promise but implementation has yet to materialize.

Corruption was also widely perceived to be endemic at all levels of society, discouraging investments and inhibiting economic growth, the report stated.

It also said that security challenges were also hindering investment and trade opportunities in the country in some areas.

Land disputes were also acting as major barriers to investment, the US State Department report said.

The report also stated that Bangladesh's garment sector has made significant progress on fire and structural safety due to unprecedented support from the international community and the private sector.

The Bangladeshi government has limited resources devoted to intellectual property rights (IPR) protection and counterfeit goods are readily available in Bangladesh. Government policies in the ICT sector are still under development. Current policies grant the government broad powers to intervene in that sector, the report said.

According to the report, electricity generation capacity had grown significantly over the last decade, but transmission and distribution systems needed additional work to ensure more reliable and inclusive access to electricity.

Reputable companies have complained the Bangladesh National Board of Revenue (NBR) has inconsistently subjected businesses' prior-year tax returns to renewed scrutiny. While this process is taking place, normal business activities such as banking, immigration procedures for foreign staff, and branch office licensing permissions may be slowed or stopped entirely, the statement said.

Stating that the country's financial sector is still highly dependent on banks, capital markets in Bangladesh are still developing, the report further said.

Economic weaknesses also include an undeveloped and undercapitalized financial sector, an inefficient and chronically loss-making public sector, and a decision-averse bureaucracy that often resists measures to improve the business climate, the US State Department added.

Regent's Shahed gets bail in 2.75C embezzlement case

Shahed, who was arrested in several other criminal cases, cannot be released from jail, says lawyer

www.dhakatribune.com

So they are not whining about corruption but taxation. They don’t want to pay any taxes at all lol lol

 

[bluesky]

This is what I have been guessing all along corruption is mostly responsible for the non-arrival of FDIs in BD. I said the same to @Bilal9 in a recent post in another thread.

Our bureaucrats and politicians do not like to move their pens unless they get their Bakhra.

 

[BananaRepublicUK]

This is what I have been guessing all along corruption is mostly responsible for the non-arrival of FDIs in BD. I said the same to @Bilal9 in a recent post in another thread.

Our bureaucrats and politicians do not like to move their pens unless they get their Bakhra.

Read the article instead of the headline.

They are whining about taxes on corporate profits. Not corruption.

Basically, they don’t want to pay corporate taxes!!

If the investment is export oriented - they should be exempted from tax. Which they are.

If the investment is to make money from our consumers - they should be walloped with taxes. Lots of it!

 

[UKBengali]

Who cares as BD does not really want FDI apart from key sectors like infrastructure.

This it is getting in spades from the likes of China.

USA - BD will be just fine with domestic investments as it wants to build up it's own companies and not become a re-exporter for MNCs.

 

[bluesky]

Who cares as BD does not really want FDI apart from key sectors like infrastructure.

Mai deere @UKBengali, caan I aask u sinch hoen you hab becum the sole ispoksmaan for tha govarnment of Golden Bangladesh?

Preez forgeev my badh Engleesh.

 

[Rushd Alam]

So they are not whining about corruption but taxation. They don’t want to pay any taxes at all lol lol

Bangladeshi tax structure is very complex, last time japan also complained about its complexity. Do not know why this is not being addressed. Current tax structure is clearly not successful as we have the lowest tax to gdp ratio around the world. We need to act soon.

Another reason FDI is low because the intellectual property law is not there or proper. Foreign companies do not want copycat competitors who would not invest in r&d.

 

[UKBengali]

Bangladeshi tax structure is very complex, last time japan also complained about its complexity. Do not know why this is not being addressed. Current tax structure is clearly not successful as we have the lowest tax to gdp ratio around the world. We need to act soon.

Another reason FDI is low because the intellectual property law is not there or proper. Foreign companies do not want copycat competitors who would not invest in r&d.

BD government has on purpose kept taxes low with all sorts of exemptions to encourage economic growth. This will change as the decade progresses as BD has publicly stated before.

Again, BD does not want too much FDI as only domestic investment can truly develop a country.

A foreigner only cares for his profits and not for the country he invests in as he has no residency or emotional attachment to it.

 

[BananaRepublicUK]

BD government has on purpose kept taxes low with all sorts of exemptions to encourage economic growth. This will change as the decade progresses as BD has publicly stated before.

Again, BD does not want too much FDI as only domestic investment can truly develop a country.

A foreigner only cares for his profits and not for the country he invests in as he has no residency or emotional attachment to it.

These guys constantly whine about low tax collection and now suddenly whining about high/complex tax rates!

I have always said BD government should never allow total tax to be more than 8-10 per cent of GDP.

Which AL has never exceeded - to its credit.

This creates the perfect atmosphere for consumer and domestic business led growth.

 

[VikingRaider]

Mai deere @UKBengali, caan I aask u sinch hoen you hab becum the sole ispoksmaan for tha govarnment of Golden Bangladesh?

Preez forgeev my badh Engleesh.

Keep it up @bluesky ! It's (top) trolling of this month! I'm truly impressed by your performance!

 

[UKBengali]

These guys constantly whine about low tax collection and now suddenly whining about high/complex tax rates!

I have always said BD government should never allow total tax to be more than 8-10 per cent of GDP.

Which AL has never exceeded - to its credit.

This creates the perfect atmosphere for consumer and domestic business led growth.

We have had this conversation before and we do not agree on this one area.

Not everything done by the private sector can be more efficient.

Even ultra-capitalist USA has tax to gdp ratio of around 25%. - BD should aim for around this figure in the 2040s.

I would be happy with around 30% max.

 

[Rushd Alam]

BD government has on purpose kept taxes low with all sorts of exemptions to encourage economic growth. This will change as the decade progresses as BD has publicly stated before.

Again, BD does not want too much FDI as only domestic investment can truly develop a country.

A foreigner only cares for his profits and not for the country he invests in as he has no residency or emotional attachment to it.

In my view FDI has both positive and negetives, I am with your view to not let the country be flooded with FDI, but at the same time not attracting enough is also not healthy.

We need to balance it and currently it is tilted towards distracting FDI. The government has done some actions to attract more FDI but more needs to be done.

The things that are distracting FDI are the same reason our local companies facing difficulties in. Hence we are at the bottom of ease of doing business ranking.

Let me make myself clear, I am not here to bash any political party or their agenda, strictly being critical about the policies in place.

Some may disagree but our country has been ran by the bureaucrats for last few decades, and I find them the biggest force who are not letting the country progress fast enough. As our politicians are mostly illiterate, they unfortunately cant outsmart the amla class who runs the show behind curtains.

Why I Believe that we can argue on but lets come back to the point of FDI, The government needs to bring reform in overall business environment very soon to keep the development growth up. Reforms in tax structure, reduction of redtape, ease of getting utility, fast document processing are required not only for more FDI but overall business environment.

 

[UKBengali]

In my view FDI has both positive and negetives, I am with your view to not let the country be flooded with FDI, but at the same time not attracting enough is also not healthy.

We need to balance it and currently it is tilted towards distracting FDI. The government has done some actions to attract more FDI but more needs to be done.

The things that are distracting FDI are the same reason our local companies facing difficulties in. Hence we are at the bottom of ease of doing business ranking.

Let me make myself clear, I am not here to bash any political party or their agenda, strictly being critical about the policies in place.

Some may disagree but our country has been ran by the bureaucrats for last few decades, and I find them the biggest force who are not letting the country progress fast enough. As our politicians are mostly illiterate, they unfortunately cant outsmart the amla class who runs the show behind curtains.

Why I Believe that we can argue on but lets come back to the point of FDI, The government needs to bring reform in overall business environment very soon to keep the development growth up. Reforms in tax structure, reduction of redtape, ease of getting utility, fast document processing are required not only for more FDI but overall business environment.

No, BD must categorically not allow the current FDI levels to rise as it may ultimately condemn BD to becoming another Thailand.

0.5-1% of GDP that is FDI now is exactly what the "Asian Tigers" like S. Korea and Taiwan had during their growth phase.

For those that think FDI is wonderful look at India's electronics industry. It is only "Indian" as in the sense that Indians assemble the products for MNCs like Samsung and LG in India. 12 billion US dollars of exports may look good on paper but very little of that is value-added in India itself.

"Ease of doing business" cannot be taken out of context of BD coming out of virtually nothing in 1971, remember it was one of the few countries in the world to swap one colonial master for another after ww2, and so it had virtually no education or infrastructure to speak of in 1971. Education and Infrastructure have taken a quantum leap by 2022 and it is going up relatively quicker compared to its neighbours as it is still playing catch up.

BD will be just fine and it is one of the few countries in the world, along with China etc, that is implementing a decades long plan. Those things you mention are being worked on and perfection does not come instantly and takes some time.

 

[Rushd Alam]

These guys constantly whine about low tax collection and now suddenly whining about high/complex tax rates!

I have always said BD government should never allow total tax to be more than 8-10 per cent of GDP.

Which AL has never exceeded - to its credit.

This creates the perfect atmosphere for consumer and domestic business led growth.

BD tax collection low: TRUE
BD has complex tax structure: TRUE ( let me know if you disagree)

How did you put high and complex under one category is beyond my understanding.


The topic of the discussion was the US report on barriers for FDI comming to BD. They have given their many reasons like corruption, Land disputes, labour rights, business environment, intellectual property rights, NRB related issues are all valid points and general knowledge and no one should disagree it needs to be done.

Keeping tax to gdp ration to 8 to 10% is a very radical view that also did not make sense. This way the Government will never be in a position to invest in infrastructure themselves and always rely on foreign debt and in time of debt servicing it will either have to sell countries assets or eventually go bankrupt like pakistan. As we are not a gulf oil rich country gov needs minimum revenue to sustaine, not one asking about raising taxes but collecting more efficiently, as still major part of tax collection come from VAT.

In my view Bangladesh need to work on its tax collection to achieve close to 15% to be sustainable.

 

[Rushd Alam]

"Ease of doing business" cannot be taken out of context of BD coming out of virtually nothing in 1971, remember it was one of the few countries in the world to swap one colonial master for another after ww2, and so it had virtually no education or infrastructure to speak of in 1971. Education and Infrastructure have taken a quantum leap by 2022 and it is going up relatively quicker compared to its neighbours as it is still playing catch up.

I solely blame our bureaucrat system for our lower ranks. I know the government has tried to reform it but as they call the shots to keep power and influence centralized they do not want to let that happen.

Our politicians are to be blamed for many other aspects but when it comes to red tape I do not blame them here, as this has been going on since 90s. Strong reform is needed in this sector, Bureaucracy wants power to be centralized to Dhaka for their own benefit. Government can start with empowering local governments to start off with to reduce their influence. Why an investment decision of Feni has to come to Dhaka.