In just 55 years, Bangladesh has transformed from one of the poorest countries in South Asia to an 'Asian Tiger'.1 The nation slowly became an emerging hub for regional connectivity and foreign investors, outshining neighbouring countries in multiple indicators such as GDP growth and gender equality. Despite the development, Bangladesh contin- ues to grapple with multiple challenges, varying from political instability to infrastructural deficiencies, and corruption. These challenges have worked as barriers for the nation in reaching its full potential. To truly transform Bangladesh's investment landscape, the following reforms are essential in the relevant sectors.
Assure stability and security
Ensuring stability and security is essential for transforming the investment landscape. Recently, widespread worker protests over back wages, salary adjustments, and benefits have led to the closure of over 200 factories, putting exports at risk. Disruption in international orders can threaten contract renewals with foreign buyers, which could have serious economic repercussions.
Given the $10 billion plus losses incurred from previous shutdowns, the last thing the country needs is further disrup- tion. The interim government must work closely with business leaders to address these issues and restore stability and security before further damage is done to the economy and foreign buyer relations.
Promote ease of doing business
Foreign investors typically face complex regulations and bureaucracy. Hence, simplifying the processes can improve transparency and reduce unwanted delays. The honourable Chief Adviser Professor Muhammad Yunus advocates for business-friendly policies and financial transparency, which can lead to a revival in investment across multiple sectors, such as banking and infrastructure. Moreover, the government should also try to focus on higher productivity and export diversification. Introducing targeted tax breaks for high-growth industries could encourage investment in sectors like electronics and automotive parts, which can help the nation secure a stronger foothold in the global value chain of high-value-added products.
Reform the financial sector
The government must initiate reforms in the banking and financial sector. The sector has been plagued by issues of high levels of non-performing loans (NPLs), political interference, and poor governance. As of May 2024, the overall nonperforming loan accumulation stood at BDT 5.50 trillion? It deters the banks from lending money effectively, hinders.
1 https://www.orfonline.org/expert-speak/bangladesh-at-crossroads-export-sustainability-amid-political-unrest
2 https://pressxpress.org/2024/05/27/bangladeshs-banking-sector-faces-tk-5-50-trillion-non-performing-loans-surge/
business development, and undermines investors' confidence. The interim government should enforce stricter lending standards, increase transparency, decrease corruption, and strengthen oversight to enhance the overall financial and banking sector to attract more foreign and domestic investment. Strengthening the financial sector is crucial in making Bangladesh an attractive destination for investment.
Improve tax compliance
The interim government must focus on improving tax compliance, broadening the tax base, and enhancing the efficien- cy of tax collection. A transparent, predictable, and fair tax system is vital to attracting foreign investors, as unpredict- able policies and inconsistent enforcement often deter investment and create an unstable business climate. Collaboration with the business community during policy formulation or reform will help maintain investor confidence and trust in the market. Moreover, with the fiscal deficit growing, efficient tax collection can help reduce the gap and increase government revenue without resorting to additional borrowing.
Invest in human capital
There is no option but to continuously invest in developing human capital if Bangladesh is to become a developing country by 2026. Accelerated investments in human capital will result in higher economic growth and should attract more foreign investment. To complement the demographic dividend Bangladesh enjoys, having a special focus on technical or vocational training will translate into a more skilled and enriched workforce. This may lead to a competitive advantage, which foreign investors would be eager to harness to expand their operations.
Adopt a technology-driven approach
Digital transformation and e-governance go hand in hand in delivering business growth. Adopting a technology-driven approach and streamlining complex and bureaucratic processes will enhance accessibility to public services and optimise government operations, while ensuring transparency and accountability. A streamlined process across all government functions will make government operations efficient and more responsive to the needs of citizens and business organisations alike.
The interim government has already brought many changes that have paved the way for a stable and transparent investment environment across Bangladesh. It has set the stage for further economic reforms and growth. However, a lot of work is still left, which better policies and implementation can aid for the long-term stability of the economy and to transform the investment landscape for a better tomorrow.
