Bangladesh - Foreign investment

Bangladesh nationalized most industries in 1972 and set up nine corporations to oversee them. In the mid-1980s, the Bangladesh government began relaxing its policy toward foreign investment and announced a program granting tax holidays to new foreign investors. In 1989 the Directorate of Industries was renamed the Board of Industries (BOI) and delegated the task of providing various forms of assistance to new investors. More recently, government industrial policies have liberalized conditions for foreign investment much further—100% foreign equity is now allowed on investments anywhere in the country, not simply in export processing zones, and many regulations discriminating between foreign and domestic investors have been abolished. Reflecting the more favorable policy environment, foreign direct investment (FDI) first flowed into the country in significant amounts, albeit still haltingly, in the late 1980s. A peak was reached in 1995/96, when the annual inflow of FDI was estimated at $900 million. As of 1999, the total estimated foreign investment in Bangladesh was $1.5 billion. The four largest investor nations were the US, Malaysia, Japan, and the UK. Total US investment was estimated to be $700 million in 1999, up from $25 million in 1997, due to massive investment in gas exploration and production, and power generation. The annual rate has slowed considerably from the mid-1990s, however.

For 2000/01 FDI was estimated at $177.8 million, less than one-fifth the inflow in 1995/96. Expanding the flow of foreign investment to the country is likely to hinge upon further proof of government commitment to facilitating private business activity. The US State Department reports that "business people consider [Bangladesh] customs to be among the worst, a thoroughly corrupt organization in which official routinely exert their power to influence the tariff value of imports and to expedite or delay import and export processing at the ports." Foreign investments are by law accorded national treatment, and 100% foreign ownership is allowed in most sectors. However, the IMF reports that most foreign investments require official approval. Most of the barriers to foreign investment in Bangladesh are informal, but formidable: bureaucratic corruption and inertia, poor infrastructure, labor militancy, and political unrest.