Despite relatively strong economic growth over the past decade, investment climate constraints, deficiencies in energy and transportation infrastructure, and an opaque regulatory environment have prevented Bangladesh from achieving higher growth.
Scarcity of land, depleting natural gas reserves, and inadequate power distribution remain major impediments to investment. Electricity generation capacity has grown significantly over the last decade, but transmission and distribution systems need additional work to ensure more reliable and inclusive access to electricity. Corruption is also widely perceived to be endemic at all levels of society, discouraging investments and inhibiting economic growth.
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.
Political unrest, largely stemming from local or national elections, has in the past shut down business operations and impacted supply chains, though not since 2014. Security challenges have hampered some investment and trade opportunities. Bangladesh saw its largest terrorist attack in July 2016 (claimed by the Islamic State of Iraq and al-Sham - ISIS) at the Holey Artisan Bakery restaurant in Dhaka, where twenty-two people, mostly foreigners including one U.S. citizen, were killed. Prior to July 2016 there were several incidents where foreigners and bloggers were targeted by ISIS and Al-Qaeda. The government and law enforcement have implemented security measures and conducted raids to restrain militant groups operating in Bangladesh. Although extremist attacks remain a concern for the country, relatively high and steady GDP growth over the last decade has shown the resilience of Bangladesh’s economy in weathering these challenges.
A series of RMG industry accidents, including the tragic deaths of more than 1,100 workers in the Rana Plaza Complex collapse in April 2013, highlighted the need for improved worker safety and prompted Western brand-led initiatives to improve factory safety. By 2021 these initiatives had broadly improved safety conditions in RMG factories, but conditions in non-export factories remained poor, a fact highlighted by the July 2021 fire at a food-processing factory in Narayanganj which killed 52 people. Labor rights continue as a source of international concern, marked particularly by low and delayed wages and government interference in attempts by workers to organize.
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.