International Chamber of Commerce, Bangladesh on Monday said that Bangladesh was struggling with attracting foreign direct investment to the country as, despite being the second largest economy in South Asia, the country got an average of $2.92 billion in FDI annually, while Vietnam got $36.61 billion.
Discussing Challenges and Opportunities for Bangladesh Economy in 2024, an editorial of the current News Bulletin (January-March 2024) of ICCB, said that Vietnam, comparable to Bangladesh, ranked fourth in Asia-Pacific after China, India and Indonesia in attracting FDI.
FDI is one of the key elements for increasing export earnings and much needed foreign exchange reserve. So, the editorial suggested that Bangladesh review its strategy for attracting FDI.
The economy is facing challenges on multiple other fronts, including inflation, declining foreign exchange reserve, depreciating local currency, income inequality and demand-supply imbalance in energy sector.
The editorial said that Bangladesh had an energy crisis due largely to reliance on imported fuels which cost about $2.5 billion yearly for power generation and also a lack of renewables and cleantech alternatives.
The bulletin said that Bangladesh turned to the use of more fossil fuels such as coal, oil and LNG instead of moving towards exploring renewable energy sources.
With a depreciating currency, a reliance on imported fuels for power generation has led to significant rise in power generation costs, it added.
The editorial also said that Bangladesh would experience significant preference erosion after graduating from a least developed country to a developing one.
Although the EU and the UK have offered to extend preferential duty-free market access for an additional three years, the export scenario to other markets will change immediately after graduation, it said.
Bangladesh faced challenges in its export basket鈥檚 diversification as more than 80 per cent of the country鈥檚 total export earnings come from garment exports, it said.
Bangladesh has significant opportunities in leather and footwear, food processing, pharmaceuticals, light engineering, assembling plants and API production. Both domestic investment and FDI will need to be geared towards these sectors.
According to 2020 data, Bangladesh imported goods worth nearly $7 billion from ASEAN countries against its export of only $1 billion. ICCB suggested in the bulletin that Bangladesh give priority to have free trade agreement with ASEAN in order to increase its exports.
Climate change is a critical issue in Bangladesh as it is one of the most vulnerable countries to the effects of climate change, according to Germanwatch鈥檚 2021 Global Climate Risk Index, the editorial said, adding that Bangladesh ranked seventh in the list of countries most affected by climate calamities during the period 2000-19.
With targeted actions and appropriate policy followed by timely implementation to overcome the key challenges, Bangladesh has the capacity to become an upper-middle-income country by 2031, said ICCB in its editorial.