Guidance

Overseas business risk: Bangladesh

Updated 12 July 2021

Information on key security and political risks that UK businesses may face when operating in Bangladesh.

Political and economic

1) Bangladesh is a parliamentary democracy. Two parties, the Awami League (AL) and the Bangladesh Nationalist Party (BNP), have dominated politics since independence in 1971, interspersed with periods of military rule. The Prime Minister, Sheikh Hasina, leads the Government and wields considerable personal power. Her Awami League-led Grand Alliance won a landslide victory in the general election in 2018, winning 96% of seats amid widespread accusations of vote rigging and intimidation.

2) Relations between the two parties are fractious and the political system remains confrontational and highly centralised. Democratic institutions, including Parliament and local government, are weak. The justice system is open to political interference. Political opposition is being slowly crushed as the AL consolidate their hold on power. A draconian Digital Security Act introduced in 2018 silences Government critics and cows the media in to silence. Creeping authoritarianism risks Bangladesh becoming a de-facto one party State.

3) While the political situation is of concern, especially in the longer term, relative stability coupled with a conservative macro-economic policy and a generally hands-off approach by the Government to the private sector has maintained economic growth at an impressive rate. Nominal GDP is $325bn and GDP per capita is $2010 (World Bank: 2020 - higher than India’s). GDP growth was over 6% in the decade to 2019. In the last year prior to Covid, growth was 8%, (higher than India and China). HSBC predicted in 2018 that Bangladesh would be the highest mover in GDP rankings, up from 42 to 26, by 2030.

4) Bangladesh has a middle class (variously defined) of around 35 million people: and it is a young country (40% are below 26). The population, largely homogenous, is about 165 million, making it the eighth largest country by population. The key drivers of the economy are domestic demand, remittances and RMG exports. In the short and medium term we expect these factors to continue generating economic growth. When Bangladesh graduates from Least Developed Country status in 2026, and loses access to concessional financing and tariff reductions, other means will have to be found to deliver growth, such as increased FDI and export diversification.

5) Ease of Doing Business remains crucial to attracting more FDI and it continues to be a problematic issue. Bangladesh is 168/190 in the World Bank Doing Business Report (2019). A political and business nexus combines powerful vested interests that wield considerable influence behind the scenes. One of the most egregious examples is the large number of politically connected non-performing loans in the poorly regulated banking sector that constitute a threat to financial stability.

6) The capital market is shallow and its development hindered by a cautious forex management policy. High import tariffs and discretionary use of regulations protect well-established businesses, restricting competition and the country’s economic potential. The standard of financial reporting is generally poor and should not be relied upon when making investment decisions.

Human rights

7) Human Rights compliance in Bangladesh remains an issue of concern. Access to justice in Bangladesh can be difficult. Implementation and enforcement of laws can be weak, and the court system faces a significant backlog. Bangladesh retains the death penalty. There are regular allegations of abuse, including extra-judicial killings, physical mistreatment and corruption, against members of the law enforcement agencies. Child labour is prohibited under the Labour Act of 2006 but remains a concern in the informal sectors. The FCO Human Rights and Democracy report 2019 contains an assessment on Bangladesh (Section 6.3).

8) Good Business: Implementing the UN Guiding Principles on Business and Human Rights makes clear the Government’s commitment to protect human rights and sets out the clear expectations for UK companies in this area.

Bribery and corruption

9) Bribery and corruption are entrenched in Bangladesh and pervade many aspects of daily life. Widespread corruption is a barrier to the effective development of the private sector. It poses significant business risks that require active management to ensure compliance. Procurement processes often lack transparency and are frequently coupled with bureaucratic obfuscation. Politicians, bureaucrats and law enforcement officials wield considerable discretionary power. Bangladesh ranked 146/180 in 2020 in Transparency International’s Corruption Perception Index.

10) With weak and selective enforcement of tax laws, reports of tax frauds are very common. For example, evasion of duty on imports through under-invoicing is reported frequently in the media. It is made easy by weak and archaic customs measures. Some efforts are being made to modernise the country’s custom controls, but full automation is still a long way off and deeply resisted by powerful officials with help of politicians and businesses benefitting from weak controls.

11) The Business Anti-Corruption portal provides advice and guidance about corruption in Bangladesh and some basic effective procedures you can establish to protect your company from them. Read the information provided on our Bribery and corruption page.

Terrorism threat

12) Please read the information provided in the Terrorism section of the Foreign, Commonwealth & Development Office’s travel advice for Bangladesh.

Protective security advice

13) The use of credit and debit cards in Bangladesh, which is still a predominantly cash society, has gone up sharply in recent times and most e-commerce platforms and larger shops now accept international cards. Mobile Financial Services are ) is popular and increasingly used throughout the country. Although cloning of cards is less prevalent than other countries in the region, fraudulent activities using MFS is common. Read the information provided on our Protective security advice page.

Intellectual property

14) Bangladesh is a member of the World Trade Organisation, a member of the World Intellectual Property Organisation plus a signatory to the Paris Convention. However, enforcement of Intellectual Property Rights (IPR) is weak in the country. Counterfeit, look-alike and parallel import of products from toiletries to generators is common. As a LDC Bangladesh has until 2039 to fully comply with the WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) TRIP. UK businesses and rights’ holders should consider developing a robust IPR strategy before entering the Bangladeshi market. Read more information provided on our Intellectual Property page.

Organised crime

15) We have no evidence to suggest organised crime is directly affecting or involved in business with British companies; although there have been reports of officials abusing their authority which could impact British firms. Read the information provided on our Organised crime page and the Safety & Security section of the Foreign Commonwealth & Development Office’s travel advice for Bangladesh. For advice on serious organised crime visit the National Crime Agency website.

Contact

Contact the Department for Business and Trade’s (DBT) team in Bangladesh for further information.