Bangladesh: Investment Climate of the Developing Country

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Bangladesh: Investment Climate of the Developing Country

Introduction

Bangladesh is constantly developing and is one of the most populous countries in the world. Because of its large population, a large number of the young and hardworking labor force. The countrys location attracts a lot of investment Bangladesh is on the trade route between South and East Asia. The combination of different conditions and risks in the mix demonstrates the attractiveness and profitability of investing in the emerging market of this country.

Economic Environment Analysis

Currency Exchange Rate Risk

The currency exchange market is considered the worlds largest market, and many countries policies have reshaped the market toward developing institutional and market infrastructures. Transaction volumes, lower interest rates, and other transaction costs have contributed to more effective risk monitoring mechanisms. Bangladesh is on the path of accelerated reforms to develop the financial sector and increase openness to global financial flows. Given the growth in production and investment incentives, currency exchange investments in the economy are quite stable at the moment. The Directorate of the Bangladesh State Bank does not interfere in the daily exchange rate determination and conducts the monetary policy with caution (Asadullah et al. 953). A comprehensive exchange-risk management program must include appropriate management systems and long-term contingency planning. Given the stabilization of the national currency in Bangladesh, the relevant risks are at an acceptable level.

Profit Repatriation Risk

In 2018, Bangladeshs parliament passed a single service law, which should help streamline the investment and registration processes for new businesses on the market. Although the online business registration process is not always consistent and transparent, the joint-stock company and firm registration office provide the necessary registration services and help with employee permits, office openings, and tax registration. Foreign capital gains in the case of investments can be made subject to the approval of the countrys state bank. Repatriation of investments and dividends today is possible subject to payment of all official taxes, which the State Bank of Bangladesh confirms. The exceptions are the cases of investments not initially subject to repatriation, and remittances are actually allowed subject to the states requirements on the amount and installment of repatriation, if available.

Purchasing Power

In terms of the purchasing power index, Bangladesh is still in the process of development. In terms of purchasing power parity for GDP, the country falls slightly behind India but has a much more impressive growth rate. This calculation method compares the relative price of comparable consumption sets or baskets. Currently, the country is developing a macroeconomic way of governing, which could impair the advancement of the economy. However, trade management in Bangladesh is now at a reasonably high level, and the correctness of trade invoicing is also under control. The purchasing power is still sufficient to develop business by investing in the country or opening representative business offices.

Political Risks in Bangladesh

The main problem in investing in the emerging market of Bangladesh is political instability. At the time of the analysis, the situation from an external point of view has stabilized, but the previous few years, with a lot of political and social unrest, did not contribute to the development of stability in the domestic and foreign markets of the country and its economy (Asadullah et al. 949). The situation is not critical and can be leveled out, for example, at the expense of favorable for the employer level of wages in the domestic market.

Remittances from investors, expatriates, or emigrants help maintain domestic consumption levels. The agricultural sector is the primary sector, and external financial inflows support its stability. Almost half of Bangladeshs labor force is employed in the agricultural industry, and thanks to this development, the cost of food, for example, is relatively low. The minimum wage for most of the population has been raised after the political instability and protests, but it is still reasonably common in the region. It is also necessary to consider the foreign policy-induced energy crisis in the world and the subsequent reallocation and re-evaluation of relevant resources. Because of the rising cost of energy resources, many industries are losing productivity, and the cost of fuel for transportation and other expenses has risen significantly.

Unstable Regulatory Environment Risks

Initially, the regulatory system was extremely excessive, but after a while, there has been a tendency to reduce the obstacles from the state to private business gradually. It is necessary to be aware that when investing in Bangladesh, it is imperative to study in detail the regulatory policies of the processes because they may not always be articulated clearly or timely enough and widely published. Unfortunately, corruption is still a problem in the state, and public services and businesses, including political forces, are interested in the systems ambiguity under the guise of confidentiality (Asadullah et al. 950). Under such circumstances, corruption schemes have the greatest chance of existing. The legal system in the state is relatively weak and sluggish, which can weaken the legal validity of international contracts.

Conclusion

Given the country and its industries characteristics mentioned above, the possibility of investment is nevertheless recognized as valid. Since corruption has not yet been ultimately overpowered, it is not advisable to make substantial investments without physically entering the countrys market. The most profitable small businesses to invest in seem to be agricultural or textile industries. Since food production comes first in Bangladesh, investing in a food production company will bring maximum benefits, given the cheap labor and raw materials. Furthermore, there is the option of growing rice without production or with further packing, processing, and exporting. Similarly, for the above reasons, it is possible to recommend opening or investing in textile production this is likewise a widespread industry in the country and can bring significant profits.

Works Cited

Asadullah, M. Niaz, and NN Tarun Chakravorty. Growth, Governance and Corruption in Bangladesh: A Re-Assessment. Third World Quarterly, vol. 40, no. 5, 2019, pp. 947-965, Web.

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