Bangladesh risk report

Updated: Wednesday. November 4, 2020

According to all major ranking institutions, Bangladesh routinely finds itself among the most corrupt countries in the world. Companies should, therefore, beware of high corruption risks when operating or investing in Bangladesh. Corruption is pervasive at all levels of society and companies have reported being subjected to costly and unnecessary license and permit requirements. The Code of Criminal Procedure, the Prevention of Corruption Act, the Penal Code, and the Money Laundering Prevention Act criminalize attempted corruption, extortion, active and passive bribery, bribery of foreign public officials, money laundering and using public resources or confidential state information for private gain. Nevertheless, anti-corruption legislation is inadequately enforced. Facilitation payments and gifts are illegal, but common in practice.

Judicial system

Very high risk

Companies face a high risk of corruption in the Bangladeshi judicial system. Companies have insufficient confidence in the judiciary's independence and the efficiency of the legal framework when it comes to settling disputes and challenging regulations (GCR 2017-2018). Businesses report that irregular payments and bribes are frequently exchanged in order to obtain favorable court decisions (GCR 2015-2016). Although formally separate since 2007, the executive maintains control over judicial appointments and the judiciary remains closely aligned with the executive branch (ICS 2017). Sluggish judicial processes and the slow development of alternative dispute resolution mechanisms pose barriers to the resolution of business disputes (ICS 2017). Corruption is perceived to be widespread in lower courts (ICS 2017); magistrates, attorneys, and other court officials frequently demand bribes from defendants or rule based on loyalty to patronage networks (HRR 2017). The judicial system also suffers from a backlog of cases, political interference and weak institutional capacities (HRR 2017). Delays in the recruitment of judges have left several hundred positions in lower courts vacant, leading to a substantial case backlog (HRR 2017). Enforcing a contract is a big challenge for businesses as it is uncertain, takes an average of 1,442 days, and is extremely costly (DB 2018).

For companies seeking to settle disputes for export-related transactions, the Bangladesh Export Promotion Bureau may offer facilitation. Bangladesh is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and it is a member state to the International Centre for the Settlement of Investment Disputes (ICSID).

Police

Very high risk

There is a high risk of corruption when interacting with Bangladeshi police. Businesses ranked the Bangladeshi police as one of the least reliable in the world and noted business costs due to crime and violence (GCR 2017-2018). Civilian authorities maintain effective control over the security forces (HRR 2017). However, mechanisms to punish abuse are not regularly deployed and as a result, impunity is a problem (HRR 2017). The police force benefits from political patronage and a culture of impunity (NIS 2014).

Public services

Very high risk

There is a very high risk of corruption and bribery for companies when acquiring public services in Bangladesh. Bangladesh is ranked among the countries where informal payments and bribes in connection with public utilities occur the most (GCR 2015-2016). Almost sixty percent of firms expect to give gifts or make informal payments when obtaining operating licenses or public utilities such as a water connection (ES 2013). Nearly half of businesses expect to give facilitation payments to public officials "to get things done" (ES 2013). Businesses should note that registration or regulatory processes are allegedly frequently used as rent-seeking opportunities (ICS 2017). Regulations are often unclear or even conflicting and are insufficiently publicized (ICS 2017). The government's support of ministers and political leaders facing corruption allegations has led to perceived impunity, which is providing an incentive for the expansion of local-level corruption (BTI 2016).

Starting a business costs the same as elsewhere in South Asia, but takes slightly longer than the regional average (DB 2018). Dealing with construction permits takes significantly longer than the regional average (DB 2018). The Board of Investment (BOI) serves as a one-stop shop for companies seeking to invest in Bangladesh, but is criticized for fragmented authority. The BOI can register investors in industrial projects outside the Export Processing Zones and assist them with tax inquiries, land acquisition, utility hook-ups, and incorporation.

Land administration

Very high risk

There is a high risk of corruption in the Bangladeshi land administration. Companies express insufficient confidence in the government's ability to protect property rights (GCR 2017-2018). The majority of firms expect to pay informal payments or give gifts when acquiring a construction permit (ES 2013). Companies should note that land is scarce and land registration is often prone to disputes due to competing titles, especially in the Chittagong Hill Tracts (BTI 2016). Settling land disputes through the judiciary is a slow process; as a consequence, people often resort to extrajudicial means of settling ownership disputes, particularly in rural areas (BTI 2016). Improper expropriation is not a concern in Bangladesh (ICS 2017). Registering property takes more than twice as long as the regional average (DB 2018).

Bangladesh's most important construction scandal is the collapse of an eight-story garment factory in April 2013 which killed over 1,100 people. The factory suffered from a faulty construction that violated building codes (CNN, June 2015). The incident highlights the larger issue of a lack of good governance, corruption, limited resources, bribes involved in licensing and permits or collusion between factory owners and safety inspections, which allows facilities to remain even when dangers are identified (TI, Apr. 2015). The owner of the factory was sentenced to three years of imprisonment in 2017 (OCCRP, Aug. 2017).

Tax administration

Very high risk

Companies face a high risk of corruption in the Bangladeshi tax administration. Bangladesh is ranked as the country where irregular payments in connection with tax payments is most common (GCR 2015-2016). Over forty percent of firms expect to give gifts in meetings with tax officials (ES 2013). US investors claim that the Bangladeshi tax authorities disproportionately target them with disputes over tax returns from the previous year to meet tax collection targets (ICS 2017). Tax evasion is a major problem in Bangladesh (BTI 2016). A weak administrative infrastructure in the National Board of Revenue (NBR) makes for collusion and a discretionary space for granting benefits to targeted groups of taxpayers in both tax policy and administration (TI, Apr. 2015). It is common for businesses to negotiate their tax liabilities with the tax administration, whereby both parties enter into implicit agreements which involves regular informal payments (TI, Apr. 2015). This informal process is especially prevalent for small businesses due to their regular interaction with the tax collectors (TI, Apr. 2015). Accounting and audit firms are passively involved as they nominally verify tax declarations (TI, Apr. 2015).

Companies make more frequent payments and spend more time on filing taxes compared to the regional average (DB 2018).

Customs administration

Very high risk

Companies indicate that bribes and irregular payments during customs procedures are extremely common (GETR 2016); Seventy-seven percent of firms expect to give gifts when obtaining an import license (ES 2013). Companies are not satisfied with the efficiency and time predictability of the clearance process (GETR 2016). Corruption at the border and burdensome import procedures are cited as among the most problematic factors for importing (GETR 2016).

The time and costs required to comply with import procedures significantly exceed regional averages (DB 2018).

Public procurement

Very high risk

There is a high risk of corruption in Bangladeshi public procurement. Bribes and irregular payments in the process of awarding government contracts are perceived as extremely common (GCR 2015-2016). Almost half of companies expect to make irregular payments and give gifts in order to secure a government contract (ES 2013). Diversion of public funds and favoritism in the decisions of government officials are both perceived to be very common by companies (GCR 2017-2018). Nepotism, fraud, and bribery in the awarding of contracts are especially common (TI, Apr. 2015). Although inconsistently enforced, public procurement is regulated by the Public Procurement Act and subsequent regulations such as the Public Procurement Rules (TI, Apr. 2015). Companies should be aware that the courts tend to favor state-owned enterprises in investment disputes (ICS 2017). There is a high risk of corruption in defense procurement (GDACI 2015). Foreign investors are informally encouraged to have a local partner when bidding for public procurement projects (ICS 2017).

Companies are recommended to implement special due diligence procedures to counter the likelihood of encountering corruption in the procurement process.

The Code of Criminal Procedure, the Prevention of Corruption Act, the Penal Code, and the Money Laundering Prevention Act criminalize attempted corruption, extortion, active and passive bribery, bribery of foreign public officials, money laundering, and using public resources or confidential state information for private gain. Enforcement of anti-corruption legislation in Bangladesh is very weak (BTI 2016). Business-to-business corruption is covered by the Money Laundering Prevention Act. Facilitation payments can be construed as an unlawful gratification and is thereby illegal (NRF 2014). As to gifts and hospitality, there are no specific guidelines or monetary thresholds under Bangladeshi laws and regulations. As a guideline, companies are advised to consider the Government Servants (Conduct) Rules, which stipulates that government servants may accept gifts, provided that the value does not exceed 500 taka (USD 6.50) (NRF 2014). The Anti-Corruption Commission Act provides the legal framework for the independent Anti-Corruption Commission (ACC) to ensure transparency in the public sector. The ACC is subject to political influence and has become ineffective, and has even been used to attack political opponents (BTI 2016). The Right to Information Act (view a summary here) is designated to play an important role in ensuring transparency and accountability. Bangladesh has ratified the United Nations Convention against Corruption.

The media environment is active and public criticism of the government is common and vocal (HRR 2017). Physical attacks and harassment against reporters are prevalent, and impunity is the norm for those who perpetrate crimes against journalists (FotP 2017). The government intimidates and silences critical journalists using legal threats, arrests, and prosecutions (FotP 2017). According to some journalists and human rights NGOs, journalists engage in self-censorship particularly due to fear of security force retribution or to avoid harming the interests of the outlet's owner (FotP 2017). The press in Bangladesh is considered 'not free' (FotP 2017).

Freedom of association and assembly is guaranteed by the constitution but is not always respected in practice (HRR 2017). Civil society plays a role in public debate, yet are often connected to political parties and do not always act independently (BTI 2016). The ruling party has frequently vilified civil society (BTI 2016).