Foreign investment and property law: Bangladesh perspective

Foreign investment is essential for the economic progress of a country since it brings not just financial resources, but also facilitates the transfer of technology, expertise in management, and the generation of employment opportunities. A country's legal and regulatory system, particularly property legislation, significantly impacts its appeal to foreign investors. Regarding Bangladesh, a developing market with a flourishing economy, the existing property regulations offer a combination of advantages and difficulties for international investors.

Bangladesh presents a favorable climate for overseas investment, with industries such as textiles, pharmaceuticals, and information technology experiencing rapid growth. However, the existing legal framework governing property rights, including land ownership, leasing, and transfers, frequently presents substantial obstacles. The intricacies and limitations inherent in these laws can discourage international investors, who seek transparency and stability in their ventures.

Bangladesh presents a favorable climate for overseas investment, with industries such as textiles, pharmaceuticals, and information technology experiencing rapid growth. However, the existing legal framework governing property rights, including land ownership, leasing, and transfers, frequently presents substantial obstacles.

The existing legislative structure imposes restrictions on foreign property ownership, necessitating foreign firms to undergo complex bureaucratic procedures. As per the Foreign Private Investment (Promotion and Protection) Act of 1980, foreigners can possess properties in Bangladesh. This is however contingent upon obtaining government authorisation, frequently requiring a protracted and unclear clearance procedure. Furthermore, the Registration Act of 1908 and the Transfer of Property Act of 1882, which regulate property registration and transfer, do not distinguish between citizens and non-citizens.

Compared to other countries, Singapore and Malaysia have property rules that are more open to and transparent for the foreigners. This has dramatically helped in luring foreign investors. Malaysia's My Second Home (MM2H) program allows foreigners to buy property under specific conditions, and the UAE provides freehold ownership in selected regions. These policies exemplify a harmonious approach that seeks to attract international investment and safeguard national interests, serving as a potential model for Bangladesh. Not only can this result in lower transaction expenses but can also remove ambiguity for foreign investors over the acquisition and ownership of property.

As per the World Bank's Doing Business Report, Bangladesh's stringent property rules hurt international investment. Bangladesh ranks low in property registration metrics, indicating the need to streamline laws and policies to create a conducive environment for foreigner investors. Bangladesh also ranked 168th out of 190 in the World Bank's Doing Business 2020 survey, noting difficulties with contract enforcement, electricity, and property registration. On the other hand, countries like Singapore and New Zealand lead, through their efficient regulatory frameworks, easy business launching, and strong property rights safeguards.

Moreover, in June 2021, studies by the Bangladesh Investment Development Authority (BIDA) emphasised that foreign investors consider the intricacies and time-consuming processes of acquiring and registering properties in Bangladesh a significant worry. Estonia and Georgia have expedited and digitalised business registration and property transactions, saving foreign investors both time and effort.

To enhance its appeal to foreign investors while safeguarding its own interests, Bangladesh must undertake a comprehensive overhaul of its property law framework to increase transparency, efficiency, and alignment with global benchmarks. To enhance the investment climate, it is imperative to streamline the approval procedure for foreign property ownership and minimise bureaucratic obstacles. Introducing an efficient, digitalised system for property registration and transactions can significantly decrease the duration and expenses involved in these processes.

In addition, implementing a transparent and market-oriented land valuation system would guarantee equitable pricing and minimise the chances of corruption and speculation, factors that currently discourage foreign investment. Implementing special economic zones (SEZs) that loosen foreign ownership restrictions, like those observed in countries such as China and India, could also be a tactical decision. These zones provide a regulatory environment that is more permissive for foreign investors, along with benefits like tax exemptions and infrastructural assistance, while still adhering to the national regulations on land ownership outside of these zones.

Legal enhancements should prioritise the augmentation of legal remedies accessible to foreign investors in property disputes. Enhancing the judicial competence to resolve such conflicts promptly and impartially will potentially enhance investors' trust in the legal system's capacity to safeguard their assets.

Implementation of these reforms, along with well-planned incentives, has the potential to establish Bangladesh as a highly preferable location for foreign investment. This would contribute to the country's economic expansion while protecting both its investment needs and national concerns.

The writer teaches law at World University Bangladesh.