Bangladesh Presents Ongoing Difficulties for Foreign Investors
April 03, 2017
Authors: Reshmi Khurana, Managing Director and Vyshak Vitobha, Associate Director
The recent spate of terrorist attacks in Bangladesh makes the operating environment in the country difficult for many foreign firms. It is forcing foreign firms to reassess whether the business prospects and opportunities of investing in Bangladesh – one of South Asia’s fastest growing economies – outweigh the political and security risks in the country.
Since the July 1, 2016, attack at Holey Artisan Bakery in Dhaka – where 29 people, mostly foreigners, were killed when militants stormed the restaurant located in one of the most affluent areas of Dhaka – it has been increasingly difficult for the Bangladeshi government to deny the presence of ISIS in the country, which has claimed to play a role in several attacks. Bangladesh’s government initially blamed the July 2016 attack and the previous killings of foreigners (mostly “lone wolf” type attacks on individual foreigners) on domestic terror groups like the neo-JMB, a splinter group of Jamaat-ul-Mujahideen Bangladesh (“JMB”), one of the two main domestic terror groups.
However, there have been several militant strikes in the country recently, many of which have been claimed by ISIS, indicating that ISIS has a firm presence in Bangladesh. In March 2017 alone, there were six terror attacks, including one by a suicide bomber who blew himself up near a police checkpoint near the Dhaka International Airport on March 24, 2017. In a separate incident, a suicide attacker detonated his suicide vest inside the facility of Rapid Action Battalion (“RAB”) in Dhaka, the primary security agency which deals with terrorism-related matters. Following the attempted suicide bombing attack at the Dhaka International Airport, the Australian Government issued a security alert for its citizens in Bangladesh. The Australian Government advisory requested citizens to reconsider travel to Bangladesh and stated that it has reliable information to suggest that militants may be planning to target Western interests in Bangladesh.
At the same time, Bangladeshi security agencies have been conducting violent raids, which they claim have wiped out militant cells, killed terrorists, and led to the recovery of bombs and bomb-making materials. The most recent and significant raid was in Sylhet (250 kilometers from Dhaka), where media reports have stated that the terrorists had placed improvised explosive devices (“IEDs”) at the entrance of the building and were highly trained in warfare.
The worsening security situation in Bangladesh is worrying current and potential foreign investors. Japanese, American, European, and Indian companies that are committed to large infrastructure and manufacturing projects in Bangladesh and cannot scale back their investments, say that they are closely observing the security situation in the country. They are investing significant resources in assessing and consolidating their security arrangements on the ground and closely evaluating their future commitment to the country. Many foreign companies have restricted non-essential business travel to Bangladesh in the wake of the terror attacks, although business travel from South Asia appears to be less affected. Companies are spending resources on studying the security risks to their local assets and employees, assessing hotel security, and closely evaluating their travel plans. Most companies also have stringent protocols in place for foreign staff in the country which restricts their movements.
In our experience operating in Bangladesh over the last 15 years, the security situation in the country has never been steady. It used to vary week by week, depending largely on internal political developments in the country that affected security, such as political hangings and riots instigated by one of the two major political parties. However, since the July 2016 attack in Dhaka, foreign investors cannot ignore the presence of external extremist elements that are difficult to control and predict.
Kroll advises foreigners traveling to Bangladesh to arrange meetings to the extent possible in Dhaka and avoid travel outside the city, even to cities such as Chittagong and Sylhet, as Dhaka has the highest security cover.
Given that the security risks in the country evolve and can change rapidly, we advise that companies conduct security assessments close to the time of their travel to identify imminent and on-the-ground developments in Dhaka and across Bangladesh that could impact local security.
Security of hotels, travel routes, meeting locations, and other logistical arrangements should also be carefully evaluated before finalizing any travel.
Finally, we advise companies and travelers have a contingency plan in place in case they have to evacuate in an emergency.