Addressing a luncheon meeting of the Foreign Investors' Chamber of Commerce and Industry (Ficci) in Dhaka, the US envoy lamented the investment climate and law and order.

"It is painful to see consumer goods manufacturer Colgate-Palmolive and American Hospital Consortium turning away from their investment plans in Bangladesh," he said.

"Once lured by generous incentives and liberal policies, investors are encountering problems they had not even imagined," Thomas said focussing on the problems facing the US companies in Bangladesh.

The work of a multi-storied building initiated by a US investor was stopped because Rajuk (Rajdhani Unnayan Kartipakkha) revoked the licence it had previously granted, he said.

A Bangladeshi buyer, claiming to find a minor flaw in shipment, is refusing to pay several US firms, he added.

Some of the US firms recently woke up to find their terms of contract with government changed without their knowledge. The envoy referred to these simply as breach of contract sanctity in Bangladesh.

He stressed the need for maintaining contract sanctity, which is key to wooing foreign direct investment (FDI).

"If investments cannot be protected, FDI will flow elsewhere. Protection of life is probably the single-most important role of the government. Unless households and investors have confidence that their lives and property are safe and their contracts are upheld and enforced, they are unlikely to commit resources needed to accelerate growth rates," the diplomat said.

The managing director of a US telecoms firm in Chennai arrived in Dhaka last fall with a plan to open an office but he reverted the plan after he encountered a countrywide strike.

"Is it any wonder that FDI from US has fallen dramatically since the large investments by international oil and gas companies in late 1990s?" he said justifying the slump in US investment in Bangladesh in recent times.

He said deficiency in infrastructures such as port, telecommunications and electricity is also keeping foreign investors at bay.

"US firms have shown interest in investing such infrastructure, as you may remember from our efforts to assist SSA (Stevedoring Services of America) to conclude an agreement for a private container terminal and Tyco to hook Bangladesh up to an underwater fibre optic cable. US firms are still looking for ways to boost the country's infrastructure but have so far found the going extremely tough," he said.

He said police and judicial reforms will yield high economic payoffs for the country. "A strong law and order system, with the accompanying effective investigation and enforcement machinery, would enable better loan collection, deter corruption and thereby improve the overall business environment," the ambassador said.

Presiding over the meeting, Mashiul Karim, committee member of Ficci and managing director of Berger Paints Bangladesh Ltd, said poor governance, excessive bureaucracy, disturbing law and order situation, lack of sanctity of contract, endemic corruption, policy inconsistencies and inadequate infrastructure still remain areas of concern for business growth.

"Unless these issues are addressed promptly, prospective foreign investors will not feel encouraged to invest in Bangladesh and existing ones may shy away gradually," he said while reading out a written speech of Ficci President Mahbub Jamil who was absent due to indisposition.

Former Ficci president Wali Bhuiyan, Ficci Committee Member Carlo Cifiello and Citibank NA Bangladesh CEO Mamun Rashid were also present.