presentation on foreign direct investment in bangladesh

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Foreign direct investment (FDI) in Bangladesh

Fdi in figures.

According to the UNCTAD’s World Investment Report 2023 , FDI inflows to Bangladesh increased by 20.2% to USD 3.48 billion in 2022 (compared to USD 2.89 billion in 2021). In the same year, the total stock of FDI was estimated at USD 21.1 billion, representing only 4.6% of the country’s GDP. Figures from the National Bank show that, during the fiscal year 2022-23, net FDI inflows totaled USD 3.25 billion, marking a decrease of USD 189.95 million or 5.5% compared to the fiscal year 2021-22 and an increase of 29.6% compared to the fiscal year 2020-21. In FY 2022-23, net FDI inflows by country blocs showed that Other European Countries (OEC) led with USD 0.828 billion, down from USD 0.845 billion in the previous fiscal year. The European Union (EU) followed with USD 0.729 billion, up from USD 0.624 billion. Other Asian Countries (OAC) contributed USD 0.659 billion, down from USD 0.836 billion, while the Association of South-East Asian Nations (ASEAN) invested USD 0.351 billion, down from USD 0.423 billion in the preceding fiscal year. In FY 2022-23, the manufacturing sector attracted the highest net FDI inflows, totaling USD 1.316 billion or 40.5%. This comprised mainly textiles & wearing (USD 0.662 billion or 20.4%), food products (USD 0.256 billion or 7.9%), and leather & leather products (USD 0.121 billion or 3.7%). The second-highest attracting sectors were power, gas, and petroleum, which drew USD 0.691 billion or 21.3%, including power (USD 0.365 billion or 11.2%) and gas and petroleum (USD 0.326 billion or 10.0%). Transport, storage & communication ranked third, attracting USD 0.463 billion or 14.3%, mainly from the telecommunications sector (USD 0.434 billion or 13.4%). Trade and commerce followed, drawing USD 0.404 billion or 12.4%, with banking (USD 0.364 billion or 11.2%) and trading (USD 0.055 billion or 1.7%) being the major contributors. Finally, services attracted USD 0.243 billion or 7.5%, mainly from the other service sector (USD 0.186 billion or 5.7%). Despite steady economic growth in the country over the past decade, foreign direct investment has been comparatively low in Bangladesh compared to regional peers. Bangladesh suffers from a negative image: the country is seen as being extremely poor, under-developed, subject to devastating natural disasters and socio-political instability. Bangladesh's capital markets are in the early stages of development, and the financial sector relies heavily on banks. In 2022, the sector experienced a significant scandal where 11 banks collectively faced a shortfall of USD 3.1 billion. However, the country has the advantage of being in a strategic geographical position between South and Southeast Asia. In addition, its domestic consumption potential and the wealth of its natural resources make the country a good candidate for investment. The government promotes private sector-led growth, foreign currency is abundant due to remittances, and the central bank respects the transferability of foreign currency. A number of more developed Asian countries have outsourced their factory production, mainly textile, to the country. Moreover, the government simplified a set of laws as part of its efforts to reduce barriers to foreign investment. Foreign and domestic private entities have the freedom to establish, operate, and divest interests in most business enterprises. However, the government imposes restrictions on foreign ownership and control in certain industries. Four sectors are exclusively reserved for government investment: arms, ammunition, and defense equipment; forest plantations and mechanized extraction in reserved forests; nuclear energy production; and security printing (e.g., currency). While private investments are allowed in power generation and natural gas exploration, full foreign ownership in petroleum marketing and gas distribution is not permitted. Foreign ownership in telecommunications is capped at 60% (70% for tower sharing). Seventeen sectors, including aviation, banking, coal, natural gas, and mineral exploration, require operational permission from ministries. Bangladesh ranks 105th among the 132 economies on the Global Innovation Index 2023 and 116th out of 184 countries on the latest Index of Economic Freedom .

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

What to consider if you invest in Bangladesh

The main assets of Bangladesh's economy are:

• Good macroeconomic stability characterised by a high growth rate of 8.2% in 2019 and 3.8% in 2020 ( IMF ) as well as a satisfactory level of the public debt of 39.6% in 2020 ( IMF )
• An open and diverse economy
• A very low-cost workforce
• A strategic geographic position as a gateway to countries in the Asia-Pacific region
• A strategic and competitive position in the value chain of the global economy
• An economic and legislative environment globally favourable to business
• Favourable biodiversity and weather conditions

The main obstacles to attracting investment include:

• A business environment complicated by the country's weak infrastructure, burdensome bureaucracy, high risk of corruption, lack of transparency and the slow pace of the judicial system
• Exports that are not sufficiently diversified and highly dependent on the textile sector
• Fragile political stability threatened by recurrent social movements;
• Weakness of the financial sector
• Vulnerability to natural disasters (cyclones, severe floods) that result in substantial income losses
• An economy dependent on the garment industry and characterised by a weak per capita income

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Foreign Direct Investment (FDI) in Bangladesh: Trends, Challenges, and Recommendations

During the liberation war in 1971 a nationalist weave emerged which gives Bangladeshis a spirit of freedom and dignity of independence but it also results on more reserved position in case of economic policy. Policy makers at that period used to see foreign companies access with a negative eyes. Foreign investments were discouraged as a result foreign direct investment (FDI) inflow in Bangladesh till 1980 is very insignificant. The growth of Bangladesh’s FDI inflow was around US$ 308 – 356 million for long fifteen years (1980 – 1995) which started with an amount of US $ 0.090 million in 1972. Afterwards this concept has been changed into a reverse position and government start encouraging foreign direct investment from 1990s. A series of policy incentives, investment sovereignty has been offered to the FDI investors including tax holiday for several years, duty free facility for importing capital machinery, 100% foreign ownership, 100% profit repatriation facility, reinvestment of profit or dividend as FDI, multiple visa, work permit to foreign executives, permanent resident or even citizenship for investing a specific amount, Export Processing Zone (EPZ) facility, and easy hassle free exit facility. Potential sectors of can attract more FDI are power generation, infrastructure devel-opment, private port establishment, joint venture with deep sea port establishment under PPP, ship building, ICT sector, call center, education, healthcare, mining, gas extraction, agro processed product, electrical & electronics, light engineering, and fashion designing etc. After so many incentives offered by the government till now FDI Inflow into Bangladesh is not at a satisfactory level. During last few years fresh FDI investment in not taking place. From the statistics of last few years it is quite clear that, reinvestment of locally earned profit is the major amount of FDI into Bangladesh. Fresh FDI inflow is decreasing day by day. Government has to investigate the issue and undertake necessary measures to increase fresh FDI into Bangladesh.

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During the liberation war in 1971 a nationalist weave emerged which gives Bangladeshis a spirit of freedom and dignity of independence but it also results on more reserved position in case of economic policy. Policy makers at that period used to see foreign companies access with a negative eyes. Foreign investments were discouraged as a result foreign direct investment (FDI) inflow in Bangladesh till 1980 is very insignificant. The growth of Bangladesh's FDI inflow was around US$ 308 – 356 million for long fifteen years (1980 – 1995) which started with an amount of US $ 0.090 million in 1972. Afterwards this concept has been changed into a reverse position and government start encouraging foreign direct investment from 1990s. A series of policy incentives, investment sovereignty has been offered to the FDI investors including tax holiday for several years, duty free facility for importing capital machinery, 100% foreign ownership, 100% profit repatriation facility, reinvestment ...

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The most prominent and important element in modern economics to develop a country is considered FDI. FDI can accelerate the economy of a developing country like Bangladesh through the influence on its GDP, export & import, and bringing some welfare to her. Being a less developing country, Bangladesh faces lot of obstacles in attracting more inflow of inward FDI. So, it is very important for Bangladesh to have some effective strategies in order to protect the foreign direct investors and ensure a congenial atmosphere to bring their capital. Bangladesh now is going through an economic & industrial transition where it needs more domestic and international investment. But it is a duty on the govt. part to make investors feel assure that their role in the business arena of Bangladesh is valued and hazardless. In this connection, friendly regulations, simplifying regulatory practices, investment incentives and bureaucratic procedures should be ensured. Problems on the way of inward FDI in Bangladesh should meet a well solution and new strategies should be taken to attract inward FDI to accelerate the economic growth of Bangladesh.

Asian Business Review

This research will try to examine the FDI plays a dominant role in the economy of Bangladesh through accelerating Gross Domestic Product (GDP), export and domestic investment followed by overall economic growth. So it is vital for a developing country like Bangladesh to carry out effective measures in protecting the prospective foreign investors so that they can get a congenial atmosphere to invest their capital. They should feel that their role in the business arena of Bangladesh is respectfully valued. In this connection, friendly regulations, simplifying regulatory practices, investment incentives and removal of inefficient bureaucratic procedures should be ensured.

Mammo Muchie

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Foreign Direct lwestment (FDI) grasps lots of benefit on a macroeconomic level. The FDI inflow facilitotes capital formation and the growth of economy, including industry, manufacturing, infrastructure, and energ/. The expansion of the GDP creates jobs and reduces unemployment rate. On the basis of intricate link between FDI and growth, the trade regime of Bangladesh has been intensely liberalized to maintain the streams of itvestments and finance from abroad. Although severql attempts (Foreign Irwestment Protection Lavt, Tm incentives, Special Investment Zones) have been made to create an irwestment friendly climate, Bangladesh has yet to be successful in creating domestic poliq settings factors, hospitable to the facilitation of business and inducement of inflow of Foreign Direct Investment.

Bangladesh is a developing country so rapid industrialization is essential to keep pace with its development needs. But the low rate of Gross Domestic Savings and Investment as well as low level of technology base hamper the expected industrialization process. Foreign aids and grants had been serving to overpass the gap. As the developing countries are in the process of graduating from being aid dependent economy into a trading economy, therefore, Foreign Direct Investment (FDI) is viewed as a major motivation to economic growth in these countries. Despite some policies reforms, Bangladesh could not attract handsome flow of FDI as yet. Furthermore, the major share of FDI is being repatriated. The main focus of this paper is to make known some general features of FDI, to observe the problems associated with attracting FDI and to recommend remedial measures to overcome those problems. The paper analyses the trends of FDI inflow and repatriation as well as what Bangladesh is doing presently to attract handsome flow of FDI.

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Foreign Direct Investment (FDI) has great impact on the development of a developing country like Bangladesh. The foreign investor seeks for new sources of investment where the developing country seeks for new sources of fund to develop the country. The FDI does not only bring sources of fund in a developing country but also new technology in a developing country. The FDI has the important role to develop the garments & weaving, telecommunication, banking and pharmaceuticals industry of Bangladesh. In this paper the role of FDI in economic growth (GDP) is analyzed to find out relationship between FDI and GDP in Bangladesh. To analyze the impact, The GDP has been taken as a dependent and FDI as an independent variable to run the regression analysis where the result shows that the FDI can explain about 83% data of GDP, p value much less than 0.05 to reject null hypothesis and GDP changes 64.0709 units for changes of each unit of FDI. The correlation matrix shows the GDP and FDI is highly correlated (0.912024962) in perspective of Bangladesh economy, so the FDI has grater impact on GDP or Economic Growth of Bangladesh. Some of the problems and prospects of FDI in Bangladesh is also discussed in the paper.

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Inward foreign direct investment in Bangladesh: Do we need to rethink about some of the macro-level quantitative determinants?

• Original Article
• Published: 24 February 2021
• Volume 1 , article number  48 , ( 2021 )

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• Mohammad Razib Hossain   ORCID: orcid.org/0000-0001-8448-1291 1   nAff2  

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FDI has become a desired form of incoming investment for capital-poor nations like Bangladesh. Therefore, a critical analysis of macroeconomic constituent’s influences that determine the inflow of this “Investment-Blood” is undoubtedly rational. The study is conducted to shed empirical light on the relationship between FDI and other macroeconomic variables in Bangladesh, which is believed to assist modifications at the policy level. Resorting on annual time-series data and harnessing ARDL bounds testing and Error Correction Model, this study detects a long-run relationship between inward FDI and a set of regressors. The study finds no impact of interest rate and foreign reserve on FDI. Export is inversely related to FDI. This study reveals a substitutionary effect of export on FDI, which suggests applying the Heckscher-Ohlin model to reduce redundant exports by producing goods only in which the nation has a comparative advantage to create more room for FDI. In other words, to attract more FDI, Bangladesh has to make a trade-off in export. This paper recommends adopting FDI-led development as an intermediary solution until export can surpass the total import. The effects of import, current account balance (CAB), and per capita GDP are all positive. The findings further disclose that the CAB gap due to reduced export can be mitigated with more FDI. Electricity production has an inverse effect on FDI for high energy production costs. Thus, to attract more FDI in Bangladesh, this paper's robust findings suggest increasing the interest rate, decreasing unnecessary export, and relying more on renewable energy sources.

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Author’s compilation by exploiting data from Asian Development Bank,

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Data availability.

The data that support the findings of this study are available on the World Development Indicators (WDI) website of the [World Bank] at the following URL: https://datacatalog.worldbank.org/dataset/world-development-indicators .

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Acknowledgement

I am genuinely grateful to my research supervisor Dr. Kausik Chaudhuri for his valuable time and suggestions during this manuscript's preparation. Besides, I would like to express my gratitude to the Commonwealth Scholarship Commission (CSC) and the University of Leeds for funding my research work.

This research was supported and funded by the Commonwealth Scholarship Commission (CSC), United Kingdom and Leeds University Business School, University of Leeds, UK.

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Mohammad Razib Hossain

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Hossain, M.R. Inward foreign direct investment in Bangladesh: Do we need to rethink about some of the macro-level quantitative determinants?. SN Bus Econ 1 , 48 (2021). https://doi.org/10.1007/s43546-021-00050-z

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Received : 23 September 2020

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DOI : https://doi.org/10.1007/s43546-021-00050-z

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Bangladesh Foreign Direct Investment

• Bangladesh Foreign Direct Investment (FDI) increased by 720.0 USD mn in Dec 2023, compared with an increase of 1.1 USD bn in the previous quarter.
• Bangladesh Foreign Direct Investment: USD mn net flows data is updated quarterly, available from Sep 2003 to Dec 2023.
• The data reached an all-time high of 1.6 USD bn in Dec 2018 and a record low of -119.0 USD mn in Dec 2005.
• In the latest reports of Bangladesh, Current Account recorded a surplus of 1.3 USD bn in Jan 2024.
• Bangladesh Direct Investment Abroad expanded by 0.1 USD mn in Dec 2023.
• Its Foreign Portfolio Investment fell by 110.3 USD mn in Dec 2023.
• The country's Nominal GDP was reported at 460.2 USD bn in Jun 2022.

View Bangladesh's Foreign Direct Investment from Sep 2003 to Dec 2023 in the chart:

What was Bangladesh's Foreign Direct Investment in Dec 2023?

Bangladesh Foreign Direct Investment (FDI) increased by 720.0 USD mn in Dec 2023, compared with an increase of 1.1 USD bn in the previous quarter. See the table below for more data.

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