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Foreign Direct Investment in Bangladesh increased by 1834 USD Million in 2015.
Foreign Direct Investment in Bangladesh averaged 930 USD Million from 2002
until 2015, reaching an all time high of 1834 USD Million in 2015 and a record
low of 276 USD Million in 2004. Foreign Direct Investment in Bangladesh is
reported by the Bangladesh Bank. Bangladesh has witnessed the highest foreign
direct investment (FDI) in last year exceeding $ 2 billion mark, reports the BSS.
The World Investment Report 2016, released today by the United Nations
Conference on Trade and Development (UNCTAD) showed that Bangladesh
registered 44 percent growth in receiving record breaking FDI of $ 2.235 billion in
2015. The FDI receipt was 44.10 percent or $ 684 million higher compared to that
in 2014. "Bangladesh has witnessed the highest growth among the South Asian
countries due to stable and favorable investment atmosphere prevailed in the
country last year," said Board of Investment (BOI) Executive Chairman Dr S A
Samad at the report launching ceremony at BOI. In terms of gross FDI inflows, the
amount stands at $ 2699.05 million which was 31.08 percent higher than in
previous year to $ 2058.98 million. In South Asia, Bangladesh is ahead of all
countries except India which was the 10th largest FDI recipient country in the
world in 2015, receiving $ 44 billion. "Although, Bangladesh was trailing India in
terms of total volume, but leading the region in attaining highest growth rate for
FDI receipt," said Power, Energy and Mineral Resources Affairs Adviser to the
Prime Minister Dr Tawfiq-E-Elahi Chowdhury who was present at the unveiling
ceremony as the chief guest. He said India has a big domestic market with higher
per capita income that pushed them in a better position. "But, we've a visionary and
dynamic leader like Prime Minister Sheikh Hasina and energetic young generation
who must propel the country ahead." Inflows to Pakistan and Sri Lanka declined to
$ 865 million and $ 681 million respectively while In Nepal, FDI inflows rose by
74
percent
to
$51
million
last
year.
According to the report, country's power, gas and petroleum sector received
highest FDI of $ 574 million followed by textile and wearing $ 443 million,
telecommunication $ 255 million and banking $ 310 million. In 2014,the FDI
receipt of power, gas and petroleum sector was only $ 50 million. Besides,
reinvested earnings in the country continued to rise, exceeding the value of the
equity component. Bangladesh, in fact, became the largest FDI host in the
subgroup of exporters reinvesting their earnings, as flows into Cambodia fell
slightly. The trend of reinvested earnings increased in 2015 by 15.74 percent which
signified the confidence of the investors to come in Bangladesh.
"Return of investment in the country is very high and it is 14 percent that's why
those who are investing here could not want to leave," opined the BOI Executive
Chairman. Recovery in FDI was strong in 2015. Global FDI flows jumped by 38
percent to $ 1.76 trillion, highest since the global economic and finance crisis of
2008-09. The report said a surge in cross-border mergers and acquisitions (M&As)
to $ 721 billion, from $ 432 billion in 2014, was the principal factor behind the
global rebound. However, there was no M&As in Bangladesh, but this is supposed
to happen in the country in future, said S A Samad, adding: "If the M&As take
place in the country, FDI receipt would jump to 5-7 billion." Besides, the FDI
outflows from Bangladesh rose slightly to $46 million last year from $44 million
the year ago. This year, the UNCTAD's report looks into global financial flows
against the background of stalling global growth, falling commodity prices and
geopolitical tensions. The report, titled "Investor Nationality: Policy Challenges",
said globally, the recovery in FDI was strong in 2015, with foreign direct
investment flows jumping. Dr M Ismail Hossain, Professor of Economics at
Jahangirnagar University,made a power point presentation on the World
Investment Report-2016. The report said global FDI flows are expected to decline
by 10-15 percent in 2016. Over the medium term, flows are projected to resume
growth
in
2017
and
to
surpass
$1.8
trillion
in
2018.
Hindered by the current global and regional economic slowdown, FDI inflows to
Asia are expected to decline in 2016 by about 15 percent, reverting to their 2014
level, it added. "Global economy is yet to get back strong shape overcoming the
financial and economic downturn in 2008-09, but it would be robust in 2017 and
2018 for some strong initiatives," observed Ismail Hossain. The United States
topped the list of the countries receiving the highest amount of FDI, followed by
Hong Kong, China, Ireland, the Netherlands,Switzerland, Singapore, Brazil,
Canada and India. Bangladesh witnessed a “historically high level” of growth in
foreign direct investment in 2015, crossing the figure $2bn mark, according to
World Investment Report.
“Thanks to rising FDI in labour-intensive manufacturing, inflows to Bangladesh
jumped by 44% to $2.23 billion, a historically high level,” the report said. World
Investment Report 2016 was released jointly by the United Nations Conference on
Trade and Development (Unctad) and Board of Investment, Bangladesh in Dhaka
yesterday. The high growth has been attributed to political stability, higher return
of investment, less risk of investment and reinvestment of earnings. During the last
year, Bangladesh witnessed the highest FDI of $2.23 billion, which is 44.10% or
$684 million higher compared to $1.55 billion of 2014. In South Asia, Bangladesh
is ahead of all countries except India which was the 10th largest FDI recipient
country that received $44 billion in 2015, said the report.
“Bangladesh has witnessed the highest growth among the South Asian countries as
the rate of investment return is higher ranging 14% to 15%, which means investors
did not want to leave,” said Board of Investment (BOI) Executive Chairman SA
Samad while addressing the report launching ceremony.
The report stated that the total inflows to South Asia increased by about 22% to
$50 billion, which was driven by India and Bangladesh that received investment of
$2.23 billion and $44 billion respectively.
Bangladesh is the second largest FDI receiver among the South Asian countries
while India became the fourth largest recipient of FDI in developing Asia and the
tenth largest in the world with inflows reaching $44 billion.
Inflows to Pakistan and Sri Lanka declined to $ 865 million and $ 681 million
respectively while In Nepal, FDI inflows rose by 74 percent to $51 million last
year.
According to the report, country’s power, gas and petroleum sector have received
highest FDI of $574 million followed by textile and wearing $443 million,
telecommunication $255 million and banking $310 million. In 2014, the FDI
receipt of power, gas and petroleum sector was only $50 million.
Strong FDI in Asia drove inflows to manufactures and mixed exporters. Five
manufactures exporters reported 18% growth in FDI flows, thanks to record flows
to Bangladesh.
FDI in the textile and garments industries remains strong in Bangladesh, as does
FDI in power generation, the report stated.
Reinvested earnings in the country continued to rise, exceeding the value of the
equity component and Bangladesh became the largest FDI host in this subgroup of
exporters, as flows into Cambodia fell slightly, said the report.
“It is a good sign that the investors are not sending their money back home, rather
they are investing further,” said Power, Energy and Mineral Resources Affairs
Adviser to the Prime Minister Tawfiq-E-Elahi Chowdhury who was present at the
report launching ceremony as chief guest.
India has a large domestic market with higher per capita income and large
population, which worked as catalyst for better position, said Tawfiq while
commenting on the India’s FDI volume.
In terms of gross FDI inflows, the amount stands at $2699.05 million which was
31.08% higher than previous year to $2058.98 million.
Recovery in FDI was strong in 2015. Global FDI flows jumped by 38% to $ 1.76
trillion, highest since the global economic and finance crisis of 2008-09.
The report said: “A surge in cross-border mergers and acquisitions (M&As) to
$721 billion, from $432 billion in 2014, was the principal factor behind the global
rebound.”
“A 38% jump in flows, to $1.76 trillion, gives hope that global FDI is at long last
returning to a growth path. But we are not yet out of the woods,” said UNCTAD
Secretary-General Mukhisa Kituyi.
FDI flows are expected to decline in 2016 in both developed and developing
economies, barring another wave of cross-border mega-deals and corporate
reconfigurations.
UNCTAD also forecasts that FDI flows are likely to contract by 10%–155 in 2016,
reflecting the fragility of the global economy, the persistent weakness of aggregate
demand, sluggish growth in some commodity-exporting countries. Over the
medium term, FDI flows are projected to resume growth in 2017 and to surpass
$1.8 trillion in 2018.
As a result, today we have an about USD140 billion economy, which is growing
with on an annual average 5% – 6.5% growth rate during last two decades.
Bangladeshi economy is transforming from traditional agriculture based economy
into industry based economy. Contribution of agriculture into GDP is reducing day
by day but till now it employs 47.5% of workforce. In FY 2012-13, contribution of
agriculture, industry and the service sector into GDP is about 13.09, 29% and
57.91% respectively. Contribution of investment is about 15.76% at the same time.
Bangladesh received USD 1599.16 Million Foreign Direct Investment (FDI) in
2013 when we have exported about USD 30.71 billion and imported about USD
40.61 billion. Therefore the contribution of investment into GDP and percentage of
FDI we received in the stated period is not satisfactory at all.
Sectors for Investment:
Readymade Garment (RMG) is the prime mover of Bangladesh economy along
with remittance, and export of home textile, frozen food and shrimp, agroprocessing products, tea, vegetables, plastic products, pharmaceuticals, electrical
products etc. Other potential Bangladeshi sectors for investment could be agrobased and agro-processing industry, skilled human resource export, ship building,
tourism, basic chemicals/dye and chemicals, ICT and ICT based service, active
pharmaceuticals ingredient industry and radio pharmaceuticals industry, polymer
industry, jute and jute products, leather and leather products, hospital and clinic,
light engineering industry, plastic industry, furniture, energy efficient appliances,
frozen and processed fish industry, tea industry, home textiles, ceramics, toy,
container service, warehouse, innovative and import substitute industry, and
cosmetics and toiletries etc.
Existing Strengths and Opportunities:
We are trying to attract foreign investors here by stating that, Bangladesh is located
at a strategic point to reach into two largest market of the world i.e. India and
China. At the same time we have a large domestic market of 160 million people
and our purchasing power parity is increasing day by day. Bangladesh enjoys duty
and quota free market access mainly in the EU, Japan, Canada and Australian
market. We have bilateral agreement to avoid double taxation with 28 countries.
Bangladesh is offering protection of foreign investment through the Foreign
Private Investment (Promotion & Protection) Act 1980. We are offering skilled
and non-skilled manpower at a competitive price; other factors of production are
also available with comparatively lower cost here in Bangladesh.
Bangladesh is offering a good number of fiscal and non-fiscal incentives like, tax
holidays five years in different slaves for fist five years in Dhaka and Chittagong,
seven years for other cities. For export oriented industries duty free import of
machinery and spare parts, bonded ware house facility, up to 90% bank loan
against LC, Permanent residence facilities is available upon investment minimum
USD 75000 and citizenship is available for minimum USD 0.5 million investment.
Repatriation facilities for invested amount with earned profit, dividends while exit.
A favorable budgetary incentives is also available for the foreign investors here in
Bangladesh.
Current Trend of FDI:
Developed and developing countries like Japan, Australia, Canada, Switzerland,
China, Singapore, Malaysia, South Korea, France, Germany, USA etc. are shifting
their industries into high-tech capital intensive industry due to rise in
manufacturing cost of land and labor. Therefore labor intensive industries are
relocating into cheaper destinations like Bangladesh, India, Brazil, South Africa,
Sri-lanka, Vietnam, Cambodia, Mongolia etc. This trend of relocation makes an
opportunity for the countries like Bangladesh to get foreign investment as a form
of relocated industry. On the other hand Multinational / Transnational Companies
are always in search of new markets to manufacture products at competitive price
to sell at domestic market or export into the target markets.
From both the aspects Bangladesh is a promising location. We have a growing
market of about 160 million people at home and we are locating in a strategic point
to reach into Indian (about 1.27 billion) market and the Chinese (about 1.36
billion) market.
Net foreign direct investments into Bangladesh during the last few years are
USD800 million in 2004-05 FY, and USD 675, 793, 748, 961, 913, 775, 995
million in 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12 FY
respectively. Bangladesh’s net FDI receipt is not satisfactory in terms of our GDP
size.
Causes of our failure to attract foreign investment could be listed as political
instability, shortage of power, gas and other utilities supplies, absence of effective
IPR imposition so on and so forth.
Why do Bangladesh Needs FDI:
Bangladesh is a growing LDC and projected to be a developing country before
2021. At this point of time we have limitation is terms of technical knowhow,
skilled manpower, power supply, infrastructure development, managerial capacity,
product’s standards and international certifications etc. With so many limitations
we have to grow further even faster to achieve the goal. Therefore foreign direct
investment could be the best alternative to keep the wheel rolling, to move the
economy faster toward prosperity.
What to do & how to do:
Our investment promotion agencies could consider the following steps to attract
foreign investment in an effective manner:
1 Priority sectors for inviting foreign investment have to be selected: Because
today Bangladesh do not need foreign investment to establish a RMG industry but
it could be welcome to develop a world class amusement park, sea or hill station,
five star hotel, to construct an alleviated express way, establish a modern
laboratory, high-tech medical facilities etc. Therefore we have to select priority
sectors for foreign investment.
2 Complete project proposals (fiscal & technical) shall be prepared: Promising
projects could be listed and preparing project proposals in terms of capital,
technology required, potential markets, with payback period etc.
3 A long list of global investment giants could be made: Sectoral list of
multinational or transnational investment companies could be drawn and
approached with specific project proposals. This approach could be given one to
one basis or organizing investment summits into global corporate hubs like
Singapore, Dubai, Geneva, Paris, Frankfort, London, New York etc.
4 Providing One Stop Investment Facility Services to the Investors: One stop
investment services like Trade License, TIN, VAT registration, Environment
Clearance, Boiler Clearance, Joint Stock Registration, Export / Import
Registration, Copyright, Patents, Trade Marks, Industrial Designs etc. has to be
offered digitally to avoid corruption and delay in decision making.
5 Post investment services: A package of thousand days post investment services
could be offered for the foreign investors to monitor and guide sustainable
investment.
Off course, local investors shall be equally eligible to get similar treatments from
the government and relevant agencies. Joint venture investment may be promoted
to ensure local stake and equal access to decision making.
Finally I would say that, this is the peak time for Bangladesh to promote its
existing strength and opportunities to attract foreign investors, because each of the
targeted investment will lead us one step forward to a developing nation within
shortest period of time. Each of the ventures will work for us in terms of
employment generation, export earnings, technology transfer, managerial
knowledge, standard of living and poverty alleviation. So many criticisms could be
written against FDI but we need it badly today, if possible now.