Country’s FDI to GDP ratio is below 1 percent but the rival countries including Vietnam, China, India and Cambodia received more than 2 percent
Zahid Hossain Biplob: Bangladesh received the highest Foreign Direct Investment (FDI) from China in the last year 2018 worth amounting at US$ 1.07 billion.
The Netherlands invested the second largest amount of $692 million, followed by, the United Kingdom was the third highest at $371 million and the United States was the fourth highest amount worth $174 million, according to the data of Bangladesh Investment Development Authority (BIDA).
Bangladesh received a record $3.61 billion FDI. Out of the foreign assistance, the power sector alone is holding the highest investments worth $1.01 billion followed by $730 million in the food sector, and $430 million in the textile sector.
Talking to Daily Industry, BIDA executive chairman, Kazi M Aminul Islam told that the government of Bangladesh over the past few years has taken various initiatives, such as policy reforms, removing infrastructural deficiencies and creating a positive business environment to encourage more investment, and that has paid off.
Regarding the downtrend of US FDI in Bangladesh, Aminul said, “The US government has cut tax rates for businesses in the US, and that has encouraged them to invest in their own country.”
Experts said, Bangladesh is an example of developing nations’ robust FDI inflow past year, though the country still gets a tiny amount of foreign investment. The GDP share of FDI is on an average I percent each year, said sources.
They said Bangladesh needs at least 10 to 12 billion FDI each year until 2030 to attain a mid-level status country.
Instead of thinking about the trade benefits or loss after the graduation from LDC, Bangladesh has to concentrate on increasing investment, they recommended.
FDI flow has been maintaining a rising trend in recent years but it was not up to the mark given the GDP size, said AB MirzaAzizul Islam, a former finance adviser to a caretaker government.
The country’s FDI to GDP ratio has been hovering below 1 percent for long but its peers like Vietnam, China, India and Cambodia have more than 2 percent, he said.
“Foreign businesses place great importance on the Ease of Doing Business ranking before taking an investment decision.”
Bangladesh is yet to become an investment destination for foreigners due to its poor governance, unavailability of energy supply, infrastructure deficits, corruption, political uncertainty and concerns over security, Islam said.
Industry insiders said, efficient bureaucracy, simplification in procedures for Foreign Direct Investment (FDI) registration, improvement in legal infrastructure as well as acceleration in one-stop service provided by the authorities concerned are needed for attracting FDI at expected level.
The number one obstacle in attracting FDI in Bangladesh is especially the bureaucratic complexities. The further reasons are lack of investors’ confidence and congenial environment, unavailability of land, institutional weakness and corruption, they observed.
Efficient bureaucracy, simplification in procedures for Foreign Direct Investment (FDI) registration, improvement in legal infrastructure as well as acceleration in one-stop service are needed for attracting FDI at expected level, they recommended.
The government should find out the reasons why the foreign investors were not coming in the country despite having all favourable regulatory regimes.
A strong partnership between the public and the private sectors is needed to solve the problems faced by the foreign investors and for creating better business environment to attract more FDI, they suggested. Continuation in policy regime is needed to boost confidence of foreign investors, they added.
According to a research of International Journal of Economics & Management Sciences, 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 can attract more FDI of power generation, infrastructure development, 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. The government has to investigate the issue and undertake necessary measures to increase fresh FDI into Bangladesh.