Net foreign direct investment (FDI) inflow dropped by 13.67 per cent to $3 billion in 2023, when the country was severely suffering from a shortage of US dollars and high inflationary pressure, according to the latest Bangladesh Bank (BB) data.
The data, released on Tuesday, also showed that such investment was $3.47 billion in 2022.
The gross FDI amount was more than $3.96 billion at the end of 2023 and the disinvestment amount was $965.36 million, which left the net FDI at a little over $3 billion at the end of 2023, according to the latest data.
At the end of 2022, BB data showed, the gross FDI inflow was more than $4.82 billion and disinvestment was over $1.34 billion. That left the net FDI at more than $3.47 billion.
Regarding the issue, Policy Research Institute Executive Director Ahsan H Mansur told The Business Post that the main reason behind the decline in FDI is that Bangladesh’s overall macroeconomic situation is not good.
On the other hand, interest rates have also increased globally. All in all, it's not a good time to invest and that is reflected in the BB data, he said.
The main component of FDI is equity, but Bangladesh’s equity dropped by 30.98 per cent in 2023 compared to 2022. At the same time, the reinvested earnings fell by 12.14 per cent. However, the intra-company loans increased by 254.21 per cent in 2023 compared to 2022, according to the latest data.
Regarding the increase in intra-company loans, Mansur said that the foreign companies operating in Bangladesh may have suffered some losses due to the economic turmoil. “That is why maybe they are borrowing from parent companies to cover the losses, which is why intra-company loans seem to have increased.”
In 2023, the highest amount of net FDI inflow — around $614 million — was from the United Kingdom, while the Netherlands was in the second position with $367 million.
The textile and wearing sector was the highest FDI receiver in 2023 with $591 million, while the banking and power sectors were in second and third positions with $434 million and $310 million, respectively.
