Home ›› 01 Aug 2022 ›› Editorial
Foreign direct investment (FDI) remains an effective tool for developing Bangladesh’s economy, and plays an important role in achieving the country’s socio-economic objectives – such as the poverty reduction goals.
Amid the severe economic headwinds created by the Covid crisis and global inflation – a ripple effect of the Russia-Ukraine war, FDI can act as a vehicle to build up capital, create job opportunities, develop productive capacity, and help our economy with global integration.
In these uncertain times, when most of the news is about doom and gloom, an article published by this daily on Sunday revealed that the FDI in Bangladesh rose by 50.14 per cent to $888.48 million in the first quarter of 2022, compared to $592 million in the same period a year ago.
FDI, in the form of equity capital, rose by 105.26 per cent to $288.33 million during the January-March period, up from $140.47 million in the same period previous year. The reinvestment of earnings stood at $613.53 million, up 61.11 per cent compared to $381 million a year ago.
The intra-company loans have declined by 119 per cent as well.
After recording a 10.8 per cent decline in 2020 year-on-year, FDI in Bangladesh rose by 13 per cent to $2.89 billion in 2021. This sharp growth has been triggered by the easing of Covid-19 restrictions and the resumption of economic activities.
The impacts of Covid-19 were severe in the first quarter of 2021, which hit the investments hard. But the economy turned around this year, with the export-import trade showing a sign of recovery.
This economic recovery allowed the companies to bring home profits, and also reinvest from their earnings. Besides, the economic recovery fuelled the confidence of overseas investors, encouraging them to make new investments.
Though the FDI growth is good, it does not automatically mean the ease of doing business has improved and the difficulties in the sector are over. To keep the FDI flowing in, local investors will have to welcome foreigners to partner with them.
Bangladesh’s growing economy – reaching $416 billion in FY22 – is a clear enough sign of our potential to foreign investors, and with adequate policy support and initiatives, the foreign direct investments can hit as high as $3 billion annually.
With sustained economic growth over the past decade, a large, young, and hard-working workforce, strategic location between the large South and Southeast Asian markets, and vibrant private sector, Bangladesh has the potential to attract increasing levels of FDI, despite the global economic and political crises.
Buoyed by a young workforce and a growing consumer base, the country has enjoyed consistent annual GDP growth of more than six percent over the past decade, with the exception of the Covid-induced economic slowdown in 2020.
Sectors with active investments from overseas include agribusiness, garment/textiles, leather/leather goods, light manufacturing, power and energy, electronics, light engineering, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, ship building, and infrastructure.
The government and Bangladesh Investment Development Authority (BIDA) should work in tandem to formulate policies and processes to make it easier to attract new investors in these industries.
Bangladesh can offer a range of new investment incentives under its industrial policy and export-oriented growth strategy to attract more foreign investors. With a good number of infrastructure projects ready to be opened to the public, and a few such as the Padma Bridge are already in operation, adequate policy support is key boosting Bangladesh’s FDI inflow in the coming years.
Without high levels of FDI, Bangladesh’s dreams of graduating from the LDC status and tackling the economic challenges that lay ahead will be much more difficult.
