BB to analyse impacts of relaxed FDI policy

The Bangladesh Bank is going to analyse the impact of relaxation of policy brought about to increase foreign direct investment (FDI).

The central bank will analyse if FDI has increased after the relaxation or any risk created due to the move and whether it made any impact on other sectors.

Foreign exchange investment department of the central bank has decided to request the BB’s research department to analyse the impacts, said officials of the Bangladesh Bank.

The FDI in Bangladesh decreased drastically during the two-yearlong Covid-19 pandemic. As a result, net FDI dropped by 39 per cent year-on-year to $2.37 billion in the fiscal year 2019-20 which was $3.88 billion in the fiscal year 2018-19, as per the central bank data.

The declined FDI inflow prompted the government to relax some policies and the central bank issued a series of circulars relaxing a number of policies to boost FDI and reduce complexity.

The policy relaxation includes liberalisation of family remittance facility for foreign nationals working in Bangladesh; repatriation of sales earnings of shares, in favour of foreigners living in Bangladesh, of private/public limited companies without the central bank’s permission; waiver of remittance of royalty fee, or technical knowledge fee, or franchise fees without the monitoring of the central bank.

The central bank officials said the net FDI inflow increased slightly due to the relaxed policies in the fiscal year 2020-21, rising by 5.77 per cent year on year to $2.50 billion.

The BB officials, however, feared that the relaxation of policies might create risk due to the eased monitoring.

The FDI inflow was also better in the FY22. The net FDI was at $2.65 billion in the nine months (July-Mar) of the last fiscal year, as per the central bank data.

Industry insiders said that a lot of work is yet to be done to create friendly environment for foreign investment.

Implementing one-stop services, providing required logistics and trade facilitation are very much needed to boost FDI, they added.

Zahid Hussain, former lead economist of the World Bank’s Dhaka office, said that the ease of doing business is yet to be improved.

He said that local investors have to welcome foreigners and partner with them to attract more foreign investments.