Home ›› 28 Apr 2023 ›› Front
Bangladesh received $2.66 billion as Foreign Direct Investment (FDI) during the first nine months of 2022 amid a stagnant investment situation and the global economic crisis caused by the ongoing Russia-Ukraine war.
As per Bangladesh Bank data, the net inflow of overseas investment stood at $2.66 billion during the Janu-ary-September period of 2022, up by 47.46 per cent from $1.8 billion received in the same period of 2021.
Gross foreign investment also increased by 47.11 per cent to $3.62 billion during the same period in 2022, which was $2.46 billion in 2021.
Reinvestment dominated the overseas investment while intra-company loans recorded negative growth. New investment was less compared to reinvestment from earnings.
Of the net investment, equity capital rose by 26.71 per cent to $753 million in these months. It was $594 million in the same period of 2021.
The reinvestment of earnings stood at $1.87 billion, up 67.55 per cent compared to $1.11 billion a year ago, and intra-company loans declined by 47.11 per cent to $33.71 million from $91 million in 2021.
Of the total FDI, $2.32 billion was made in non-export processing zone (EPZ) areas, while EPZs received $334 million in investments.
After recording a 10.8 per cent decline in 2020 year-on-year, FDI in Bangladesh had risen by 13 per cent to $2.89 billion in 2021.
“The Covid-19 pandemic had badly impacted the foreign investment flow. A 47.46 per cent rise in overall FDI is encouraging in a sense that the pandemic’s impact on investment has ended,” M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, told The Business Post.
“Bangladesh’s FDI inflow is lower than the size of its economy. But now we are turning around from low inflow to high,” said the economist.
“If we analyse the investment trend, over 70 per cent was reinvestment and new investment is below 30 per cent. But we need new invest-ment,” said Reaz.
“New investment inflow is very slow and it’s far away from our expectations and needs. The government should prioritise measures to attract new investment,” he added.
On the other hand, Reaz said, “We have to develop new sectors with big opportunities to attract more foreign investment. In addition, the government needs to develop an investment promotion strategy.”
Improvement in infrastructure and logistics services has played an important role in attracting FDI, while new opportunities in special economic zones (SEZs) also helped to attract more investment.
According to World Bank, Bangladesh has climbed up 12 notches in the World Bank’s Logistics Perfor-mance Index 2023, ranking 88th among 139 countries due to significant investments in both soft and hard infrastructure, as well as technology.
Steps for improvement
As per the Eighth Five-Year Plan, Bangladesh aims to increase FDI contribution to GDP to 3 per cent by 2025 from the existing 1.35 per cent in FY2022-23. Gross investment contribution will rise to 36.59 per cent from the existing 32.73 per cent.
Meanwhile, investors also want a quick implementation of ongoing development projects and One Stop Services to retain the growth to attract new investment to achieve the government’s target. They have also called for completing the SEZs to lure more investment.
“Simplification of rules and regulation is very important to attract foreign investors. The government has to make the visa issuing process and licencing for investors simpler and quicker,” BGMEA President Faruque Hassan told The Business Post over the phone from Japan. He is in Japan as part of the prime minister’s entourage which is on a four-day visit.
“We are inviting investment from different countries like Japan for high-end product manufacturing, most-ly in non-cotton and high-valued apparel products,” said the business leader.
The government needs to implement infrastructure projects within the deadlines and complete the EZs. Once that happens, it would be a game changer for the country in bringing FDI, he added.
When an investor wants to invest in Bangladesh, he expects to get a trade licence quickly and import with-out any hassle, Faruque said.
But one of the main reasons why FDI inflow is not increasing is that the reality is different than what for-eigners see on paper, said Abul Kasem Khan, former president of Dhaka Chamber of Commerce and Indus-try.
“Our cost of doing business is high because of bureaucracy. We will have to do a study to see why the for-eign investment proposals are not bearing fruit and then effective measures will have to be taken to re-move those barriers,” he added.
Global investment status
As per the OECD International Direct Investment Statistics data, in Q3 of 2022, global FDI flows decreased by 7 per cent compared to Q2.
However, due to a strong first quarter in 2022, global FDI flows in the first nine months of 2022 remained 16 per cent higher than the levels recorded in the first nine months of 2021.
The top recipient of FDI inflows worldwide in Q3 2022 was the United States with $86 billion. It was fol-lowed by Ireland with $37 billion and the United Kingdom with $36 billion.
The top source of FDI outflows worldwide was the United States with $66 billion, followed by Japan with $40 billion and China with $90 billion.
