FDI inflow up despite economic headwinds

The foreign direct investment (FDI) inflow rose last year despite Bangladesh’s economy facing serious headwinds, triggered by the Covid aftermath, and ongoing Russia-Ukraine war.

Net FDI inflow reached $3.47 billion at the end of 2022, up by 20.18 per cent compared year-on-year, shows latest data from the Bangladesh Bank. The figure stood at $2.89 billion in 2021 and $2.56 billion in 2020 – when the Covid-19 pandemic struck Bangladesh hard.

Reinvested earnings rose by 60.98 per cent to $2.51 billion last year, but equity capital fell by 10.19 per cent to $1.02 billion and intra-company loans also dropped by 129.63 per cent to negative 0.57 billion during that period.

During the October-December period last year, Bangladesh received $703.83 million FDI inflow, compared to $1,100.16 million recorded in the previous quarter.

In that quarter, the power sector received the highest $152.03 million FDI inflow, followed by $144.12 million in textile and clothing sector, $106.46 million in banking sector, $55.77 million in gas and petroleum sector, and $50.16 million in telecommunications sector.

The highest $145.42 million in FDI came from the United Kingdom (UK), followed by $83.40 million from Singapore, and $70.56 million from the USA, central bank data shows.

M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, had recently told The Business Post, “Bangladesh’s FDI inflow is lower compared to the size of its economy, we are now turning from low inflow towards a higher one.

“If we analyse the investment trend, a higher portion was reinvestment, and new investments are lower, but we need new investments. New investment inflow is very slow and it is far from our expectations and needs.”

He added that the government should prioritise measures to attract new investments.

Echoing the same, Policy Research Institute (PRI) of Bangladesh Executive Director Ahsan H Mansur said, “The FDI inflow rose slightly, which is good, but not enough because it is still 1 per cent of our Gross Domestic Product (GDP).

“The government has a target to attain FDI amounting to 3 per cent of our GDP since the last ten years, but we are yet to achieve this feat.”

He continued, “Foreign investors visit Bangladesh, but many return without making any investments due to a multitude of reasons, including bureaucratic red tape. The government should take immediate steps to ensure a smoother investment process.

“There currently exist significant complications in the process of fund repatriation from Bangladesh, and most companies are not able to provide dividends at all. We must work on curbing such complications to further boost the FDI inflow.”

Former president of Dhaka Chamber of Commerce and Industry Abul Kasem Khan said, “The key reason why our FDI inflow is not increasing is because the reality is different from what foreigners see on paper.

“Our cost of doing business is high because of lengthy bureaucracy. We will have to conduct a study to see why many of the foreign investment proposals are not bearing fruit, and then effective measures will have to be taken to remove those barriers.”

A senior official of the central bank, on condition of anonymity, said the regulator continues to work for easing the rules and regulations for fund repatriation, with the aim to attain more FDI.

Global investment status

Latest data from the OECD International Direct Investment Statistics show that in Q3 of 2022, global FDI inflow decreased by 7 per cent compared to Q2.

But due to a strong first quarter in 2022, global FDI inflow in the January-September period of last year remained 16 per cent higher than the levels recorded in the same period of 2021.

The top recipient of FDI inflows worldwide in Q3 2022 was the United States with $86 billion, followed by Ireland with $37 billion, and the United Kingdom with $36 billion.

The top source of FDI outflow worldwide was the United States with $66 billion, followed by Japan with $40 billion and China with $90 billion.

It should be noted that fully foreign and joint venture investment proposals with the Bangladesh Investment Development Authority (BIDA) rose by 126.06 per cent (Tk 28,086.31 million) during the January-March quarter of 2023, compared year-on-year.

During this period, the BIDA received around 231 investment proposals involving Tk 167,862.49 million, show latest data.