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Foreign Direct Investment: A Study On Bangladesh

The document discusses foreign direct investment (FDI) in Bangladesh. It defines FDI and notes its importance for economic growth in developing countries. Bangladesh has seen increasing FDI inflows in recent decades, reaching over $1 billion annually, though various factors still affect FDI levels such as bureaucracy, weak infrastructure, and political unrest. The document concludes that while barriers exist, opportunities remain for FDI in Bangladesh.

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155 views10 pages

Foreign Direct Investment: A Study On Bangladesh

The document discusses foreign direct investment (FDI) in Bangladesh. It defines FDI and notes its importance for economic growth in developing countries. Bangladesh has seen increasing FDI inflows in recent decades, reaching over $1 billion annually, though various factors still affect FDI levels such as bureaucracy, weak infrastructure, and political unrest. The document concludes that while barriers exist, opportunities remain for FDI in Bangladesh.

Uploaded by

Arittro Chakma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Foreign Direct

Investment
A STUDY ON BANGLADESH
Introduction
Foreign direct investment (FDI) is often seen as important
catalysts for economic growth in the developing countries. The
relationship between Foreign Direct Investment (FDI) and
economic growth has long been a subject of great interest in the
field of international development.
In the era of volatile flows of global capital, the stability of FDI
emerges as an effective channel to faster growth in developing
countries, particularly in relation to Least Developed Countries
(LDCs).
Definition of FDI
A foreign direct investment (FDI) is an investment made by a
firm or individual in one country into business interests located
in another country. Generally, FDI takes place when an investor
establishes foreign business operations or acquires foreign
business assets in a foreign company.
Examples are as a company in Japan, Toyota has opened a plant
in Shah Alam, Malaysia is consider as foreign direct investment
(FDI)
Components & Categories of
FDI
FDI has three components: equity capital, reinvested earnings and intra-
company loans.
Foreign investment is, however, especially desired in the following major
categories of industries:
 Export oriented industries
 Industries in the Export Processing Zones
 High technology products that will be either import substitute or export
oriented.
Advantages of FDI
 Location : Geographic location of Bangladesh is ideal for global trades with
very convenient access to international sea and air route.
 Natural Resources : Bangladesh is endowed with abundant supply of
natural gas, water and its soil is very fertile.
 Human Resources : Bangladesh has a population of more than 138.8
million who are hardworking and generally intelligent. There is a profuse
supply of disciplined, easily trainable and low-cost workforce suitable for any
labor-intensive industry.
 GSP Facility : Most Bangladeshi products enjoy complete duty and quota
free access to EU, Japan, Australia and most of the developed countries.
Present FDI Status in
Bangladesh
As a developing country, Bangladesh needs FDI for it’s ongoing development
process. Since independence, Bangladesh is trying to be a suitable location
for FDI. However, the total inflow of FBI has been increasing over the years.
In 1972, annual FDI inflow as 0.090 million US$, and after 39 years, in 2011
annual FDI reached to $1.17 billion.
FDI (Foreign Direct Investment) in Bangladesh increased by 1583 USD Million
in 2018. Foreign Direct Investment in Bangladesh averaged 994.88 USD
Million from 2002 until 2018, reaching an all time high of 1726 USD Million in
2013 and a record low of 276 USD Million in 2004. (source: Bangladesh Bank)
FDI Flow in Bangladesh
Factors Affecting FDI in
Bangladesh
 Bureaucracy: The activities of bureaucrats in some government agencies create
problems in the implementation of the project, thereby giving rise to acrimony and
legal hassles. Inconsequence, these adversely affect the attractiveness of a country for
future potential investment.
 Weak Infrastructure: The infrastructural inadequacy like, power, fuel supply,
telecommunication, road and railway communication, modern management technique
and above all inadequate and insufficient port and shipping facilities hamper foreign
investment. However, these type of facilities are available in EPZs.
 Political Unrest: Political unrest, due to lack of understanding between government
and oppositions, delays the implementation of the project.
 Lack of Adequate Information: The image of Bangladesh is unfavorable for
investment to the outside world. The cultivation of favorable image requires
dissemination of information related to macro-economic situation, industry policies,
lists and descriptions of political joint venture partners etc. relevant to FDI.
Conclusion
Bangladesh has considered FDI as more favorable factor for stimulating
economic growth. A number of factor lie behind this new orientation:
slowdown of the world economy along with political unrest in the
international arena, declining trend in public capital or foreign aid and the
globalization of production and services. Though there are some interrelated
administrative barriers which result inferiority in policy formulation and
implementation, competitive drawbacks, poor quality of skills and
infrastructure, ineffective institutions, and below average governance which
dampen potential of FDI. Besides the above, it has also been found out that
Bangladesh is not full of hindrances of FDI, but some opportunities and
prospects are also available in this host country. In very recent the
quarrelsome political environment has been changed and hopefully, new era
will be started of investment for the native and foreign investors.

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