The linkage FDI & economic growth:

A study on agricultural firm sector of

Bangladesh

1
Table of Content:

Title Page No

Introduction 03

The Relationship between FDI and Economic

03
Growth in Bangladesh

A study on agriculture based sector of Bangladesh 04

Bangladesh agriculture’s contribution to GDP 05

Agriculture contribution in Bangladesh economic

06
growth

Agricultural recommendation in Bangladesh 07

Conclusion 07

Reference 08

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Introduction:

Bangladesh has a primarily agrarian economy. Agriculture is the single largest producing sector of the
economy since it comprises about 18.6% (data released on November, 2010) of the
country's GDP and employs around 45% of the total labor force. [1] The performance of this sector has
an overwhelming impact on major macroeconomic objectives like employment
generation, poverty alleviation, human resources development and food security.

A plurality of Bangladeshis earn their living from agriculture. Although rice and jute are the primary

crops, wheat is assuming greater importance. Tea is grown in the northeast. Because of Bangladesh's
fertile soil and normally ample water supply, rice can be grown and harvested three times a year in
many areas. Due to a number of factors, Bangladesh's labor-intensive agriculture has achieved steady
increases in food grain production despite the often unfavorable weather conditions. These include
better flood control and irrigation, a generally more efficient use of fertilizers, and the establishment
of better distribution and rural credit networks. With 35.8 million metric tons produced in 2000, rice
is Bangladesh's principal crop. National sales of the classes of insecticide used on rice, including
granular carbofuran, synthetic pyrethroids, and malathion exceeded 13,000 tons of formulated product
in 2003. The insecticides not only represent an environmental threat, but are a significant expenditure
to poor rice farmers. The Bangladesh Rice Research Institute is working with various NGO and
international organizations to reduce insecticide use in rice.

In comparison to rice, wheat output in 1999 was 1.9 million metric tons. Population pressure
continues to place a severe burden on productive capacity, creating a food deficit, especially of wheat.
Foreign assistance and commercial imports fill the gap. Underemployment remains a serious problem,
and a growing concern for Bangladesh's agricultural sector will be its ability to absorb additional
manpower. Finding alternative sources of employment will continue to be a daunting problem for
future governments, particularly with the increasing numbers of landless peasants who already
account for about half the rural labor force.

The Relationship between FDI and Economic Growth in Bangladesh:

Inward FDI to the middle-income countries has the evidence as a major stimulus to the economic
growth; conventionally at export-oriented manufacturing sector. In point of fact, basic macro
fundamentals like as growth of gross domestic capital formation, foreign reserve, infrastructure etc.
accelerates the FDI inflows. This study reviews the long-run trend on the time scale of FDI to
Bangladesh over the period 1975-2006 and major factors determining foreign companies' decisions to
invest, in associated with economic growth. Contents of the paper describe the theoretical
development and extensive literature review to find out the appropriate variables to deter the foreign
direct investment from time series data. On the basis of intricate link between foreign direct
investment and growth, all explained determinants enhance the facilitation, turnover, and return in
FDI concentrated sectors that promote long-term sustainable growth with specific shortcomings,

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directly or indirectly, in our labor-intensive economic activity. Reduced government’s ineffectiveness
along with supporting policy framework makes Bangladesh as an attractive destination of FDI, that
has a positive spillover and significant impacts affect over time through dynamic effects on economic
growth.

A study on agriculture based sector of Bangladesh:

Foreign Direct Investment (FDI): Bangladesh Perspective

Bangladesh is a country with thousand year’s history in international trade, investment and business.
We have both good and bad experiences with the foreign investors or trading partners. Because of
fertile plain lands and favorable climatic condition, ours had predominantly been an agricultural
country for centuries. Industrial setup started its journey in the region mainly during British colonial
age but got its momentum during 1950s. Investment promotion agencies started their activities at that
period.
Current Scenario:
As a result, today we have an about USD140 billion economy, which is growing with on an annual
average 5%-6.5% growth rate during last two decades. Bangladeshi economy is transforming from
traditional agriculture based economy into industry based economy. Contribution of agriculture into
GDP is reducing day by day but till now it employs 47.5% of workforce. In FY 2012-13, contribution
of agriculture, industry and the service sector into GDP is about 13.09, 29% and 57.91% respectively.
Contribution of investment is about 15.76% at the same time. Bangladesh received USD 1599.16
Million Foreign Direct Investment (FDI) in 2013 when we have exported about USD 30.71 billion
and imported about USD 40.61 billion. Therefore the contribution of investment into GDP and
percentage of FDI we received in the stated period is not satisfactory at all.

Last 10 years FDI statistics in agriculture sector:

Total Total
Years Years
(In million US$) (In million US$)
2013-2014 29.04 2008-2009 19.14

2012-2013 29.72 2007-2008 3.65

2011-2012 49.50 2008-2009 4.57

2010-2011 11.53 2005-2006 1.37

2009-2010 10.95 2004-2005 2.07

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 60 60

50 50

40 40

30 30

20 20

10 10

0 0
4 3 2 1 0 9 8 9 6 5 (In million US$)
2 01 2 01 2 01 2 01 2 01 2 00 2 00 2 00 2 00 00
3- 2- 1- 0- 9- 8- 7- 8- 5- 4 -2
2 01 2 01 2 01 2 01 2 00 2 00 2 00 2 00 2 00 2 00

Sectors for Investment:

Readymade Garment (RMG) is the prime mover of Bangladesh economy along with remittance, and
export of home textile, frozen food and shrimp, agro-processing products, tea, vegetables, plastic
products, pharmaceuticals, electrical products, etc. Other potential Bangladeshi sectors for investment
could be agro-based and agro-processing industry, skilled human resource export, ship building,
tourism, basic chemicals/dye and chemicals, ICT and ICT based service, active pharmaceuticals
ingredient industry and radio pharmaceuticals industry, polymer industry, jute and jute products,
leather and leather products, hospital and clinic, light engineering industry, plastic industry, furniture,
energy efficient appliances, frozen and processed fish industry, tea industry, home textiles, ceramics,
toy, container service, warehouse, innovative and import substitute industry, and cosmetics and
toiletries, etc.

Bangladesh agriculture’s contribution to GDP:

Replying to a question on Sunday, Abul Maal Abdul Muhith said share of industrial sector to the GDP
growth ‘is increasing’.

He said contribution of agriculture to the GDP growth was 18.36 percent in 2009-10 financial years
and it fell to 16.33 percent in the 2013-14 FY.

On the other hand, industrial sector’s share in the growth rose to 29.61 percent from 26.78 percent
during the period, he added.

The minister said service sector’s contribution declined to 54.05 percent in 2013-14 FY from 54.83
percent in 2009-10 FY.

To another query, Muhith said Bangladesh Customs had seized 2,344 kilograms of gold illegally
carried to the country.

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The gold has been deposited with the central bank, he added.

Replying to another question, the finance minister said foreign aid’s share in the gross national
income had now declined to 1 percent from 7 percent in 1988.

Road Transport and Bridges Minister Obaidul Quader, who acted for the telecommunication minister
in parliamentary affairs, said in an answer that number of 3G mobile-phone subscribers was 11.183
million at the end of 2014.

He said the country’s 10 public switched telephone network (PSTN) owed Tk 318.7 million to the
government.
The government served notices on several of the private fixed phone operators and sued several others
for realization of the dues, he added.

FDI invective classified by Major Countries:

Country Agriculture
United Kingdom (UK) 64.99
Australia 0.72
Netherlands --
South Korea 2.48
United States Of America 0.33
Malaysia -
Malta -
Singapore 30.49
Hong Kong 0.77
Japan -
India 5.42
Saudi Arabia -
Pakistan 0.21
British Virgin Islands -
Taiwan 0.68
Norway -
United Arab Emirates -
Thailand 5.76
Sri Lanka -0.28
Denmark 03.1
Other Countries 0.32
Total 4.1

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Agriculture contribution in Bangladesh economic growth:

In Bangladesh, services are the biggest sector of the economy and account for 50 percent of total
GDP. Within services the most important segments are: 20 percent

Bangladesh Agriculture barriers:

 Sea Level Rise (SLR)

 Floods

 Riverbank erosion

 Drought

 Salinity intrusion

 Loss of homestead and livelihoods

 Pest infestation

 Land scarcity

Agricultural recommendation in Bangladesh

Bangladesh Agricultural Development Corporation (BADC) to develop and promote Irrigation

Recommendation Software (IRS) on 5 January 2012.

The IRS, an ICT based recommendation platform will enable farmers to have access to proper
irrigation recommendations. This will include irrigation scheduling, information regarding crop
specific water requirement, irrigation methodology and more.

The information received from the IRS will help farmers to increase their yield and reduce their
production cost. The appropriate use of the software generated recommendations will also result in
positive environmental benefits such as reduced water usage leading to less pressure on the water
table and deducting emissions of greenhouse gases. Thus, the progress from the IRS platform will
trickle down to increased income for farmers combined with wider environmental benefits.

Conclusion:

Agriculture is the determining factor for food security as well as pro-poor development of Bangladesh
economy.

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The Problems of agriculture are multifaceted. So the ways of addressing the challenges should be
comprehensive, global and participatory for sustainable agricultural development.

Reference:

Bangladesh Bank, World Bank, Agriculture Bank.

Foreign Direct Investment (FDI): Bangladesh Perspective | Md. Joynal Abdin’s Development
Proposals

Foreign Direct Investment (FDI): Bangladesh Perspective by Md. Joynal Abdin :: SSRN

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Bangladesh GDP Annual Growth Rate | 1994-2015 | Data | Chart | Calendar

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http://www.theglobaleconomy.com/Bangladesh/Foreign_Direct_Investment/

http://www.tradingeconomics.com/bangladesh/foreign-direct-investment-net-inflows-percent-of-gdp-
wb-data.html