University of Dhaka

Individual report on

Current status of Foreign investment of Bangladesh: Challenge and opportunities analysis

Submitted to

Asmina Akter

Lecturer

Department of International Business

Submitted by

Khadija Akter

ID: SK-030-096

Batch: MBA 13th

Course Name: International Investment

Date of submission: 30 April, 2021

 Executive Summary
Once titled “A bottomless basket” –Bangladesh, now an emerging country and attracted major
players of the world by continuing its growth, development, reducing mortality rate of infants,
increasing the participation of women and girls at school and working places, holding a good
debt to GDP ratio even passing through hard times after independence. Bangladesh‟s such
uptrend in development process and her future perspectives, planning, achieving the MDGs
successfully have made Bangladesh more prominent after independence. Now the Vision to be a
developed country, to maintain her sustainable growth she needs huge capital flows and internal
development. To achieve such long term plans, Bangladesh is focusing most on FDI. To attract
FDI Bangladesh has been successful but the rate of success is not satisfactory till now.
Bangladesh needs to develop its IT sector, water routes development, sea port development,
acceleration of supply of power and energy, redesigning administrative policies and should build
the capabilities of absorbing technological advancement at a faster rate, reducing the challenges
and increasing the opportunities will make grow Bangladesh a new market for investment
specifically in Asian region. So this report aims to scrutinize the current status of Bangladesh‟s
FDI, challenges, opportunities which will pave the way to solution to the challenges.
Introduction

Amidst 1990 after recession, Foreign Direct Investment got attention from the world. Since then
it has been using as an inevitable source for development. FDI has become a defining feature and
got special treatment in policies towards FDI in last 2 decades. MNCs are expanding their
business in foreign lands through direct investment. Due to Corona Virus, FDI has shifted inward
and followed downtrend. According to UNCTAD, Global FDI falls 49% in the first half of 2020.
The developed nations experienced flow of FDI $98 billion in six month period but which was
only 25% of FDI compared to 2019. (UNCTAD report 27th October, 2020)

In Bangladesh, it upward trend of FDI is not exception because developing countries like
Bangladesh are the prime clamant of FDI. Because FDI fosters economic growth of developing
countries. (Behname,2012). Bangladesh is an agrarian country, Bangladesh is yet to develop in
industrial sector and it must be admitted that developing countries have to depend highly on FDI
for overhauling the industrial development. Government of Bangladesh is focusing importantly
on FDI and trying to create a favorable environment to attract investors and to do this
government of Bangladesh are taking measures such as economic policy reformation, providing
incentives to foreign investors and promoting privatization etc. In Bangladesh, FDI always
plays an unavoidable role in accelerating the economic development and also contributed
to increasing GDP (Mottaleb,2008).
What factors allure the investors to make an investment in Bangladesh?

 Availability of skilled labor at lower wages

 Stable macroeconomic environment

These two factors have contributed Bangladesh to attract FDI (Anwarul Islam, 2014).

After independence, Bangladesh adopted a policy which enabled to nationalize the all large and
medium scale industries. Till 1993, Bangladesh attracted tiny foreign investment due to instable
political environment. From 1977 to 1993 Bangladesh had around 250 registered units of FDI,
after 1993 Bangladesh registered FDI units about 450. From then till now FDI is increasing in
Bangladesh except some unavoidable unstable situations and factors. Around the decade of
1980‟s, Bangladesh attracted a little FDI and most of the portions were invested in Banking
Sector. Bangladesh started attracting more FDI since 1996 and investments were coming in
power and energy sector and the reasons were:

 Environment friendly policies for foreign investors

 Economic reformation along with unexplored natural resources.

Till then, Bangladesh experienced growth in FDI.

Foreign investment trend of Bangladesh:

FDI totally depends on the environment of the host countries. Host countries arrangement,
political stability, inflation rate, business ambience, tax to GDP ratio etc affect FDI. More
feasibility in business environment and endowment of factors that effect FDI leads to increase
FDI. Because MNEs and investor countries invest in host countries due to three reasons:

 Expansion of sales to get access to the large markets

 To acquire more resources
 Minimization of risks

Bangladesh has become the hub of investment in infrastructural development, energy and power,
food and security, agriculture, exploration of oil and gas from the underneath of the sea (after
winning the verdict over the sea dispute against India and Myanmar which allowed Bangladesh
to own sea are in the Bay of Bengal about 1,17,980 sqkm) and other sectors which provide
services in communication and connectivity. So Bangladesh has come to the fore to those
investors who are in quench for investing in host countries and Bangladesh belongs to such
countries. Bangladesh is a promising country with such facilities:

 Large domestic Market

 Cheap labor market with skills
 Low utility charges
 Deep sea port facilities alongside the Bay of Bengal which connects Indian Ocean
 Long-term tax holiday
 100% investment repatriation facility
 Easy access to largest market like China, India, Japan, ASEAN countries and other South
Asian countries.
 Special Economic zones and Exclusive Economic zones (Financial Express, DCCI data
from 2020-2021)

 FDI incentives and facilities in Bangladesh:

 Government provides tax exemption on royalties
 Tax reliefs are provided to capital gains from transfer of shares by the investing
company
 Foreigners employed in Bangladesh can remit up to 50% of their salaries along
with repatriation of savings and can enjoy retirement benefits at the time of their
return
 There is no need of work permits to project related works for the foreign workers
and employees
 Provision of transfer of shares held by foreign investor to local investors
 Facilities for repatriation of invested capital, profits and dividends
 If any foreign investors invest remittable dividends in the host country than it will
be considered as new investments
 Fiscal incentives:
 100% corporate tax waiver for 10 years
 Total VAT waiver on land leasing for factories, and 50% cost for central effluent
treatment plants in SEZs.
 Bonded warehousing
 Accelerated depreciation on cost of machinery is admissible for new industrial
undertaking (The Daily Star, BEZA website, Shaheen 2006)
  FDI inflow

It is undeniable fact that FDI plays a major role in the development of any nation, particularly
developing nations. After 1980‟s when globalization was trending (till now) up economist
advised to rely on FDI as it fosters growth as it was mentioned before in the discussion. When
Asia and Latin America fell into financial crisis in 1997, most of the economists at that time
advised to attract FDI. This advice was given to developing nations to supplement saving
through capital inflow and promote economic development. Even at that time the critics who
are strongly in favor of isolating capital flow from international market, they also
suggested to market openness to accept capital inflow or FDI (Stiglitz,2000).

The images below represent the present stats of FDI movement internationally and regionally to
have a flash of FDI inflow and outflow:
Now historical data will be examined to justify the trends of FDI in Bangladesh.

(https://stats.unctad.org/handbook/EconomicTrends/Fdi.html)

In this graph, it can be examined that there was a sizable decline of FDI in 2017 and 2018
compared to 2016 but a modest rise of FDI in 2019 is observable. At US $1.54 trillion,
inflowswere around 3% higher than that of 2.108%. If regional FDI flows are examined by
means of the image below:
Developing economies are the major recipient of FDI the image depicts. Following the image, it
is observable that developing economies were around $650 billion USD which was almost 2
times of their outflow (e.g. around US$350 billion). As a developing nation Bangladesh needs to
focus on FDI. Because developing nation like Bangladesh needs distribution of factor
endowments and technology transfer between Bangladesh and giant developing nations (e.g.
China, India, Brazil, Australia, New Zealand etc) and developed nations (e.g. USA, Canada, UK
etc). As Bangladesh is included in the group of Next-11 (Goldman Sachs, 2007), it has become
a prominent time for Bangladesh to develop its economy through FDI. For Bangladesh FDI will
play greater role than international trade because FDI has more complementary effect on
developing nations than international trade because it ensures flows of capital rapidly
(Fontagne, 1999).

The FDI data presented below extracted from the published data World Bank will give an
overview of present stats of FDI in Bangladesh

Year Amount in Year Amount in Year Amount

USD USD in USD
million million million
2000 280.3846 2007 651.0297 2014 2539.191
2001 78.52704 2008 1328.423 2015 2831.153
 2002 52.30493 2009 901.2866 2016 2332.725
2003 268.2852 2010 1232.258 2017 1810.396
. 2004 448.9054 2011 1264.725 2018 2421.626
2005 813.322 2012 1584.403 2019 1908.045
2006 456.5232 2013 2602.962 -- --
Bangladesh‟s FDI inflow is rising since 1997. Major investment sectors were manufacturing,
trade and services, infrastructure and power, gas and energy. Other sectors are not receiving that
much level FDI. In 2000 FDI was only 280 million than from 2010 FDI crossed the value of FDI
1000 million USD and after 2011 Bangladesh always received FDI more than 1500 million
USD. This was the total scenario of FDI in Bangladesh. Descriptive analysis will be discussed
later in Opportunities and Challenges section.

 Comparison with Bangladesh regarding FDI with similar countries

Indonesia

Year Amount(USD Year Amount(USD Year Amount(USD

million) million) million)
2000 -4550.36 2007 6928.48 2014 25120.73
2001 -2977.39 2008 9318.454 2015 19779.13
2002 145.0855 2009 4877.369 2016 4541.714
2003 -596.924 2010 15292.01 2017 20510.31
2004 1896.083 2011 20564.94 2018 18909.83
2005 8336.257 2012 21200.78 2019 24993.55
2006 4914.201 2013 23281.74
(Source: World Bank)
Turkey

Year Amount(USD Year Amount(USD Year Amount(USD Year Amount(USD

million) million) million) million)
2006
2000 982 20185 2012 13744 2018 12822
2001 3352 2007 22047 2013 13563 2019 9266
2002 1082 2008 19851 2014 13337
2003 1702 2009 8585 2015 19263
2004 2785 2010 9099 2016 13835
10031 16182 11042
2005 2011 2017
Philippines

Year Amount(USD Year Amount(USD Year Amount(USD

million) million) million)
2000 1487 2007 2918.725 2014 5739.574
2001 760 2008 1340.028 2015 5639.156
2002 1769 2009 2064.621 2016 8279.548
2003 492 2010 1070.387 2017 10256.44
2004 592 2011 2007.151 2018 9948.599
2005 1664 2012 3215.415 2019 7685.339
2006 2707.415 2013 3737.372

Vietnam

Year Amount(USD Year Amount(USD Year Amount(USD

million) million) million)
2000 1298 2007 6700 2014 9200
2001 1300 2008 9579 2015 11800
2002 1400 2009 7600 2016 12600
2003 1450 2010 8000 2017 14100
2004 1610 2011 7430 2018 15500
2005 1954 2012 8368 2019 16120
2006 2400 2013 8900

All the comparisons are on the basis of Next-11 as the countries are same in economic
growth, potentialities, emerging markets and possess to be future attractive markets for
investment.

FDI Comparison
30000
25000
20000 Indonesia
FDI in USD Million

15000 Turkey
10000 Philippines
5000 Vietnam

0 Bangladesh
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

-5000
-10000
According to the data and graph aforementioned, Bangladesh is far below in terms of FDI than
that of Turkey, Indonesia, Vietnam and Philippines. If we look at the table below:

Bangladesh Indonesia Turkey

Years GDP(In FDI(In FDI GDP(In FDI(In FDI GDP(In FDI(In FDI
USD USD in % USD USD in % USD USD in %
Billion) Billion) of Billion) Billion) of Billion) Billion) of
GDP GDP GDP
2015 302.6 2.831153 0.94% 1109.0 19.77913 1.78% 761.4 19.263 2.53%
2016 274.0 2.332725 0.85% 1042.0 4.541714 0.44% 778.4 13.835 1.78%
2017 249.7 1.810396 0.73% 1016.0 20.51031 2.02% 859.0 11.042 1.29%
2018 221.4 2.421626 1.09% 931.9 18.90983 2.03% 869.7 12.822 1.47%
2019 195.1 1.908045 0.98% 860.9 24.99355 2.90% 864.3 9.266 1.07%

Philippines Vietnam
Years GDP(In FDI(In USD FDI in % of GDP(In FDI(In USD FDI in % of
USD Billion) GDP USD Billion) GDP
Billion) Billion)
2015 376.8 5.639156 1.50% 261.9 11.8 4.51%
2016 346.8 8.279548 2.39% 245.2 12.6 5.14%
2017 328.5 10.25644 3.12% 223.8 14.1 6.30%
2018 318.6 9.948599 3.12% 205.3 15.5 7.55%
2019 306.4 7.685339 2.51% 193.2 16.12 8.34%
(Source: World Bank)

The data above indicates Bangladesh falls below 1% of GDP in terms of FDI. Indonesia is above
2% if 2016 is excluded. Turkey is on average 1.63%, Philippines 2.53% and Vietnam 6.37%.
Bangladesh‟s FDI situation is not so astounding and as a growing competitor to hold
Bangladesh‟s GDP growth momentum Bangladesh should increase FDI more than ever because
Bangladesh is heading towards to enter global competitive market once she graduates to
developing country in 2026. Bangladesh‟s competitor will be Next-11 countries mostly as
Jeffrey D. Sachs echoed with other monetary institutions. If such FDI rates continue, Bangladesh
will fall behind the other competitors like Vietnam, Cambodia, Indonesia, Philippines.
  Top 3 Sector based FDI (in USD million)

Power, Gas and Energy Manufacturing Transport, Storage and

Communication
Year Amount of Year Amount of Year Amount of
investment investment investment
2000 313.78 2000 193.46 2000 5.40

2001 176.12 2001 132.25 2001 20.71

2002 58.07 2002 142.95 2002 61.74

2003 87.44 2003 165.04 2003 43.76

2004 198.40 2004 139.46 2004 263.96

2005 209.32 2005 219.27 2005 269.01

2006 229.93 2006 104.86 2006 305.12

2007 157.92 2007 142.68 2007 299.92

2008 46.89 2008 168.49 2008 579.62

2009 73.66 2009 211.29 2009 445.99

2010 127.19 2010 238.78 2010 54.50

2011 244.94 2011 425.50 2011 179.04

2012 93.67 2012 515.21 2012 527.09

2013 50.43 2013 702.05 2013 272.54

2014 236.89 2014 722.80 2014 205.98

2015 430.16 2015 841.23 2015 273.61

2016 467.93 2016 869.43 2016 601.28

2017 696.56 2017 1005.65 2017 166.10

2018 1328.65 2018 1493.75 2018 232.47

2019 632.15 2019 688.77 2019 277.86

(Source: Data Compiled from Bangladesh Bank website, https://www.bb.org.bd/en/index.php/publication/publictn/1/30)
  Power, Gas and Energy sector

From the data it can be clearly examined that Bangladesh has always received on average
147.6971 million USD (average calculations from FDI 2000-2013 data) in this sector and except some
years Bangladesh has always received around 207.2 million USD FDI in this sector per year. From the
year 2014 Bangladesh has experienced uptrend in FDI in this sector above 500 million USD. Such
uptrend may be due to the declaration of United Nations General Assembly to make sustainable energy
development and to establish modern energy. To do this, Government of Bangladesh adopted Vision
2021 to adopt strategies to secure and develop energy sector in Bangladesh (7th 5 Year Plan 2016-
2020), taking initiatives to develop capital outlays in this sector to revamp the transmission, generation
and distribution channels.

FDI in Power, Gas, Energy sector

1400
1200
Amount in USD million

1000
800
600
400
200
0

Power and energy related capital installation needs huge outlays and Bangladesh needs at least
21 billion USD within 2030 but public and private sector of Bangladesh alone cannot finance
such projects. So it is pivotal for Bangladesh government to encourage FDI in this sector
and government has already implemented policies which will be supportive (Khatun and
Ahmad 2015). Bangladesh‟s inhabitants need for energy, gas and power is growing with increase
in population. To cope up with this change and meet the demands of population Bangladesh
needs huge investment and to meet the investment there is not alternative to FDI. So to attract
FDI in this sector government needs to strengthen four areas land acquisition,
infrastructure, government procurement and ensuring accountability with
security(Mahbub and Jongwanich, 2019).
  Manufacturing sector

Bangladesh attracts FDI in Manufacturing industry because main aim of FDI is to increase
productivity, firm‟s competitiveness in domestic as well as in international market and enhance
product quality. Bangladesh is not exception to this. The data designed sector wise FDI shows an
astounding performance in this sector. A steep growth of FDI in this sector is observable.
Bangladesh has always been suffering from low resource, insufficient productivity and growing
challenges of job creation has made government take attempts to attract FDI in export-oriented
manufacturing sector. The graph presented below blatantly shows that after 2010 in this sector
FDI inflow was significantly higher than ever and the growth was rapid increase from 425 USD
million to the peak in 2018 about 1350 million USD.

FDI in Manufacturing sector

1600
1400
Amount in USD million

1200
1000
800
600
400
200
0

To attract more FDI in this sector Bangladesh government needs to increase the ability of
absorbing FDI efficiently. Because benefits of FDI doesn’t come automatically and
government must have the absorption capacity (Blomstrom et al. 1992). Bangladesh received
FDI in manufacturing sector before 1990 but growth peaked since 1994-96. From this point
Bangladesh achieved remarkable growth in FDI in this sector and even experienced double
digit growth 10.3% in 2014-15 and 2015-16 fiscal year (GOB, Economic Review, 2016).
After increasing in FDI in manufacturing sector, the export of Bangladesh from $3,706 million
in 1996 to $34,120 million in 2019 increased (GOB, Economic review 2019-20,. The Daily
Star,April 22,2021). So it can be claimed that FDI in this sector has affected positively this
sector.
  Physical Infrastructure sector (Transport, Storage and Communication)

Sustainable Development Goals (SDGs) one goal is to achieve balanced social, economic and
environmental development. To achieve the target it is prerequisite for Bangladesh to achieve
improved infrastructure in SDG project and this must be achieved within 2030. As Bangladesh‟s
vision is to become a developed country in 2041 so it is pivotal to maintain balanced and
developed infrastructure.

Investment in Physical Infrastructure sector

700

600
Amountin USD million

500

400

300

200

100

As Bangladesh is going through a transitional period, she needs to focus more on physical
infrastructure. Bangladesh’s infrastructure is still insufficient and to avoid this deficit
attention must be paid to establish strong railway network, developing inter-district
elevated expressway, redesigning the river routes, well planned roads and metrorails (The
Daily Star, . January 27, 2019). Bangladesh still has the great potential to attract investment and
she can achieve astounding growth in her economy by developing a well-structured
communication and transportation system to become a developed country. Bangladesh‟s FDI in
this sector is not so much satisfactory and not stable. The average FDI is 249.06 million USD
and the frequent amount of FDI is around 200-270 million USD which is really a sorry figure. As
Bangladesh’s geostrategic location is getting priority day by day Bangladesh should
develop its infrastructure (The Daily Star, April 13,2017). Bangladesh has become a partner of
the followings:

 BCIM Corriodor (Bangladesh China India Myanmar economic corridor)

 OBOR (One Belt One Road-Initiative By China)
 BIMSTEC
 BIG-B project (Initiative by Japan in Bangladesh)
Due to such projects, importance of Bangladesh is rising up and has great potentiality to
experience high growth momentum in the coming future. To become an important role players in
developing economy, to become a milestone in the world, to be an important partner in Asia and
South Asia region specially in Indian Ocean and Indo-Pacific region Bangladesh‟s infrastructure
development is the need of time.

 FDI in Other Sectors

Amount Amount
(USD (USD Amount
Year Million) Year Million) Year (USD Million)
2000 66 2007 65.84 2014 385.61
2001 25.39 2008 291.31 2015 690.39
2002 72.71 2009 30.78 2016 394.08
2003 54 2010 492.85 2017 283.25
2004 141.41 2011 286.9 2018 558.43
2005 147.6 2012 156.59 2019 1275.17
2006 152.57 2013 574.14 -- --
(Source: Data has been collected from Bangladesh Bank website)

FDI Inflow in Other Sectors

1400

1200
Amount in USD Million

1000

800

600

400

200

0
2001

2016
2000

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

2017
2018
2019

FDI in other sectors is too much low according to data and it is creating divergence and it
may be depicted that government is focusing a little to the other sectors and it may lead to
poor performance of FDI and production efficacy.
  Foreign Investment in Portfolio

Foreign investors are not investing through FDI but also investing in stocks. Bangladesh has
been receiving foreign investment in capital market since 1990s. As Bangladesh is growing as a
next economic miracle, its lucrative project obviously attract foreign investors. Has Bangladesh
been so successful in attracting investment in capital market? It can be judged by analyzing the
data presented below:

Amount in Amount in Amount in

Year USD Million Year USD Million Year USD Million
2000 -3.24412 2007 -18.3146 2014 79.16778
2001 1.346263 2008 -8.96637 2015 168.463
2002 1.375208 2009 -91.8979 2016 3.337464
2003 8.180757 2010 123.4796 2017 -235.131
2004 0.697845 2011 207.7515 2018 -0.42101
2005 -16.6579 2012 172.2785 2019 -24.8339
2006 -14.5935 2013 152.2857 79.16778

(Source: World Bank)

300

200

100

0
2003

2007

2011

2015

2019
2000
2001
2002

2004
2005
2006

2008
2009
2010

2012
2013
2014

2016
2017
2018

-100

-200

-300

The and graph presented above tells that foreign stock investment is not satisfactory at all.
Bangladesh stock has been experiencing ups downs of foreign investment in Bangladesh stock
market. While Bangladesh‟s economic is experiencing growth, the stock market has failed to
attract the foreign investors. The reasons are :

 Financial statements of the companies do not depict true and fair view of the
corporation‟s performance
 Scarcity of good stocks
 Most of the corporations do not meet the criteria of the foreign investors (The Daily
Star)
Due to the problems aforementioned, foreign investors lose their confidence to invest
in Bangladesh‟s stock market which is a dejected picture for in the time of
Bangladesh‟s growth. Any negative effect in the way of prosperity can hamper
growth potentials. Bangladesh is not so far away from achieving Developing Country
status and it will be in 2026 and then Bangladesh will lose all of its prerogatives like
patent advantage, DFQF advantage, Intellectual Property rights etc. from international
market. As a result a hard competitive environment is going to be set for Bangladesh.
To sustain, Bangladesh also needs to overhaul the stock market.
  FDI Challenges for Bangladesh

In this present era of the world, now developing countries are thinking about the rapid
development of economy and shifting their sluggish economic activities towards new momentum
of growth. Because global economies are going through the phase of economic integration and
economic internationalization, in this transitional period FDI works as a catalyst in developing
nation and host countries. When Bangladesh identified the potential benefits can be ripped
from FDI, Bangladesh took the initiative of deregulation and market liberalization based
on the Structural Adjustment Program with the assistance of IMF and World Bank
(Mamoon and Rahman, 2016). As Bangladesh is going to enter foreign market and has the
rising tensions to hold its economic and trade growth and development momentum, she has to
attract more FDI. But Bangladesh still has formidable challenges. The challenges are:

 Political Instability: Political turmoil, red tapism, corruption, global terrorism hinders
FDI. Political instability, Wars and Coup d’etats disturbs internal mechanism and
create obstacles in attracting FDI (Blonigen, 2005)
 Labor Unrest: It plays as a major obstacle in the path of export development. As
Bangladesh wants develop its international trade by increasing exports to reduce balance
of payments than she has to revamp her labor intensive industries such as agriculture,
infrastructure and manufacturing industries. Due to frequent labor strikes, strikes on
wages, working hours and bonus problems has made the situation more complex.
This will create hurdles in attracting FDI (Hasan, 2017)
 Overlapping Administrative Procedures: When any investment is made in Bangladesh
and for startups or business development, the time consuming and tiresome procedures
hamper the business development, times to getting trade license, import registration
certificates, TIN and so on made the foreign investors dejected. If such administrative
barriers exist, it will fail to attract FDI and lengthy procedures hamper
development (Morisset, 2002).
 Local Corruption and Bureaucratic Intervention: Procrastinating process on approving
files is a common phenomenon in Bangladesh. Going door to door to sign files, practice
of taking bribes, lengthy time consumption on files to be approved are hampering in
development process (Hasan, 2017).
 Poor Public Institutions: Bangladesh‟s government or public institutions have always
been blamed of following poor infrastructure. Irresponsive towards development and
scarcity of gas and minerals supply are the major impediments toward development.
Poor Public Institutions showed strong results and in explaining the poor economic
outcomes and this showed slow growth, low investment and begets poor
macroeconomic conditions and policies (Shang-Jin Wei; 2000).
 Poor Infrastructure and Cost of Doing Business: Infrastructural obstacles such as
undeveloped sea routes, improper design of high roads, traffic jam are the major
obstacles in developing rich infrastructure and communication system. Most alleged
sector is electricity generation sector. UNCTAD report of 2013 cited that, poor
electricity infrastructure is the major impediments in the field of investment. Even
Bangladesh‟s rank in “Ease of Doing Business‟‟ indicator in 2020 was 168th which was
176th in 2019 but this will not be able to create satisfactory mind set up for foreign
investors. Such conditions hamper FDI inflows (Hasan 2017, The Daily Star).

Bangladesh is one of the Asian miracles, is going to be one of the important node and hub
for investment and geopolitical strategy and geo economy. Foreign investors have a special
eye on Bangladesh due to its rising by economic growth and development and has come to
the fore. As a result, Bangladesh needs to hold its momentum of growth and cycle of
development. FDI can work as a spell. To attract more FDI, Bangladesh needs to settle the
internal disturbances and challenges.

 Solutions
 Good Governance is a must for any type of development. So government should
focus and give special efforts to develop governance practices in Bangladesh to
attract FDI. Good governance brings necessary reformations and qualitative
development in judiciary, legislation and administration which eradicate the
corruption and illegal practices.
 Agencies related to carry out governmental activities should be well co-ordinated and
therefore it would bring good environment in business activities, develop smoothness
and efficiency in investments.
 Agencies of government in Bangladesh like Bangladesh Bank, Bangladesh
Investment Development Authority, Investment Promotion Agencies etc. should be
given independent and must be dynamic in decision making. Because sometimes it
becomes hard for these agencies to make proper decision over large investments.
 Accountability and Transparency must be practiced thoroughly and independently.
 Developing the better diplomatic relationship with the developed countries which will
help in bringing lucrative investment.
 Increasing power generation and ensure supply along with gas, water to the
manufacturing entities.
 Giving importance heavily on labor intensive, import substitute and export oriented
industries. (Sultana and Akhter, 2013 and Abdin MJ, 2015)
 Such initiatives if practices seriously and applied on the basis of analysis then it would bring
new arena for Bangladesh in the field of FDI.

FDI Opportunities in Bangladesh

FDI plays as a major ingredient to boost up the economic growth and development of middle
income countries like Bangladesh, Vietnam, India etc. As a result FDI works as a growth engine
for middle income and developing countries and Bangladesh is also not exception to this. As
Bangladesh‟s perspective plan and long term goal has been set to achieve the maximum goals of
SDGs and Vision by 2041 of being a developed nation FDI can be a major role player. There are
abundance of opportunities in Bangladesh that can be availed from FDIs. The opportunities are
listed below:

 Industrious Workforce at Low-Cost : Since Bangladesh always been prominent for a

cheap labor workforce with skill and highly adaptive labor group, even well-educated
youths, university graduates can be hired at lower salary base, it gives foreign investors to
invest here (Faruk,2013). This would provide foreign investors to produce and invest at a
lower cost and earning good profits.
 Strategic Location, Access to the Near South Asian Countries and Connectivity between
East and South-East Asian Nations: This is the major benefit for the foreign investors.
BIG-B projects, Elevated Express Highway, establishment of corridors, hub to OBOR are
making important Bangladesh to the global major economic players and investors and
this major strategic location and access to other countries will increase the acceptability
of Bangladesh. (Sheikh Shams Morsalin, 2019)
 Competitive Incentives: Full repatriation of investment, dividend, considering re-
investment of dividends as investment, borrowing loans at lower rate from local banks,
unrestricted exit policy, easy remittance of royalty are the major incentives provided by
Bangladesh to the foreign investors (Faruk,2013).
 Export Processing Zones: By 2030, Bangladesh government took master plan to build up
at least 79 economic zones and those zones were already approved in 2018, Special
Economic Zones are also going to be on the work. Such zones will improve the
economic, export processing environment and therefore facilitate the total business
environment. Consequently, this initiative will benefit the foreign investors. (Razzaque et
al. 2018).
 Generation of Electricity, Improving Power Supply: Bangladesh government has set a
target of supplying uninterruptible power supply to the enterprises and to increase the
capacity 24,000 megawatts of electricity per year by 2024 accelerate the production
facilities and working environment in Bangladesh. This will help foreign investors to
facilitate their activities in Bangladesh (World Bank, The Financial Express)
If Bangladesh performs well in developing the projects which have been undertaken and also
works out with her agenda and visions and scrutinize the geostrategic location and future
economic perspectives than aforementioned points will come true.

Conclusion
Bangladesh government has declared to provide incentives in the factors of production,
providing special advantages to the foreign investors considering port facilities. But doing so will
not bring economic prosperity and FDI in Bangladesh. Bangladesh‟s government needs to be:

 Proactive
 Involvement of specialized workforce in implementing the projects
 Eradicating red-tapism
 Improvement in the field of generating electricity and ensure no interruption by taking
under serious consideration
 Developing the sea routes and increase the port capacities and facilities
 Improving transparency, governance, administrative policies, eradication of corruption
 Facilitating the one stop services in practical ground to reduce the investment related
harassments
 Developing industrial parks before 2026 (as Bangladesh is going to enter competitive
market in international trade) and establishing forward and backward linkages to connect
to the international supply chain management.

Considering the above factors to be modified, opportunities and problems, there is a copious
probability of developing and accelerating economic growth. To sustain in the global market
Bangladesh must offer new innovations, new production facilities, modifying Intellectual
Property rights must be provided to the foreign investors. Therefore, Bangladesh will be able to
fulfill her economic perspectives and the dream of being a Developed nation by 2041.
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