It was expected that Bangladesh’s foreign direct investment (FDI) inflows, an Achilles heel of the economy, would drop amid the pandemic. And it did.
Between January and September, FDI inflows stood at $1.7 billion, down 19.4 per cent year-on-year, according to data from the Bangladesh Bank.
“Considering the present circumstances and the ongoing pandemic, a $1.7 billion investment is a significant one,” said Zahid Hussain, a former lead economist of the World Bank’s Dhaka office.
Transaction of money was very difficult during the lockdown as people’s movement was restricted, he said.
In addition, business people were not in a mood for new investment decision as the global economic activities came to a standstill and consumption declined sharply, Hussain added.
“While the global FDI witnessed a sharp decline, a 20 per cent drop in Bangladesh’s foreign investment inflow is not unusual,” said Sirajul Islam, executive chairman of the Bangladesh Investment Development Authority.
Global FDI collapsed 42 per cent last year to an estimated $859 billion, as per the United Nations Conference on Trade and Development (UNCTAD).
“We expected that the FDI would decline as people would not make the investment without making psychical visits to Bangladesh, which was not possible due to the pandemic,” Islam said.
Reinvestment of earnings, which soared 12 per cent year-on-year, accounted for the bulk of the FDI during the period: $1.1 billion.
Equity investment declined nearly 22 per cent to $472 million and intra-company loans 76.4 per cent to $144 million.
“It is good for us that we were able to retain the investors here. Even amid the pandemic, we have provided all-out support to the investors as required so that they can continue their existing investment.”
The investment figure would have been better had the investors not pull out intra-company loans.
“But the increased reinvestment of earnings gives us hope,” Islam added.
As per the data, the UK made the highest investment of $102 million, followed by the Netherlands at $60 million, Norway at $58 million and the US at $53 million.
As a sector, the power sector received the highest investment of $101.5 million and telecommunication $69 million. The textile and weaving sector saw an investment of $68 million, followed by banking at $64, food $41 million and construction $35 million.
“It is true that the global FDI trend is negative, and this is because of the economic slowdown in the FDI outward countries caused by the pandemic,” said Mostafizur Rahman, a distinguished fellow at Centre for Policy Dialogue (CPD).
But Bangladesh still has to address its structural problems to attract FDI.
“We have some inbuilt problems such as infrastructure deficiency, ease of doing business index and business climate, lack of reforms in some regulations and full-fledged implementation of one-stop services.”
The special economic zones (SEZs) is a great proposition.
“If we can make at least 10 zones ready for investment, it would lure in huge sums.”
He went on to express hope that by 2021-22 Bangladesh would turn around from the pandemic and record robust growth in foreign investment.
In the seventh five-year plan, which wrapped up last fiscal year, the government has set a target to receive $33 billion in FDI. But it received over $9 billion.
