• Wednesday, Oct 21, 2020
  • Last Update : 04:13 pm

Maintaining FDI inflow and outflow

  • Published at 09:51 pm May 12th, 2019
Maintaining FDI inflow and outflow

Making the right adjustments could really boost our economic prowess

Bangladesh received $3.61 billion in 2018 as Foreign Direct Investment (FDI), up 68% from 2017. The country received $2.15bn as FDI in 2017. 

While China became the leading investor in the country with $1.03bn, the US, traditionally the top investor, dropped to fourth with only $174m. 

The Netherlands invested the second largest amount of $692m, and the UK was the third highest at $371m. 

The power sector alone had attracted investments worth $1.01bn, where China contributed $834m, followed by $730m in the food sector, and $430m in the RMG sector. 

Core equity investment has increased by 109% to $1.12bn, which was $539m in 2017, while reinvestment has increased by 2.3% to $1.30b. 

Intra-company loans have also increased for the same period by 254%, from $333.24m to $1.18bn.

What worked behind the FDI increase?

From the country of origin, we can easily guess -- because of Banglalink having its headquarters in The Netherlands, China Power and a few other Chinese companies investing to build power plants in Bangladesh and the UK companies instead of remitting their profit back to the country are reinvesting to exploit the increasing market opportunities have facilitated the FDI increase. 

Factors such as attractive economic growth, a young articulate workforce, significant rise in domestic consumer demand, and the infrastructural development necessary to attract investments have also worked well. 

According to the analysts, the initiatives to establish 100 Special Economic Zones (SEZs) by 2030 also gave FDI a good boost, with investors already having started production in some of the zones. 

Over the past year, a good number of foreign companies invested in SEZs and have even started production. To continue this momentum, experts have suggested finishing the construction work and setting up of SEZs as soon as possible to maintain investor confidence. 

According to reports, BEZA is also contemplating the establishment of a “smart city” in Bangabandhu Shilpanagar in Mirsharai.

What we need to do to attract more FDI

According to the World Bank’s “Doing Business 2019: Training for Reform” report, Bangladesh stands 176th out of 190 countries for ease of doing business. 

The country was 177th in the ranking the previous year, opposite to significant improvement in India over last few years.

In order to improve this scenario, we must prepare a laundry list to improve our country’s business environment and work with military precision to remove all identified obstacles, including bringing in necessary changes in archaic laws and regulations with regard to private sector investment from home and abroad. Our development partners are eager to help us in this front.

Bangladesh Bank needs to look at all the existing guidelines with regard to outward remittance as well as capital investment and take measures to fine-tune those to the extent possible before we go for an overhaul. 

Our financial sector needs to further deepen to structure and facilitate investment inflow in to booming and dynamic sectors. Digitization of the land records and delineation of a “land use policy” are of paramount importance here.

We need to facilitate FDI Outflow too

We get to hear from lot of businessmen that their opportunity to continuously invest in Bangladesh is getting narrowed. Hence, they need to invest in countries like Myanmar, Vietnam, some of the rising African economies, and may be countries like Turkey and Indonesia too. 

While we are building economic zones to attract FDI, why not government to government (G to G) arrangements which establish some “Bangladesh Economic Zones” in Vietnam, India, or Indonesia? 

This may solve the long-term problem of our apparel sector. Our apparel sector has shown a lot of mettle to expand and by this time has gained some surplus expertise to invest offshore too. 

Following their footprint, our leather, agriculture and steel sector can also move offshore, especially into countries which enjoy preferential treatment from the off-takers and have better infrastructure facilities.

Mamun Rashid is a leading economic analyst in Bangladesh.

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