FDI yet to pick up despite govt efforts
The inflow of foreign direct investment to Bangladesh crept up 4.4 percent in 2016 from a year earlier despite the government's many efforts to attract funds from abroad.
Some less developed African nations like Ethiopia and Angola received more FDI than Bangladesh, according to the World Investment Report 2017 of the United Nations Conference on Trade and Development.
In 2016, some $2.33 billion of FDI flew into Bangladesh, which is only 4 percent of the total FDI inflows to South Asia and just 0.1 percent of global flows.
India got 82 percent of the FDI to South Asia: of $44 billion, which is the same amount as in 2015.
The reason for the neighbouring country's large FDI inflow is cross-border merger and acquisition deals, which have become important for foreign multinational enterprises to enter into the rapidly-growing Indian market.
Pakistan's inflows soared 56 percent in 2016 primarily due to investment in infrastructure from China for its One Belt, One Road initiative, the report said.
Apart from Chinese investment, Pakistan received big sums from the Middle East.
However, a troubled Pakistan is not a preferred destination for investment, said Ahsan H Mansur, executive director of Policy Research Institute, while presenting the key findings of the report at a programme yesterday.
“The OBOR initiative also provides an opportunity for Bangladesh to accelerate FDI inflows, if we can take advantage of the offers coming from the last year visit of the Chinese president.”
The US remained the world's largest outward investing country in 2016, with outflow of $299 billion, followed by China at $183 billion and the Netherlands $174 billion.
The rise of China to the second spot is a particularly noteworthy phenomenon, the report said.
For Bangladesh, the most important source of FDI continues to be reinvestment earnings.
This means the foreign companies already operating in Bangladesh feels comfortable enough to reinvest their profits for expansion of their existing operations, Mansur said.
Equity capital is the second most important component of FDI, which, despite some volatility, has been increasing in recent years. In 2016, it soared 30 percent to $911 million.
Intra-company loans are also increasing in recent years, although such flows have been volatile and remained in the range between $200 million and $300 million.
The telecommunication has received the highest amount of FDI, followed by power and gas in 2016.
In telecom, there was a large injection of capital by Singapore Telecom to enhance the capital base of Bharati Airtel in Bangladesh.
In future, Bangladesh should focus on attracting state-owned FDI from China as such investment is also a lucrative one for the FDI-receiving nations, Mansur said.
He called for more engagement with regional trade blocs for more FDI in Bangladesh.
Globally, after a strong rise in 2015, FDI flows lost growth momentum in 2016, indicating that the road to worldwide economic recovery would not be smooth, the UNCTAD report said.
In 2016, global FDI flows slipped 2 percent to $1.75 trillion owing to weak economic growth and significant policy risks, as perceived by multinational enterprises.
The government has been developing special economic zones for attracting FDI and the one-stop service act is in the offing for providing more efficient and quick services to foreign investors, said Md. Abul Kalam Azad, chief coordinator of SDG at the Prime Minister's Office.
Azad also touched upon the cargo troubles that Bangladesh is facing.
He said most of the requisite security equipment would be installed at the Shahjalal International Airport in Dhaka within the next two months for more efficient management of airport activities.
The Bangladesh Investment Development Authority organised the event at the capital's Sonargaon Hotel.