Political stability is needed to increase foreign investment

Dr. SM Jahangir Alam :

Foreign investment is declining. The global economic instability has had the greatest impact on the country’s Foreign Direct Investment (FDI). In just one year, the investment in this sector has decreased by 25 million dollars.

In the last financial year 2022-23, FDI came to 319 crore dollars. In the previous fiscal year 2021-22, the investment in this sector was 344 million dollars. This information was obtained from the latest updated report of Bangladesh Bank.

In the fiscal year 2022-23, net FDI came to the country at 319 crores or 3.19 billion dollars. Prior to this, net FDI came in at 344 crores or 3.44 billion dollars in the financial year 2021-22.

The FDI inflows decreased by 7.11 percent in the last fiscal year. Although in the previous financial year 2021-22, net FDI increased by a record 37.22 percent.

However, in the fiscal year 2020-21, FDI came to 250 crore 7 million or 25.7 billion dollars. And in 2019-20 fiscal year, FDI in the country is 237 crores or 2.37 billion dollars. Foreign companies generally invest in three ways.

The methods are, as new capital, by reinvesting profits from existing businesses and by one company borrowing from another company, known as intra-company loans.

The report of Bangladesh Bank also shows that in 2022-23 UK entrepreneurs invested the highest in Bangladesh.

During this period, about 565 million dollars of investment came from the UK, which was 56 million dollars in the financial year 2021-22. The second highest investment of 43.5 million dollars came from the Netherlands.

In the financial year 2021-22, the investment from the country was 303 million dollars. 29.52 million dollars came from Korea, which was 31.29 million dollars in the previous fiscal year. The United States is fourth with an investment of 289.1 million dollars.

In the financial year 2021-22, the investment from the country is 35 crore 41 lakh dollars. In addition, foreign investments of 192 million dollars from Singapore, 184 million dollars from Norway, 183.8 million dollars from Hong Kong, 17 million dollars from Malta, 119.8 million dollars from India and 99.5 million dollars from Malaysia have come.

Meanwhile, the highest foreign investment in the last financial year was in the textile sector, amounting to 662.2 million dollars. In the fiscal year 2021-22, the amount of foreign investment in this sector was 705.6 million dollars.

Next is the telecommunication sector. In the financial year 2022-23, foreign investment in this sector was 43.43 million dollars, which was 51.16 million dollars in the previous financial year.

The third highest amount of 36.45 million dollars came from the banking sector, which was 31.99 million dollars in the financial year 2021-22. The gas and petroleum sector received 32.56 million dollars, which was 34.32 million dollars in the fiscal year 2021-22. Besides, 30 million dollars in electricity sector, 265 million dollars in food sector, 12 billion 11 million dollars in leather and leather products sector, 7 million 95 million dollars in chemical and pharmaceutical sector, 7 million 61 million dollars in construction sector and 6 million 97 million dollars in fertilizer sector.

Foreign investment in dollars has come. According to the data, in the outgoing fiscal year, FDI came to the economic zone of the country only 4.16 million or 41 lakh 60 thousand dollars and 406.46 million or 40 crore 64 lakh 60 thousand dollars in EPZ. And outside EPZ and economic zone, net foreign investment in other sectors came to 2.785 billion or 278 million 50 million dollars.

On the one hand, abnormal dollar sales from reserves are increasing the country’s foreign exchange deficit. On the other hand, foreign investment, non-fulfillment of export targets, and downward flow of remittances, have challenged the country’s economy. Remittances are coming into the country. But it is on an illegal channel. Not coming through the bank.

One of the reasons is the low dollar rate in the bank. Banks pay less per dollar than hundi. As a result, expatriates are sending money in hundi due to which the people of the country still have normal purchasing power. But the country’s economy is under threat.

Remittances of just over $134 million came in last September, which is less than 21 million dollars compared to September of the previous year. In this situation, the country’s foreign investment is decreasing.

Political instability, various questions of foreign donor countries, lack of good governance are major obstacles to foreign investment.

It is disappointing that the problem of gas and electricity in EPZs and economic zones has not yet been resolved. That’s why foreign investment is not coming. Besides, there is no proper functioning of good governance, business facilities. This creates a fear to invest in this country. The sooner we can assure them about these things, the sooner our investment will increase.

Our country’s rivals are not stopping. Vietnam is receiving a lot of foreign investment. Foreign investment has also increased significantly in our neighboring countries Sri Lanka and Pakistan. So without delay take proper action. BIDA has to play a more active role in attracting foreign investment.

At the same time, investment environment has to be created. One thing must be remembered, without political stability, foreigners will not come forward to invest.

(The writer, Bir Muktijoddha, is a former Tax Commissioner and Director, Bangladesh Satellite Co. Ltd.)