More need to be done about FDI to stop downswing
MEDIA outlets reported that foreign direct investment in Bangladesh declined by 4.50 percent in 2014 as against a sharp rise of 16 percent FDI growth collectively for other South Asian countries. The United Nations Conference on Trade and Development (UNCTAD) prepared the report that stated the FDI inflow in Bangladesh declined to $1,527 million in 2014 from that of $1,599 million in 2013 despite a visibly stable political environment. The narrowing FDI inflows signalled that country’s economic growth rate is slowing also, though the government is projecting a 7.2 percent GDP growth. Without boosting FDI inflows, the government anticipated growth would be hardly possible to attain.
As per the UN trade agency report, equity investment dropped by $261 million to $280.31 million in the year under review compared to that of 2013. On the other hand FDI inflow in South Asia has surged significantly, driven by huge investment in neighbouring India. Pakistan received a rise of 31 percent to $1.7 billion in 2014. The FDI inflows remained relatively high due to green-field investment in a large number of industries. Green-field investments were mainly in automobile, gas exploration, chemicals and construction materials. The Board of Investment (BoI) in Bangladesh, which launched the report in Dhaka cited that UNCTAD underestimated the overall FDI inflows. But, a Deputy Governor of Bangladesh Bank said UNCTAD estimation is similar to Bangladesh Bank data suggesting there is no faulty calculation at all.
FDI is recognized as a powerful engine for economic growth which enables capital-poor countries to build up physical infrastructure, create job, develop productive capacity, enhance skills of local labour through transfer of technology and managerial know-how. It helps integrate the domestic economy with the global economy. FDI can also help force creating domestic investment to match external funds, it helps competitiveness in the economy exposing the domestic manufacturing to global market. Bangladesh economy needs to grow at 7-8 percent in the next several years to become a middle-income nation and cut the poverty rate at its low. But a growth rate of seven percent at least would require an investment-GDP ratio of more than 30 percent as opposed to the current level; which is much below.
In this situation Bangladesh needs to undertake effective investment promotional steps to convince the potential foreign investors to come in here. So it needs an investment-friendly policy including simplifying regulatory practices, and removing inefficient bureaucratic procedures. Its fragile political environment must stand on firm footing to pass the message that the business environment is here in full scale. Needless to say investment goes to a pace where cost on business is low and risk is minimum while prospect of profiteering is high and steady. Bangladesh must look at these things away from confrontational politics.
As per the UN trade agency report, equity investment dropped by $261 million to $280.31 million in the year under review compared to that of 2013. On the other hand FDI inflow in South Asia has surged significantly, driven by huge investment in neighbouring India. Pakistan received a rise of 31 percent to $1.7 billion in 2014. The FDI inflows remained relatively high due to green-field investment in a large number of industries. Green-field investments were mainly in automobile, gas exploration, chemicals and construction materials. The Board of Investment (BoI) in Bangladesh, which launched the report in Dhaka cited that UNCTAD underestimated the overall FDI inflows. But, a Deputy Governor of Bangladesh Bank said UNCTAD estimation is similar to Bangladesh Bank data suggesting there is no faulty calculation at all.
FDI is recognized as a powerful engine for economic growth which enables capital-poor countries to build up physical infrastructure, create job, develop productive capacity, enhance skills of local labour through transfer of technology and managerial know-how. It helps integrate the domestic economy with the global economy. FDI can also help force creating domestic investment to match external funds, it helps competitiveness in the economy exposing the domestic manufacturing to global market. Bangladesh economy needs to grow at 7-8 percent in the next several years to become a middle-income nation and cut the poverty rate at its low. But a growth rate of seven percent at least would require an investment-GDP ratio of more than 30 percent as opposed to the current level; which is much below.
In this situation Bangladesh needs to undertake effective investment promotional steps to convince the potential foreign investors to come in here. So it needs an investment-friendly policy including simplifying regulatory practices, and removing inefficient bureaucratic procedures. Its fragile political environment must stand on firm footing to pass the message that the business environment is here in full scale. Needless to say investment goes to a pace where cost on business is low and risk is minimum while prospect of profiteering is high and steady. Bangladesh must look at these things away from confrontational politics.
