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FDI inflow rises marginally


Date: May 2022 

Foreign direct investment to Bangladesh rose 6 per cent year-on-year to $2.51 billion in the last fiscal year, continuing the recent trends whereas peer countries secured a higher level of investment.

Fresh investment, or equity capital, did not arrive as expected in 2020-21. Foreign companies operating in Bangladesh largely reinvested their earnings in the year, helping the country keep its FDI trend stable.

FDI in the field of equity capital rose 12.08 per cent to $816 million, disappointing analysts as it remains less than $1 billion.

Reinvestment of earnings stood at $1.58 billion, up 4.63 per cent year-on-year, data from the Bangladesh Bank showed.

Intra-company loans dipped to $105 million in contrast to $1.32 billion in FY20.

"Countries such as Vietnam usually mobilised $8-10 billion in FDI per year, but the situation is completely different here," said Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue.

He blamed red tape for the country's continuous struggle to draw a desired level of FDI.

The government had targeted to attract $32 billion in FDI during the seventh five-year plan period stretching from FY16 to FY20. But, the country had managed to receive less than $10 billion.

"The government should implement the one-stop service for investors in an appropriate manner so that foreign investors feel comfortable in choosing the country as their investment hub," Rahman said.

In a positive development, the government has reduced the lock-in period for foreign investment to one year from three years.

It means investors, who hold 10 per cent shares in a company or directorship, are not allowed to sell the stake within the stipulated period.

"This will make it easier for investors to exit from Bangladesh," said the analyst. Many peer countries have set the lock-in period at six months.

He said the country's rules and regulations relating to the FDI were more complex than many other countries.

Per capita income in Bangladesh is on the rise, but it has not been reflected in the FDI trend.

Rising income means purchasing, and consumption power is maintaining an upward trend. Bangladesh also has a large consumer base.

"But, the positive indicators have failed to satisfy the foreign investors," said the analyst.

Regulators still take more time in the name of scrutiny when it comes to granting approval to foreign investors, he said.

In some cases, foreign investors are forced to change their plan as they have to complete the process within a certain period set by their parent companies.

"If we do not avoid the red tape, there will be no scope to attract investors," said the analyst, on condition of anonymity.

Md Sirazul Islam, executive chairman of the Bangladesh Investment Development Authority (Bida), the state agency responsible for promoting investment, describes the FDI flow in the last fiscal year as good considering the ongoing business slowdown brought on by the coronavirus pandemic.

The entity has recently taken a set of initiatives to give a boost to the FDI inflow.

"It will take three to four years to get the results from the initiatives," he said, adding that the latest inflow was the outcome of the previous steps.

The Bida will organise investment summits at home and abroad to highlight positive stories about the country and the investment opportunities in Bangladesh.