Foreign direct investing is considered as a important ingredient for economic development of a underdeveloped state. States that are dawdling behind to pull FDI are explicating and implementing new policies for pulling more investing. Foreign direct investing ( FDI ) plays an extraordinary and turning function in planetary concern. It can supply a house with new markets and selling channels. cheaper production installations. entree to new engineering. merchandises. accomplishments and funding. For a host state or the foreign house which receives the investing. it can supply a beginning of new engineerings. capital. procedures. merchandises. organisational engineerings and direction accomplishments. and as such can supply a strong drift to economic development. In this current universe we are recognizing the fact that the economic development and economic domination go the top subjective affair. Bangladesh is a hapless state which has non plenty domestic nest eggs to put for developing the country’s economic status. As a affair of fact for any sort of development investing is obvious. As Bangladesh has non adequate nest eggs to put in ain state FDI become the most resourceful sector to develop the country’s economic status. Specifying FDI
Foreign direct investing is the procedure whereby occupants of one state get ownership of assets for the intent of commanding the production. distribution and other activities of a house in another state. The international pecuniary fund’s balance of payments manual defines FDI as ‘an investing that is made to get a permanent involvement in an endeavor operating in an economic system other than that of the investor. the investor’s intent being to hold an effectual voice in the direction of the enterprise’ . The united states 1999 universe investing study ( UNCTAD 1999 ) defines FDI as ‘an investing affecting a long-run relationship and reflecting a permanent involvement and control by a resident entity in one economic system ( foreign direct investor or parent endeavor ) in an endeavor occupant in an economic system other than that of the foreign direct investor ( FDI endeavor or affiliate endeavor or foreign affiliate ) .
Such investing involves both the initial dealing between the two entities and all subsequent minutess between them and among foreign affiliates. both integrated and unincorporated. FDI may be undertaken by persons every bit good as concern entities. . Flows of FDI comprise capital provided ( either straight or through other related endeavors ) by a foreign direct investor to an FDI endeavor. or capital received from an FDI endeavor by a foreign direct investor. FDI has three constituents: equity capital. reinvested net incomes and intra-company loans.
Present FDI position in Bangladesh
Bangladesh ranked 16th among the top 74 FDI receiver states across the universe with a record US $ 1. 13 billion received in foreign direct investing ( FDI ) in 2011. said the latest World Investment Report ( WIR ) . The Board of Investment ( BoI ) released the WIR of the United Nations Conference on Trade and Development ( UNCTAD ) on Thursday.
Harmonizing to the WIR. increased reinvestment and intra-company loans offered by bing foreign companies. including those in telecom. energy and fiscal sectors. helped hike the FDI flow to Bangladesh in 2011. Bangladesh secured 15th place in the WIR ranking in 2010 with the state having $ 910. 33 million. while the ranking was 24th in 2008.
For the lacking of domestic nest eggs Bangladesh needs FDI to develop its economic status. The present status of FDI is better than any other times. The entire influx has been increasing over the old ages. In 1972. one-year FDI influx as 0. 090 million US $ . and after 33 old ages. in 2005 one-year FDI reached to 845. 30 million US $ and to 989 million US $ in 2006 ( UNCTAD-2005. Bangladesh Investment Handbook 2007- BOI ) . Contribution of FDI was non singular until 1980. a twelvemonth of policy alteration. That twelvemonth authorities enacted the’ Foreign Investment Promotion and Protection Act. 1980’ with an effort to pull FDI.
The country’s overall FDI ( foreign direct investing ) influx rose by US $ 228. 58 million or 66. 79 per cent. to $ 570. 80 million during the January-June period of 2010 over the corresponding period of 2009 due chiefly to important addition of equity capital influx. the findings of the latest study by Bangladesh Bank ( BB ) showed. The influx of equity capital marked a 253. 99 per cent addition during the January-June period 2010. despite a important autumn in reinvested net incomes and intra-company loans by 14. 04 per cent and 68. 28 per cent severally during the same period. said the study study on ‘Foreign Direct Investment in Bangladesh’ . On a financial year-on-year footing. the entire FDI influx dropped by $ 47. 57 million or 4. 95 per cent to $ 913. 02 million in financial twelvemonth ( FY ) 2010 compared to the addition of $ 191. 90 million or 24. 96 per cent in financial 2009 and lessening of $ 24. 05 million or 3. 03 per cent in financial 2008. the BB study revealed.
Harmonizing to the study. the reinvested net incomes decreased by US $ 25. 00 million or 14. 04 per cent to $ 153. 05 million during January-June. 2010 compared to the lessening of $ 8. 84 million or 4. 73 per cent over July-December. 2009 and an addition of $ 37. 17 million or 24. 83 per cent during the same period of the old twelvemonth. Bangladesh has attracted USD 913 million foreign direct investings ( FDI ) in 2010 calendar twelvemonth. a spring by 30 per cent. This upgrades the country’s place to 114 from 119 out of 141 states in the World Investment Report ( WIR ) . During this period the telecom sector received USD 360 millio N F DI. the fabrication sector received USD 238 million in investing from abroad. USD 145 million in the fabric a nd vesture sector. while leather a nd leather goad ucts got USD 46 million. ( The fiscal Express. 27 July. 2011 )
As a underdeveloped state. Bangladesh needs Foreign Direct Investment ( F DI ) for its ongo ing development procedure. Since independency. Bangladesh is seeking to be a suited state for FDI. In order to speed up economic growing. Bangladesh opened her economic system in the late eightiess to harvest the benefits of FDI. In 1989 the authorities set up Board of Investment ( BOI ) . The primary aim of which is a imed at pulling and easing investing from abroad ( Mondal 2003 ) . The authorities besides lifted limitations o n capital and net income repatriation grad ually and opened up about all industrial sectors for aliens to put either independently or jointly with the local spouses.
Further. the authorities besides introduced assorted fiscal and non-financial inducements like revenue enhancement freedoms for power coevalss. import responsibility freedoms for export processing industries. revenue enhancement vacation strategies for set abouting investing in precedence sectors and low develop ment countries. zero responsibility rate for the import of capital machinery and trim parts for 100 per centum export oriented industries. about no limitations o n the vitamin E ntry a nd issue manner. and decrease of bureaucratic fusss in acquiring faster blessings of foreign undertakings. To gether with all these inducements follo wed by a low labour cost construction. Bangladesh has been an attractive finish for FDI in the South Asiatic part since the late eightiess.
The tendency of Inflow of FDI in Bangladesh has increased over the 1980s as compared to earlier periods and this same impulse continues in 1990s every bit good. The entire influx of FDI has been increasing over the old ages. During the period of 1977-2010. entire influxs of FDI were USD 8927. 9 million. among which the sum influxs of FDI during 2006-2010 was USD 4158. 63 million. In 1977. this influx was USD 7 million and in 2008. one-year FDI reached to USD 1086. 31 million. Unfortunately. there was a decline in influxs o f FDI in 2010 which was USD 913. 32 million ( Source: Survey Report. Statistics Department. Bangladesh Bank ) .
3. 1 illustrates the tendency o f FDI influxs in Banglad esh during 1996-2010.
Figure FDI Inflows in USD in Bangladesh during 1996-2010Beginning: Survey Report. Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh ( 1971-2010 ) . Board of Investment.
The figure shows an inconsistent proceeding of FDI influxs during the period. In 1999 there was a sudden December line in the FDI a neodymium the falling tendency continued for many grounds once more in 2001. 2002 and 2003. Serious political agitation during the period discouraged foreign investing a neodymium it took rather some clip to recover the assurance of foreign investors. There were besides some other factors that force this decline in the influxs. After that. there was really good intelligence for Bangladesh. The FDI influx was o n the steady rise from 2003 to 2005. It rose to US $ 1086. 3 million in 2008 but slumped to US $ 700. 16 in 2009 and once more increased to $ 913. 32.
3. 2 FDI Inflows by Components
Figure 3. 2. 1:
FDI Inflows ( in million USD ) by constituents in Bangladesh during 1996-2010
Survey Report. Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh ( 1971-2010 ) . Board of Investment.
Figure 3. 2. 2
FDI Inflows. in million USD by constituents in 1996
Figure 3. 2. 3
FDI Inflows. in million USD by constituents in 2010
Survey Report. Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010). Board of Investment.
FDI in Bangladesh consists of three constituents: Equity capital. Reinvested Net incomes and Intra-co mpany loans. These co mponents have fluctuated carbon monoxide nsiderably in the last two decennaries. In the early twelvemonth of 1996. the entire FDI influx was merely 210 million USD where reinvested net incomes were the bigger part. This tendency continued up to 1998. Then there is a sudden diminution in footings of entire inflo tungsten every bit good as constituent wise influx of FDI. Beside a little addition in 2000. this worsening tendency continues up to 2003. After so entire influx continues to lift with some ups and downs. The portio N of equity capita cubic decimeter continues to hold a bigger dad rt in the entire FDI influxs. In 2008 the entire influxs was 1100 million USD which is the highest of all time.
The switching o f constituent wise FDI influx in Bangladesh is clearly in the figure 3. 2. 2 and 3. 2. 3. In present old ages. the major portion of FDI influx in Bangladesh come in equity capital signifier. In 1996 the portion of equity capital in entire FDI was 30 per centum which increases to 57 per centum in 2010. In 1996 portion o f reinvested net incomes was 53 per centum which decreased to 40 per centum in 2010. On the other manus. portion o f intra-company loan was 17 per centum which so decreased to 3 per centum in 2010. This shows that the net transportation of resources from abroad into Bangladesh is reasonably negligible. The co ntribution of FDI is really small in instance of transportation of ‘hardware’ engineering.
3. 3 FDI Inflows by Areas ( EPZ and not EPZ )
Figure 3. 3. 1:
FDI Inflows ( in million USD ) by country ( EPZ and not EPZ ) in Bangladesh during 1996- 2010Beginning: Survey Report. Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh ( 1971-2010 ) . Board of Investment.
Figure 3. 3. 1
reveals that despite the initial addition and steady carbon monoxide ntinuation. FDI inflows in Non-EPZ countries was in worsening tendency during the period of 2001-2003. In 2004 it increased to 800 million USD and this tendency continued up to 2005. The FDI influxs in No n-EPZ countries in 2010 recorded to USD 795. 15 millio N which is 87 per centum of entire influxs whereas in the beginning of this period ( in 1996 ) it was US D 189. 3 million which is 82 per centum of entire influxs. In the EPZ countries. the FDI influxs were a lways in a steady way.
Inflows of Foreign Direct InvestmentThere was an influx of $ 666m foreign direct investing in 2007 which raised significantly in 2008 to $ 1086m. As of 2010. influxs of foreign direct investing recorded to $ 571m.
Beginning: Bangladesh Economic Review-2011 ( Bangla version ) . Ministry of Finance Foreign and Joint Venture InvestmentIn the twelvemonth 2009-10 ( February ) . there were 89 new foreign and joint venture investing undertakings registered to BOI which sum to $ 590m. The undertakings were invested to chiefly in the service. technology. vesture and agricultural sectors. Sectorwise foreign and joint venture investing during 2010-2011*
* As of March. 2011Beginning: Bangladesh Economic Review-2011 ( Bangla version ) . Ministry of Finance
Countrywise foreign and joint venture investing during 2009-2010* Country| No. of Projects| Proposed Investment ( US $ m ) |Saudi Arabia| 3| 478. 652|Australia| 4| 2. 036|USA| 5| 2. 990|Finland| 2| 3. 023|India| 9| 8. 451|South Korea| 12| 33. 768|Malaysia| 3| 3. 056|Netherlands| 5| 8. 544|China| 12| 21. 000|United Kingdom| 5| 3. 507|Pakistan| 2| 0. 990|Japan| 8| 2. 624|Denmark| 1| 1. 217|Sri Lanka| 2| 0. 646|Canada| 2| 1. 017|Taiwan| 1| 0. 502|Singapore| 4| 1. 929|Turkey| 1| 0. 150|Greece| 1| 0. 156|Italy| 2| 1. 039|Hong Kong| 5| 14. 805|Total| 89| 590. 102|As of February. 2010Beginning: Bangladesh Economic Review-2011 ( Bangla version ) . Ministry of Finance
Investing Climate in BangladeshBangladesh offers an alone investing clime compared to the other South Asiatic economic systems.
Here are eight cardinal arrows to Bangladesh’s investing clime today.
1. Bangladesh is a mostly homogenous society with no major internal or external tensenesss and a population with great resiliency in the face of hardship ( e. g. natural catastrophes ) .
2. Bangladesh is a broad democracy. The population of this state irrespective of race or faith have been populating in harmoniousness and apprehension for 1000s of old ages.
3. Broad non-partisan political support for market oriented reform and the most investor-friendly regulative government in South Asia.
4. Trainable. enthusiastic. hardworking and low-cost ( even by regional criterions ) labour force suited for any labour-intensive industry.
5. The geographic location of the state is ideal for planetary trade. with really convenient entree to international sea and air paths.
6. Bangladesh is endowed with abundant supply of natural gas. H2O and its dirt is really fertile.
7. Although Bengali ( Bangla ) is the official linguistic communication. English is by and large used as a 2nd linguistic communication. The bulk of the educated population can read. compose and talk in English.
8. As a consequence of low per capita GDP. present domestic ingestion is non important.
However. it should ever be considered that there exists a in-between category with over 10 % of the population. As economic growing picks up. the buying power will besides turn well. Bangladeshi merchandises enjoy duty free and quota free entree to about all the developed states. This entree to the planetary market is further helped by the fact that the policy government of Bangladesh for foreign direct investing is by far the best in South Asia. Most East pakistani merchandises enjoy complete responsibility and quota free entree to EU. Canada. Australia and Norway. Though in limited graduated table. Bangladesh merchandises already found their entree with lower responsibility in the markets of Thailand. India and Pakistan. However. negotiations are afoot with China. Russia. Malaysia and other neighbouring states in this respect. Sectors for FDI in Bangladesh
Though Bangladesh is a hapless state it has some certain attractable countries or sector which are able to pull the foreign state or company’s to do investing in this state. The authorities of this state besides provides some certain comfortss for the investors in this state which besides induce to do investing. The policy and investing act besides sees to be really convenient to the investors. Some sectors names are given below.
1. Telecommunication and Service sectors
3. Glass and ceramics
6. Leather merchandises
8. Food and nutrient grain
• The fastest turning industry in Bangladesh with RMG accounting for more than 75 % of entire exports.
• Bangladesh is best placed in the part for fabrics and garments because of inexpensive labour and trade position with the EU.
• Government inducements for the spinning and weaving industries include a 15 % hard currency subsidy of the cloth cost to exporters sourcing cloths locally.
• There is a immense fabric demand supply spread in the RMG industry which is being me by imports. Thus the potency for backward linkage industry is tremendous. RMG and Backward Linkage:
The phenomenal growing in RMG was experienced in the last decennary. With about 2. 600 mills and a work force of 1. 4 million. RMG jointly with knitwear accounted for more than 70 % of entire investings in the fabrication sector during the first half of the 1990’s.
• Cell Phone Assembly
• Other ElectronicssSector Highlights
• Manufacturing of semi-conductors could be established as a possible bungalow industry.
• Bangladesh is traveling to be the largest cell-phone market in South Asia. Industry Outlook
Bangladesh’s experience in basic electronics spans over two decennaries. In recent old ages. European and Asiatic electronic houses have established proficient coaction with their Bangladeshi opposite numbers to bring forth some electronic goods at competitory monetary values. This has enormous potency for enlargement. The Government of Bangladesh has adopted National Telecommunication Policy. 1998. Investing is encouraged through BLT-BOT/BOO/BTO and other joint venture strategies which by greatly increasing the capacity. quality and type of services. will make improved efficiencies in other sectors such as transit energy and the fabric industry.
To run into the telecommunication demands of the state the authorities has been developing and spread outing the systems and services of BTTB. Private sector operations in the rural telecommunication. paging. cellular telephones and riverine wireless trunking have already been allowed. At present 7 private operators are supplying their services to about 100. 000 clients. Government has allowed spread outing 300. 000 digital telephones in Dhaka by private sector engagement through unfastened tendering. In conformity with overall national policy. liberalisation of the telecommunications sector will go on. However. the authorities retains the sale authorization to find the figure of competitions that are economically feasible for certain services. The scheme is to supply equal and rational chances to all rivals.
• Data Processing
• Software Development
• Investment is largely confined to information processing.
• Bangladesh has a cheaper and quickly turning IT work force.
• Government is acute in set uping IT related substructure for the development of the industry. Industry Outlook
Handiness of significant figure of qualified and experient immature people in assorted subdivisions of technology. scientific discipline and engineerings have opened up the range of profitable investing in these sectors. Relatively short preparation period and low investing have made such ventures extremely profitable. A figure of Bangladeshi IT houses are interested in happening international investors or confederates in assorted sub-sectors.
Natural Gas-based Industries:
• Petro-chemicalsSector Highlights
• Bangladesh has a significant gas modesty of about 20 trillion three-dimensional pess ( tcf )
• There is a immense demand for fertiliser in Bangladesh as the agribusiness is the chief sector of the economic system. Industry Outlook
The private sector power coevals policy announced in 1996 under which private power companies are exempt from income revenue enhancement for 15 old ages. Several barge-mounted power workss are in operation. But an extended demand spread for electricity is important. Opportunities exist in developing new workss ( barge-mounted and other. big. little and mini ) . building transmittal and distribution system. rehabilitating or upgrading bing workss and providing a assortment of support services. Investing chances are available on a build-operate-transfer ( BOT ) footing
Frozen Foods:Sector Highlights:
• Government is advancing semi-intensive runt agriculture.
• Fish and prawn exports grew at an mean 20 % in the past decennary.
• Shrimp processing and export industry is mostly dominated by the smaller unorganised sector. Industry Outlook
The frozen nutrients export is the 2nd largest export sector of the state. The mean one-year growing rate is about 28 % . This export-oriented industry includes the following sub-sectors which need proper attending for augmentation of production and export net incomes.
* Sustainable aqua-culture engineering
* Feed repasts workss
* Processing unit for value-added merchandises.Investing in frozen nutrient sector with new engineering and equipment has a huge potency for growing Leather:a. Finished Leatherb. Leather Goods
• The labour-intensive leather industry is good suited to Bangladesh holding inexpensive and abundant labour.
• Bangladesh has a domestic supply of good quality natural stuff. as fells and teguments are a byproduct of big farm animal industry.
• Adequate authorities support in the signifier of revenue enhancement vacations. responsibility free imports of natural stuffs and machinery for export-oriented leather market
• The industry lacks domestic engineering and expertness and local support industries such as chemicals are still under-developed. InvestingIncentive:
• Present Government is in the procedure of puting up of separate Leather Zone relocating the bing industry sites to an well-organized topographic point.
• New FDI influx is extremely bucked up and foreign investors are welcome to hold the chance. Industry Mentality:
There is already a significant domestic leather industry. largely export-oriented. The leather includes some ready-made garments. although that facet is continued chiefly to a little export-trade in “Italian-make” garments for the US market. Footwear is more of import in footings of value add-on. This is the fast growth sector for leather merchandises. Soon Bangladesh produces between 2 and 3 per centum of the world’s leather market. Most of the farm animal base for this production is domestic which is estimated as consisting 1. 8 per centum of the world’s cattle stock and 3. 7 per centum of the caprine animal stock. The fells and teguments ( mean one-year end product is 150 million sq. ft. ) have a good international repute. Foreign direct investing in this sector along with the production of tanning chemicals appears to be extremely honoring. Having the basic natural stuffs for leather goods every bit good as for the production of leather shoe. a big pool of low cost but trainable labour force together with duty grant installation to major importing states under GSP coverage. Bangladesh can be a possible off shore location for leather and leather merchandises fabricating with low cost but high quality.
* Sanitary ware
• Bangladesh has a skilled work force in ceramic industry.
• Historically. tableware industry is labour-intensive.
• The clean gas modesty required for fire is a great competitory advantage for Bangladesh. Industry Outlook
Global ceramic tableware industry is presently traveling through a stage of acquisition and consolidation as smaller industries in the developed states are going incompetitive and belly-up. As a consequence. the large names like Noritake. Wedgewood. Lenox. Villeroy & A ; Boch and Royal Doulton are all separately going billion-dollar operations. Historically. tableware industry is labour-intensive and even after passing one million millions of dollars on mechanization. developed states could non cut down the figure of work force harmonizing to their outlooks. As a consequence. the cost of production will ever stay highly high in developed states and the premium trade names are merely lasting because they are bear downing immense monetary value to the consumers for their trade name equity. Bangladesh. being a gas-rich and low-labor-cost economic system. offers to be a strategic spouses in production and supply of ceramic merchandises. Investing involvements in this sector are strongly welcomed.
• Machinery Partss
• Consumer ItemsSector Highlights
• A turning and progressively flush in-between category indicates demand for consumer durable goodss.
• There is a important sector of bungalow industries engaged in simple electronic goods.
• Export-oriented production in light industries has gained impulse in the past few old ages.
Light industries in Bangladesh produce a battalion of labour intensive goods including plaything. consumer points. little tools and paper merchandises for the domestic market. Further development for these industries offers assorted investing chances. Export-oriented production in light industries has gained impulse in the past few old ages. Entrepreneurs from Hong Kong. Japan and Korea have taken advantage of Bangladesh’s cheap and easy trainable labor and its substructure installations to fabricate merchandises for the export market Agro-based Industry
• Canned Juice / Fruit
• Dairy and PoultrySector Highlights
• Bangladesh has a immense supply of natural stuffs for the agro-based industry
.• Fruits and vegetable production has increased significantly in recent old ages.
• Government and NGOs have been carry oning regular preparation plans in developing a skilled work force for this industry.
• There is a significant demand supply spread in the agro-based industry. Industry Outlook
Bangladesh has the basic attributes for successful agro-based industries. viz. . rich alluvial dirt. a year-around frost-free environment. an equal H2O supply and an copiousness of inexpensive labor. Increased cultivation of veggies. spices and tropical fruits now grown in Bangladesh could provide natural stuffs to local agro-processing industries for both domestic and export markets. Progressive agricultural patterns. improved selling technique and modern processing installations would enable the agro-processing industry to better its quality and spread out production degrees significantly. Investing involvements in agro-based industries are extremely encouraged.