Foreign Direct Investment in Bangladesh: A Comprehensive Analysis

This report provides an analysis of Foreign Direct Investment (FDI) in Bangladesh. It highlights the growth in FDI over the past decade, driven by government initiatives and investments in sectors like leather and RMG. The report examines the impact of the COVID-19 pandemic on FDI inflow, as well as the country's strategic geographic position, cheap labor, and natural resources that attract investors. It discusses key sectors attracting FDI, including power, food, banking, and textiles. The report also identifies challenges such as infrastructure limitations, bureaucratic complexities, and political instability. The report includes data from Bangladesh Bank and UNCTAD, as well as references to relevant sources, providing a comprehensive overview of the FDI landscape in Bangladesh.

FDI scenario- Bangladesh
Foreign direct investment has improved and become double through past ten years. Because of
the imphasis of government and concentating on some new sectors such as leather, RMG
products, energy etc. foreign direct investment of bangladesh is seeing this massive growth.
Significant improvement in the infrastructure and energy sector is encouraging the foreign
investors to invest in this country more. According to Bangladesh Bank data shows that
Bangladesh received 912 million US dollars in 2009-10 year fiscal year which increased to
$2650 million US dollars in 2018-2019 financial year.
However, according to United Nations Conference on Trade and development (UNCTAD)
Bangladesh foreign direct investment inflow fell by 11% in 2020. The inflow was $ 2.87 billion
in 2019 and reach at $2.56 billion in 2020. The decline indicates the economic crisis triggered by
COVID-19 pandamic.
Bangladesh has a advantage of being in a strategic geographic position between south and
southeast position. Bangladesh has cheap labor and also fertile land which is favourable for
agricultural products. Bangladesh also has a large reserve of natural gas and certain offshore
discoveries in bay of Bangladesh which make this country more lucrative to the investors than
the neighboring countries. Bangladesh has two most important port one is in Mongla and the
other one is in Chittagong. There is other small sea port such as payra, coxsbazar which is
alongside the Matarbari, Sanodia. There are also 23 land port in our country which works as
customs station. These port works as important route for shipment of products. A number of
more developed Asian countries have outsourced their factory production, mainly textile, to the
country. Moreover, in 2020, the government simplified a set of laws as part of its efforts to
reduce barriers to foreign investment in this country.
The main investors in Bangladesh are-
 China
 South Korea
 India
 Egypt

 The United Kingdom
 The United Arab Emirates
 Malaysia
Net FDI inflow by major sectors during 2019 in Bangladesh-
In 2019, Bangladesh gets the highest amount of FDI inflow from power sector which is 1217.84
million. The other sectors which contribute significantly in FDI inflow of bangladesh are food,
banking, textile and apprel telecommunication, lether and lether products etc. Besides these
industries the agro-processing, computer softwear, digital finace servies etc. industry is also high
potential industry for FDI.
Challenges for foreign direct investment in bangladesh-
 Bangladesh has limited port and road and has limited efficient physical infrastructure.
However, this country also has lack of technological infrastructure to support FDI.
 Bangladesh has limited capacity for supply of electricity and natural gas.

 Bangladesh bureaucratic complexity lack of transparency and the registration process is
also complex which makes the overall process critical.
 Bangladesh has lack of professional trade man power and has poor intellectual property
law. This country also has lack of expertise to make attractive project proposal to show
investors.
 Political unrest situation and corruption. With the change of government, the policies also
got changed which creates confusion among investors regarding which policy to follow.
Reference
https://www.dhakatribune.com/business/economy/2021/06/21/fdi-to-bangladesh-fell-11-last-year
https://santandertrade.com/en/portal/establish-overseas/bangladesh/investing
FDI Inflow in Bangladesh: Time to Rethink and Redesign Policies (lightcastlebd.com)