2015 FDI inflow in better shape

Asjadul Kibria | Published: February 06, 2016 00:00:00 | Updated: February 01, 2018 00:00:00

Flow of net foreign direct investment (FDI) into the country registered 23.5 per cent growth last year, according to the latest official balance-of-payments (BoP) statistics, in a little recovery from past setbacks.
The Bangladesh Bank (BB) released the update on the BoP Thursday. It shows that the FDI inflow in July-December period of last year stood at $795 million. On the other hand, net inflow was $1096 million ($1.09 billion) in January-June period.
Thus, net inflow of FDI stood at $1.89 billion in 2015 while the amount was $1.53 billion in 2014. The estimate, however, is preliminary and it will be revised later.Â Â
Nevertheless, by registering 23.5 per cent growth after a 4.2 per cent decline in 2014, FDI inflow again returns to a positive trend.
"It is a positive trend but the amount is still very low compared to many other developing countries, like Vietnam where annual FDI is over $9 billion," said Professor Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD).
"We are yet to attract foreign investment targeting developed and emerging markets where the country enjoys tariff-free access," he added.
"As infrastructure is a major bottleneck for both domestic and foreign investment, we need to attract FDI to build better infrastructure," he said while talking to the FE.
"The government, however, has taken initiative to develop special economic zones (SEZs) which will be helpful to attract FDI in the near future," added the economist.
Prof Mustaiz also opined that through these SEZs, two types of foreign investment could be attracted: "Firstly, investment for power, gas and other infrastructure and secondly, investment in manufacturing sector based on these infrastructures."
He was of the view that problem of availability of land could be addressed by planned development of SEZs.
"Access to land is major bottleneck for FDI in manufacturing sector," said Syed Ershad Ahmed, a former president of the Foreign Investors' Chamber of Commerce and Industry (FICCI).
"We have lot of opportunities, but we can't provide required support to the foreign investors," he said.
He cited shortcomings. "A multinational company showed interest to build a chocolate factory but couldn't move ahead due to land problem. Japanese motor-car manufactures want to shift their expensive plants in South and East Asian countries. But, they can't find policies in Bangladesh quite supportive."
Analysing the latest trends in FDI, Mr Ershad said the existing foreign companies were mostly reinvesting their incomes and not brining in any big amount of fresh investment.Â Â Â Â Â Â Â Â Â Â Â Â Â
Although full-year comprehensive data on the FDI have yet to be finalised, details of nine months (January-September) support the chamber leader's observations.
In the first nine months of 2015, only 34 per cent of FDI came as equity or fresh investment while 49.5 per cent as reinvested earnings of the existing multinational corporations. The rest was intra-company loan.
Mr Ershad also pointed out bureaucratic complexities and lack of good governance as two major roadblocks to foreign investment.
"Though the government already provides support to building several SEZs and private sector is coming, it will take time to realise the full potential of SEZs," he said.
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