FDI crosses $2.0b level for first time in country

Asjadul Kibria | Published: April 08, 2016 00:00:00 | Updated: February 01, 2018 00:00:00

The annual inflow of foreign direct investment (FDI) crossed the $2.0 billion level for the first time in Bangladesh last year.
Updated statistics on FDI, released by the central bank, showed that the net inflow of FDI stood at $2.23 billion in 2015.Â The amount was 44.10 per cent higher than the FDI worth $1.55 billion in 2014.
The provisional estimation of FDI last month, however, showed that the net inflow of FDI was $1.89 billion in 2015. Bangladesh Bank now comes with revised statistics giving details of the annual FDI inflow.
It also shows that gross inflow of FDI stood at $2.69 billion last year and the amount of disinvestment $463.66 million. Disinvestment generally means withdrawal of investment. Net inflow is, thus, calculated by deducting the disinvestment from the gross amount of inflow.
Appreciating the increased inflow of FDI, Dr Mirza Azizul Islam, former finance and planning adviser to caretaker government, said: "It is definitely a positive thing as the country is now attracting more foreign investment."
The economist, however, emphasised analysing the composition and sector-wise volume of foreign investments to understand the real effect.
The composition data showed that 51 per cent or $1.14 billion of the net FDI came as reinvested earnings of multi-national corporations (MNCs) operating in the country.
"There is nothing wrong here," said Dr Aziz. "If the MNCs don't reinvest, they must repatriate their full profits and earnings as there is no legal bar. So, by reinvesting their earnings, they are keeping the inflow of FDI."
Bangladesh Bank's latest data also showed that some $697 million came as equity capital, which was around 31 per cent of the annual inflow of FDI. The remaining amount, $394 million, came as intra-company loans in 2015.
The maximum amount of FDI went to five broader sectors last year. These were: textile and wearing (19.8 per cent), gas and petroleum (14.6 per cent), banking (13.8 per cent), telecommunication (11.4 per cent) and power (11 per cent).
"When Bangladesh has a very strong footing and competitiveness in ready-made garments and textile industries, it is not very clear why a big amount of FDI is coming into this sector," said Dr Aziz.
"I am not fully opposing FDI in this sector," he added. "But, we need to attract FDI into other sectors like electronics and agro-processing."
The former policymaker also pointed out that FDI in non-tradable sector like banking would not make any positive impact on the country's balance of payment situation. Â
Md Shafiul Islam, first vice president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said that though the increase in FDI inflow was positive, the amount was well below those in countries like Vietnam and Myanmar.
In 2015, Vietnam attracted FDI worth around $14 billion while the amount was $9.0 billion in Myanmar. Â
The business leader, however, opined that political stability in the country was now paying off.Â "As special economic zones are now under construction, it will attract more FDI in near future," he added.
Regarding FDI in the textile sector, Mr Islam, also a former president of Bangladesh Garments Manufacturers and Exporters Association (BGMEA), said that there is a good opportunity to diversify textile and clothing products.
"We mostly produce some select categories of garment products while global market is open for many more items," he explained.
"By attracting FDI, we can also produce and export many of those items. Similarly, non-cotton and man-made fibre items can be produced."
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