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FDI flow drops by 7.7pc last year

Asjadul Kibria | April 26, 2018 00:00:00

Net inflow of foreign direct investment in the country declined by 7.72 per cent last year, with officials attributing the drop-off to geo-political tension, the central bank has said.

Statistics available with Bangladesh Bank showed that net inflow of FDI stood at US$ 2.15 billion in 2017, down from $ 2.33 billion a year ago.

The seventh Five-Year Plan (7FYP) of the country, however, projected to attract $ 5.87 billion in the current fiscal year (FY18). It appears that actual FDI is much lower than the projected in the medium-term development plan document.

The central bank statistics also showed that the gross inflow of FDI was recorded at $ 2.68 billion in the past year, which was $2.82 billion in 2016.

Divestment and repayment of loans and loss of the current multinational entities have been deducted from the gross inflow of FDI to calculate the net FDI.

Bangladesh Bank also said that more than half of the total FDI originated from the reinvested earnings of the existing multinational firms in the country.

Some $ 1.28 billion net FDI came as reinvested earnings in the past year.

The fresh investment, also known as equity capital, declined to $ 538.90 million in the past year from $ 911.38 million in 2016.

The falloff doesn't bother analysts much.

Shaquib Quoreshi, secretary of the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), said that such a decline in FDI is not a big deal for the country.

Though "FDI is crucial for economic growth, it is yet to be a factor for the Bangladesh economy," he told the FE on Wednesday. "The amount of FDI is still tiny."

Mr Quoreshi noted that there are some other factors discouraging the FDI in the country. These include higher tax regime in the region and lack of better business climate.

"Moreover, when the national election is ahead and there is a risk of political instability, drop in FDI is nothing abnormal," said Quoreshi who also works as a trade expert in various capacities.

A senior official of the central bank, however, termed the drop in FDI a reflection of global tension.

"The world is going through a period of huge geo-political tension mainly due to changed policies of the United States," said Dr Md Ezazul Islam, a general manager of Bangladesh Bank.

"The intense geo-political tension made many multinationals shaky and so there is a global slowdown in FDI," he added.

Provisional estimates of the United Nations Conference on Trade and Development (UNCTAD) showed that the global inflow of FDI plunged by 16 per cent in the past year.

According to the UN agency's Global Investment Trends Monitor, released early this year, estimated that the global inflow of FDI dropped to $1.52 trillion in 2017, which was $1.81 trillion in 2016.

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