Greenfield FDI doubles in 2015
Talha Bin Habib | Tuesday, 21 June 2016
The value of greenfield (GF) foreign direct investment (FDI) in the country jumped almost double following a spur although the number of announced projects declined.
According to available figures, greenfield foreign investment in Bangladesh found a surge last year mainly due to the announcement of two proposed large-scale electricity projects by Indian conglomerates Adani and Reliance. Total worth of the two projects is US$3.0 billion.
In 2015, greenfield FDI worth $4.49 billion against 22 projects was announced by the multinational enterprises (MNEs) in Bangladesh, according to 'fDi Markets'.
The 'fDi Markets' is a service of the Financial Times, which is considered most comprehensive online database of cross-border greenfield investments.
It also shows greenfield FDI in 2014 as $2.05 billion against 28 announced projects in Bangladesh.
Generally, greenfield investment is a form of FDI where a 'parent company builds its operations in a foreign country from the ground up.'
In addition to the construction of new production facilities, these projects may include the building of new distribution hubs, offices and living quarters.
The data carried by the 'fDi Markets' site are extensively used by The United Nations Conference on Trade and Development (UNCTAD) especially for World Investment Report (WIR), one of the UN body's annual flagship publications.
UNCTAD, however, cautioned that greenfield investment projects' data refer to announced projects and the value of such a project indicates the capital expenditure planned by the investor at the time of the announcement.
So, 'data can differ substantially from the official FDI data as companies can raise capital locally and phase their investments over time, and a project may be cancelled or may not start in the year when it is announced'.
According to Bangladesh Bank statistics, net inflow of FDI in the country stood at US$2.23 billion in 2015 while the amount was $1.55 billion in 2014. Net inflow doesn't include greenfield FDI.
The UNCTAD usually uses the central bank data in compiling the statistics of FDI across the world.
"We will disclose our new strategy for drawing more GF FID on June 22 while launching the UNCTAD report in Bangladesh," member of the Board of Investment (BoI) Nabhash Chandra Mandal told the FE.
Economists suggested improving the environment conducive to drawing local and foreign investments.
They said information and communication technology (ICT), leather and leather goods etc could be potential sector for GF FDI in the country.
"There are potentials of Greenfield FDI. The country needs to improve overall investment scenario such as development of infrastructure and uninterrupted supply of power and gas," former finance adviser of the caretaker government Dr A B Mirza Azizul Islam told the FE.
He suggested increasing local investment which is important as a bait for attracting more greenfield FDI.