Foreign Direct Investment (Fdi) in Bangladesh

Topics: Investment, Foreign direct investment, Macroeconomics Pages: 24 (5958 words) Published: April 8, 2012



The issue of Foreign Direct Investment (FDI) has been receiving phenomenal attention from many governments. Bangladesh is not lagging behind from it. Economic development for the developing countries like Bangladesh is largely dependent on FDI. The major challenges for the host country are to ensure an eye-catching and conducive investment climate to foreign investors for FDI inflow. In recent years, Bangladesh has been devoting efforts for attracting FDI offering a lot of lucrative incentives and benefits. Though attempts taken to increase FDI inflow, the result achieved is not appreciable enough for Bangladesh. This paper will portray the FDI inflow since 1995 and finds out causes and reasons of low inflow based on secondary data. It also finds out the impediments and highlighted prospects for FDI in Bangladesh and provides some recommendations for its enhancements.

Key Words : foreign direct investment, economic development, Bangaladesh.


1.0 Introduction

Economic supremacy is the foremost feature of the current world. In order to survive, Bangladesh has no other options but to attain economic development. Foreign Direct Investment (FDI) is recognized as a key component for economic growth for Bangladesh. Being one of the Least Developed Countries (LDC) with insufficient domestic savings rate for investment after fulfilling its basic needs, the importance of foreign investment is unquestionable. Foreign Direct Investment (FDI) will create employment, increase efficiency of labor, encourage technology transfer and develop new exportable sector. To attract more and more FDI the government of Bangladesh has been trying to establish private investment friendly environment. A number of opportunities have been given by the Government of Bangladesh (GoB) to attract foreign investors to invest in the country in some prospective sectors. As Bangladesh does not have sufficient domestic savings for investment, foreign investment is the most powerful ingredient for its economic development. In international business FDI has become a significant component for many countries. Nowadays Asian countries have a great influence in the global economy. Though Bangladesh is comparatively lagging behind of them, there are a lot of opportunities to attain economic development by undertaking some initiatives. Considering the above facts the overall purpose of preparing the paper was to identify the prospect of Foreign Direct Investment in Bangladesh Economy.

1.1 Defining FDI

FDI is defined as an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise resident in an economy other than that of the foreign direct investor (FDI enterprise or affiliate enterprise or foreign affiliate). FDI implies that the investor exerts a significant degree of influence on the management of the enterprise resident in the other economy. Such investment involves both the initial transaction between the two entities and all subsequent transactions between them and among foreign affiliates, both incorporated and unincorporated. FDI may be undertaken by individuals as well as business entities. Flows of FDI comprise capital provided (either directly or through other related enterprises) by a foreign direct investor to an FDI enterprise, or capital received from an FDI enterprise by a foreign direct investor. FDI has three components: equity capital, reinvested earnings and intra-company loans.

Objective of the Study

2.0 Objective
In international business FDI has become a significant component for many countries. Nowadays Asian...
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