Foreign Investment Trends in Bangladesh

Topics: Foreign direct investment, Investment, Macroeconomics Pages: 15 (4237 words) Published: February 11, 2013
Foreign Investment Trends in Bangladesh
Foreign direct investment is considered as a crucial ingredient for economic development of a developing country. Countries that are lagging behind to attract FDI are formulating and implementing new policies for attracting more investment. Foreign direct investment (FDI) plays an extraordinary and growing role in global business. It can provide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing. For a host country or the foreign firm which receives the investment, it can provide a source of new technologies, capital, processes, products, organizational technologies and management skills, and as such can provide a strong impetus to economic development. In this current world we are realizing the fact that the economic development and economic supremacy become the top subjective matter. Bangladesh is a poor country which has not enough domestic savings to invest for developing the country’s economic condition. As a matter of fact for any kind of development investment is obvious. As Bangladesh has not enough savings to invest in own country FDI become the most resourceful sector to develop the country’s economic condition. Defining FDI

Foreign direct investment is the process whereby residents of one country acquire ownership of assets for the purpose of controlling the production, distribution and other activities of a firm in another country. The international monetary fund’s balance of payments manual defines FDI as ‘an investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor, the investor’s purpose being to have an effective voice in the management of the enterprise’. The united nations 1999 world investment report (UNCTAD 1999) defines FDI 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).

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.

Present FDI status in Bangladesh

Bangladesh ranked 16th among the top 74 FDI recipient countries across the world with a record US$1.13 billion received in foreign direct investment (FDI) in 2011, said the latest World Investment Report (WIR).The Board of Investment (BoI) released the WIR of the United Nations Conference on Trade and Development (UNCTAD) on Thursday.

According to the WIR, increased reinvestment and intra-company loans offered by existing foreign companies, including those in telecom, energy and financial sectors, helped boost the FDI flow to Bangladesh in 2011.Bangladesh secured 15th position in the WIR ranking in 2010 with the country receiving $ 910.33 million, while the ranking was 24th in 2008.

For the lacking of domestic savings Bangladesh needs FDI to develop its economic condition. The present condition of FDI is better than any other times. The total inflow has been increasing over the years. In 1972, annual FDI inflow as 0.090 million US $, and after 33 years, in 2005 annual FDI reached to 845.30 million US$ and to 989 million US $in 2006 (UNCTAD-2005, Bangladesh Investment Handbook 2007- BOI). Contribution of FDI was not remarkable until 1980, a year of...
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