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An empirical study of the status of Foreign Direct Investment (FDI) & impact of FDI in major economic sectors of Bangladesh

Table of Contents

Abstract:

This report is about the Foreign Direct Invest (FDI) in Bangladesh. FDI is one of the most potential and significant driving force of the economical progress not only for Bangladesh but also for all the nations. Foreign direct inflows play a significant role in the economic progress of our country improving GDP, creating employment opportunities, enhancing technological advancement, flourishing export and import and so on. The government has also implemented various lucrative and incentive policies to allure the foreign investors to invest in our country. Although, political crisis, some policies and regulations and economic instability is hampering FDI significantly, therefore, it is one of the most flourishing and potential source to progress.

Chapter 1

1.1: Background of the study
Foreign Direct Investment (FDI) is considered as one of the vital ingredients for overall development process of a developing country like Bangladesh. Industrial development is an important pre-requisite for economic growth of a developing country. Bangladesh is basically a country of agrarian economy. For her economic development, industrial economy is imperative. So Bangladesh is gradually moving from agrarian economy to industrial economy. In the age of globalization, it has become a burning issue to exchange views, ideas, capital and human resources. Government of Bangladesh is trying to create a favorable investment environment through introducing economic policies, incentives for investors, promoting privatization and so on. Therefore, the contribution of FDI is necessary in the enhancement of a country’s economic growth. Researchers have marked FDI as an important factor in accelerating economic success and wealth of a country as well as a door in creating jobs, facilitating economy, and creating more competitive environment and contributing productivity to the host country. In Bangladesh, FDI plays a significant role in GDP acceleration and economic growth. (Mottaleb, 2007) FDI has a mentionable role in the modernization of the Bangladesh economy for last two decades. It helps the country in building up infrastructure, creating more employment, developing capacity, enhancing skills of the labor force of the host country through transferring technological knowledge and managerial capability, and helping in integrating domestic economy and the global economy. Various positive attributes of Bangladesh is now drawing the attention of the investors from both developed and developing countries. In Bangladesh, it is available to get skilled labor at relatively low wages. Moreover, there is reasonably stable macroeconomic environment. These two important factors can make Bangladesh an alluring destination for foreign investors. Lowest wage rates among the Asian countries, tolerable inflation rate, reasonably stable (except previous year) exchange rate, investment friendly custom regulations and attractive incentive packages make Bangladesh a favorable investment destination. Bangladesh became more open toward FDI policies over the last decades. These above features will certainly maintain the recent advancement in FDI investment in Bangladesh by the foreign investors. During 1980s, FDI to Bangladesh was very little and mostly focused in banking and a few other sectors. Bangladesh started attracting FDI since 1996 in energy and power sector because of favorable and supportive policies for foreign investment, economic reform as well as unexplored gas and oil resources. In 1972, annual FDI inflow was 0.09 million USD and in 1996, it became 231.61 million USD which rose significantly in 2008 to 1086 million USD which declined to 913.32 million USD in 2010. (Investment, 2012)...
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