Foreign Direct Investment (Fdi): a Potent Weapon for Economic Growth of Bangladesh

Topics: Macroeconomics, Investment, Foreign direct investment Pages: 17 (4551 words) Published: January 29, 2012
Foreign Direct Investment (FDI): A Potent Weapon for Economic Growth of Bangladesh

Eman Hossain
Faculty of Business Administration
Prime University, Dhaka, Bangladesh
Cell no.: +88-01816747945

Md. Zafrul Hannan
Faculty of Business Administration
Prime University, Dhaka, Bangladesh
Cell no.: +88-01715007383


Md. Mukul Hossain
Faculty of Business Administration
Prime University, Dhaka, Bangladesh
Cell no.: +88-01714657373

Foreign Direct Investment: A Potent weapon for Economic Growth of Bangladesh

In the current global context, Foreign Direct Investment (FDI) is an effective tool for economic growth. It enables a capital-poor country like Bangladesh to build up physical capital, creates employment opportunities, develop productive capacity, enhance skills of local labour through transfer of technology and managerial know-how, and help to integrate the domestic economy with the global economy. 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. This paper will portray the FDI inflow since 2001 and finds out causes and reasons of low-inflow based on secondary data. It also finds out the hindrances and highlighted prospects for FDI in Bangladesh and provides some recommendations for its enhancements.

Key Words: foreign direct investment, economic growth, Bangladesh

The definition of FDI (Foreign Direct Investment) will be followed in accordance with the United Nations Conference on Trade and Development (UNCTAD) and its World Investment Report 2006, which states that “FDI is 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)”. The Bangladesh Board of Investment maintains the same definition.

Foreign Direct Investment plays a vital role by bringing prosperity to the recipient countries through technological transfer, increasing volume of exports, enhancing job opportunities and increasing government revenue. Foreign Direct Investment (FDI) increases the volume of domestic capital to finance new development projects in the country and simultaneously provides access to new technology, managerial and marketing know-how. But the inflows of FDI are not praiseworthy though it has an increasing trend. According to UNCTAD in 2009 Bangladesh achieved only 716 million US$ FDI while the amount was 34,613 million US$ in India. Where as, whole South Asia received 41,406 million US$, Developing economics received 478,349 million US$ and the whole world’s FDI inflow was 1,114,189 million US$. In 2006 FDI inflow in Bangladesh was 989 million US$. In 2007 there was a sudden fall in FDI (666 million US$) because of political unrest in Bangladesh. A matter of well-being that in 2008 FDI inflow got in touch with the highest amount in Bangladesh history (1084 million US$) (Ministry of Finance, Bangladesh). During July to December, 2009 the major sectors of FDI inflows in Bangladesh was telecommunications, textile and wearing etc. In this period, Bangladesh received highest amount 49.41 million US$ from Hong Kong (Statistics Department, Bangladesh Bank). The inflow of FDI is being reduced in the country for the infrastructural, bureaucratic and environmental complicacy (Mian, M. E. Alam, Q. 2006). Besides these hindrances for FDI, some opportunities are hidden...

References: Bangladesh Bank, Statistics Department, 2009
Board of Investment, Bangladesh Economic Review 2010,
Hossain, E. (2008), Internship Report, Department of Banking, University of Dhaka.
Investment Handbook of Bangladesh, 2009
Kafi, M.A., Uddin, M.M., Islam, M.M., (2007), Foreign Direct Investment in Bangladesh: Problems and Prospects, the Journal of Nepalese Business Studies, Vol
Mian, M.E. Alam, Q. (2006) “Foreign Direct Investment and Development,” Monash Business Volume 2, Issue 1-April 2006.
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