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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 term paper will portray the FDI inflow since 1995 and finds out causes and reasons of low-inflow based on data available in web. Here different indices have been shown graphically which have substantial impact on investment decision of foreign investors. Recent indices are illustrated and briefly analyzed here collected from Doing Business Report 2011, Human Development Report 2010, Bangladesh Economic Review 2011, Major economic indicators: monthly update (volume 06/2010), Bangladesh Bank and Global Competitiveness Report by Center for Policy Dialogue. Export data and information on EPZs have also been stated here importantly. Incentives for foreign investors offered by Bangladesh Government and competitive advantages of doing business in Bangladesh are two very important parts stated in this paper. It also finds out the impediments and highlighted prospects for FDI in Bangladesh and provides some recommendations for its enhancements.
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Welcome to the Presentation on
FDI in Bangladesh: Problems & Prospects
Prepared for:Dr. Khondoker Bazlul Hoque
ProfessorDepartment of International Business
University of Dhaka
Prepared by:MD. Mushfiqur Rahman
Roll: 05BBA 2nd Batch
Department of International BusinessUniversity of Dhaka
ECONOMY OVERVIEW
GDP total: $100.00 bn (at current prices 2010-11)
GDP per capita: $664 (at current prices 2010-11)
GDP growth rate (%): 6.0 (at constant prices 2009-10)
Total exports: $16.20 bn (2009-10) Total imports: $23.74 bn (2009-10) Total FDI: $0.913 bn (2010) Forex reserves: $10.700 bn (Nov 2010) Currency: BDT (1 BDT=$0.01438) (avg 2009-10)
GDP AND GNI RELATED DATA OF LAST FIVE FISCAL YEARS:
GDP data 2006-07 2007-08 2008-09 2009-10 2010-11 (p*)
GDP (bn taka) 4,724.77 5,458.22 6,147.95 6,943.20 7875.00
GNI* (bn taka) 5,077.52 5,942.12 6,706.96 7,589.28 8528.22
Per capita GDP (in taka)
33607 38330 42628 47536 53236
Per capita GNI (in taka)
36116 41728 46504 51959 57652
Per capita GDP (in US$)
487 559 620 687 755
Per capita GNI (in US$)
523 608 676 751 818
Table 1: GDP & GNI data of last five fiscal years.
*P=provisional
GNI=Gross National Income
[Source: Bangladesh Economic Review-2011 (Bangla version), Ministry of Finance.]
MID-TERM MACROECONOMIC FORECAST 2011-2015
Real sector Projection2011-12 2012-13 2013-14 2014-15
GDP at current price (bn US$)
128.03 145.35 165.31 187.55
GDP growth at current price (%)
13.2 13.5 13.7 13.5
GDP growth at constant price (%)
7.2 7.6 8.0 8.0
Inflation (%) 6.3 6.1 6.0 6.0
GDP deflator (%) 5.6 5.5 5.3 5.0
Total investment (% GDP)
28.4 30.0 31.6 32.0
FIGURE 3: LINE CHARTS SHOWING PROJECTED GDP AT CURRENT PRICE COMPARISONS OVER YEARS.
2011-12 2012-13 2013-14 2014-150
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
GDP at current price (bn US$)
GDP at current price (bn US$)
FIGURE 4: LINE CHARTS SHOWING PROJECTED GDP GROWTH AT CURRENT PRICE (%), GDP GROWTH AT CONSTANT PRICE (%), INFLATION (%), GDP DEFLATOR (%) & TOTAL INVESTMENT (% GDP) COMPARISONS OVER YEARS.
2011-12 2012-13 2013-14 2014-150
5
10
15
20
25
30
35
GDP growth at current price (%)GDP growth at constant price (%)Inflation (%)GDP deflator (%)Total investment (% GDP)
FIGURE 5: PIE CHART SHOWING SECTOR WISE CONTRIBUTION TO GDP
WORLD ECONOMY AND BANGLADESH
Economy growth rate (%) 2007 2008 2009 2010
Projections
2011 2015 Bangladesh 6.3 6.0 5.4 5.4 5.9 6.2 Developing Asian economies 10.6 7.9 6.6 8.7 8.7 8.5 Emerging economies and developing economies
6.5 9.2 5.2 6.2 4.7 3.8
Developed economies 0.2 0.5 0.4 0.4 0.3 0.1 World 5.2 3.0 -0.6 4.2 4.3 4.6
YEAR WISE INVESTMENT
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
500
1000
1500
2000
2500
3000
3500
Investment in USD million
Investment in USD million
Figure 12: Line chart showing year wise Investment Inflow in USD million.
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
2
4
6
8
10
12
Employment opportunities (person)
Figure 13: Bar chart showing year wise Employment opportunity from Investment Inflow.
KEY SECTORS:
AgribusinessCeramicsElectronicsFrozen FoodsGarments and TextilesICT and Business ServicesLeather and Leather GoodsLife SciencesLight EngineeringPower Industry
SECTOR WISE FOREIGN INVESTMENT (CY 1971-2010)
Agro Based Chemical EngineeringFood & Allied Glass & Ceramics Printing Publishing & PackagingTannery & Rubber Products Textile ServicesMiscellaneous
Figure 14: Pie chart showing percentage of sector wise foreign Investment (CY 1971-2010)
EPZ BENEFITS AND INCENTIVES
The following are just some of the special incentives offered to businesses located in an EPZ:
10 years tax holidays (5 years for new establishments commencing from 1st January 2012).
Concessionary tax for five years, after the first ten. Duty and tax free exports from the zone. Intra and inter zone exporting and sub-contracting. Fully serviced plots. Readymade factory buildings. Available infrastructure facilities. Warehouses and bonded areas. Duty free import of machinery, raw materials, construction materials and spare parts. Sale of 10% finished product to domestic tariff area. Sale of 10% surplus raw material to domestic tariff area. Sale of 10% defective finished goods and domestic tariff area items. 100% backward linkage and accessories items are allowed to be sold in export
oriented industries (deemed as exports). Sale of old/scrap machineries in domestic market. Business and administration support services. Customs clearances on site. Recreational amenities.
YEAR WISE INVESTMENT IN EPZS
2006-07 2007-08 2008-09 2009-10 2010-11(April)0
50
100
150
200
250
300
350
Investment(million US$)
Investment(million US$)
NO. OF INDUSTRIES IN EPZS
Chittagong Dhaka Comilla Mongla Uttara Ishwardi Adamjee Karnaphuli0
20
40
60
80
100
120
140
160
180
No. of Manufacturing IndustriesIndustries under implementation
Figure 17: Bar chart showing number of manufacturing industries and industries under implementations in EPZs.
SOME IMPORTANT INDICES FOR ATTRACTING FDI :
Doing Business Report Indices Human Development Report Indices Global Competitiveness Report Indices
DOING BUSINESS 2011
WHO IMPROVED THE MOST IN STARTING A BUSINESS?
It’s a good indicator that Bangladesh is in number 9 among the countries which have improved significantly in starting a new business. These types of factors work as positive motivators to the foreign investors.
WHO MAKES REGISTERING PROPERTY EASY—AND WHO DOES NOT?
Registering properties in Bangladesh is a long-tiring task, which can frustrate investors. So, in this sector Bangladesh has to concentrate very seriously to attract more FDI.
WHERE IS ENFORCING CONTRACTS EASY —AND WHERE NOT?
Another factor of concern is that enforcing contract is not easy rather situation is comparatively worse here. Steps should be taken to overcome situation and create positive impression among investors throughout the world.
GLOBAL COMPETITIVENESS INDEX
HDI VALUE ILLUSTRATION BY YEAR:
1980 1990 1995 2000 2005 2009 20100
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
HDI Value
HDI Value
AVERAGE ANNUAL HDI GROWTH RATE(%) BY YEAR:
1980-1990 1990-2010 2000-20101.75
1.8
1.85
1.9
1.95
2
2.05
Average annual HDI growth rate(%)
Average annual HDI growth rate(%)
FACTORS AFFECTING FDI
Infrastructure Macroeconomic Environment Governance International integration Political stability Human resources Technology infrastructure
COMPETITIVE ADVANTAGES
Language Social Stability Human Resources Natural Resources Location Market Access GSP Facility Cost of Business
IMPEDIMENTS OF FDI IN BANGLADESH
Complicated Bureaucracy Political Unrest Corruption High Inefficiency Cost Absence of Autonomous Regulatory Bodies Differential Treatment Insufficient Power Supply Inconsistent Policy Implementation Tax Authority’s Discretion Lack of effective cooperation of Board of Investment (BOI) Legal Absurdity Disrupting Fiscal Policy Administrative coordination problem Time wasting customs processing
RECOMMENDATIONS
Ensure of Good Governance Coordinated Government Agencies Dynamic and Independent Govt.
Agencies Accountability and Transparency Developing Diplomatic Relation Devoting Efforts to Shift FDI Track Ensuring Power and Energy Political Reformation
THANK YOU
