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Record $3.7b FDI in 2018

Spl economic zones behind high inflow, says UNCTUD


Published : 15 Jun 2019 09:04 PM | Updated : 06 Sep 2020 11:54 AM

Setting up special economic zones contributed significantly in attracting foreign direct investment (FDI) in Bangladesh, which as per the WIR of UNCTAD, rose to record high by 68 percent to the level of $3.7 billion. The World Investment Report (WIR) 2019 of the United Nations Conference on Trade and Development (UNCTAD) mentioned that Bangladesh has registered a record level of FDI inflow last year which will continue in the coming years.

UNCTAD, the UN body, generally provides the global FDI and also focused a theme linked with FDI, this year with a special focus on Special Economic Zones. The current development of Special Economic Zones (SEZs) through Public-Private Partnership in Bangladesh and other Asian countries is likely to help attract more FDI in the years to come, the report claimed.

As per the report, the FDI to India was accounted for 70-80 percent of inflows—increased by 6 percent to $42 billion while Pakistan, the fourth largest recipient of FDI in the sub-region, registered a 27 percent decrease in investment to $2.4 billion. The report mentioned that “in Bangladesh, the gains were mostly the result of a $1.5 billion M&A (merger and acquisition) deal in tobacco and new investments in power generation.

 Also, reinvested earnings in the country, mainly by MNEs in banking, textiles and apparel, more than trebled to $1.3 billion.” Chairman of Bangladesh Investment Development Authority (BIDA), Kazi M. Aminul Islam told that Bangladesh now have every supports that should have for the investment growth, remarkable development of infrastructure has taken place, one stop service has been introduced so it is natural that the FDI will increase in the country.

"Foreigners are considering the youth forces so positively, trust or faith of foreigners have increased due to attaining the socio-economic improvement as a result FDI is increasing expectedly but some old laws are still causing barriers that needs to be amended", Kazi Amin added.
He said they are trying to turn the laws time befitting, and hoped that if the flow of development continued and necessary reforms are done then FDI will increase further.

UNCTAD observed that the special zones are one of the most important tools to draw foreign investment in different countries, the WIR report further said the ongoing SEZ developments through PPP in Bangladesh and other Asian LDCs may contribute to attracting and retaining more FDI, not only from potential zone tenants in manufacturing, but also from zone developers or service operators to build infrastructure.

However, the report termed the FDI inflow target of $9.6 billion as ambitious, given the country’s annual average FDI flows of $2.2 billion in 2015–2017, 15 to 20 percent of which was attracted by the eight EPZs. Delays in the acquisition of land, limited availability of long-term finance for private developers and the lack of expertise in zone marketing were detected as key challenges to ensure rapid development of the economic zones, the UNCTAD report pointed out.

As per the report Bangladesh became the top host LDC to attract FDI in the past year followed by Myanmar ($3.58 billion), Ethiopia ($3.30 billion), Cambodia ($3.10 billion) and Mozambique ($2.70 billion). Meanwhile a review of the metropolitan Chamber of Commerce and Industries (MCCI) found that during July-February of FY19, the net foreign direct investment (FDI) increased by 24.79 per cent to US$1.183 billion from US$948 million in the corresponding eight months of the previous fiscal year (Table 11).

In the calendar year 2018, the net inflow of FDI in Bangladesh increased by 67.91 per cent to US$3.61 billion from US$2.15 billion in the previous calendar year. According to a government estimate, the country needs to attract average annual FDI inflows of US$6.7 billion to graduate to an upper middle income country by 2021.

Experts said that Bangladesh’s low labor costs are generally believed to be attractive to foreign investors, yet the issues like infrastructure, shortage of power and energy, lack of consistency in policy and regulatory framework, scarcity of industrial lands to be addressed by the government to attract more FDI in the country.