Enhancing FDI through Investment Policy Reform
The average annual FDI inflow in Bangladesh is significantly lower than comparable economies.Over the past decade (2007 to 2017), inflows have averaged at 0.9 percent of GDP in Bangladeshcompared with 3.0 percent in China, 5.5 percent in Ethiopia,...
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| Language: | English |
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/270301537422462536/Bangladesh-Policy-Note-Enhancing-FDI-through-Investment-Policy-Reform http://hdl.handle.net/10986/30557 |
| Summary: | The average annual FDI inflow in
Bangladesh is significantly lower than comparable
economies.Over the past decade (2007 to 2017), inflows have
averaged at 0.9 percent of GDP in Bangladeshcompared with
3.0 percent in China, 5.5 percent in Ethiopia, 2.6 percent
in The Philippines, 6.6 percent in Vietnam, 4.6 percent in
Malaysia, and 2.1 percent in India. In 2017, the sectoral
distribution of FDI was concentrated in businesses like
telecom (24 percent), power and energy (20 percent), and
banking and trading (11 percent). Inflows are primarily from
the UK, USA, Norway, Singapore and South Korea which
constitute about 65 percent of FDI inflows. The country’s
export diversification strategy calls for an
efficiency-seeking FDI policy regime with instruments for
firm linkages, investment incentives, preferential trade
agreements, and efficient services provided by investor
promotion agencies (IPA). The absence of such a policy
regime is one of the factors restraining FDI inflows into
the country. FDI in Bangladesh is primarily reinvestment of
retained earnings, reflecting investor confidence but also
some constraints. More than 50 percent of FDI in Bangladesh
are reinvestments. This shows confidence in the economy
among the existing investors, However, the low levels of FDI
and absence of new investors indicates problems related to
greenfield entry barriers, valuation challenges, and
repatriation restrictions. The dearth of enabling policies
such as easy business entry, access to serviced land, and
investor aftercare, limits the potential for investment in
greenfield and expansion projects which are more likely to
create new jobs. |
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