Sherpa Hossainy's Blog

FDI flow in Bangladesh surges to $913 million

Posted in Bangladesh, Business, Dhaka, Economy, Finance by Sherpa Hossainy on July 30, 2011

Published in The Independent on 27 July 2011

Read the article on The Independent website

Digital print version

Bangladesh received $913 million in foreign direct investments (FDI) in 2010, marking a 30 per cent rise from the previous year, the Board of Investment (BoI) has said.

According to the the World Investment Report 2011, released by the country’s investment promotion agency at its office on Tuesday, much of the foreign investment has gone for acquisition of old assets rather than setting up Greenfield companies.

“It was up to the foreign companies to decide whether to purchase the existing companies or set up new ventures,” said SA Samad, executive chairman of BoI.

He acknowledged that FDI flow in acquisition did not help enlarge the economy.

Telecom sector received $360 million, while manufacturing sector bagged $238 million in FDI. Foreign entrepreneurs invested $145 million in textile industries under the manufacturing sector, while leather sector received $46 million.

Samad said the country should have received $5 to $6 billion in FDI as the country has a huge market and growing economy.

Political instability, military intervention, lack of capacity in the public sector, bureaucracy and natural disaster are some of the major risks of investment in Bangladesh.
However, it is a good sign that the risk factor perception of foreign investors is gradually declining, he said.

Samad said if Bangladessh gets FDI of about 30 per cent of its GDP, up from the existing 24 to 25 per cent, the GDP growth rate would hit about 8 per cent.

“If a country has a sustainable growth rate, the FDI will come automatically,” Samad said, adding that the 65 per cent literacy rate is another factor that attracts FDI.

“If the country has 8 to 10 per cent growth rate for three consecutive years and literacy rate keeps increasing, more FDI would pour in,” he added.

Explaining the high flow of FDI in 2008, Samad said the military-backed government had “friends” from outside also.

“An investment of $300 million came in the telecom sector in 2008 and it accounted for the surge,” he said.

Samad said BoI welcomed global beverage company Coca-Cola’s announcement to invest $50 million to set up a plant in Bangladesh. “We invited them in February to register with BoI to set up the plant,” he said.

“I just came from Moscow and Gazprom also wanted to set up its office in Dhaka,” he added.

The government is negotiating with Gazprom to strike deals to supply gas production-related equipment. It may be a regional office of the Moscow-based multinational company, he said.

The United Nations had set up United Nations Industrial Development Organisation (UNIDO) office to raise the capacity of the government to promote investments in the country, Samad said.

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