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Tuesday, April 5, 2016

FDI makes upturn in FY15 after a drop

Asjadul Kibria

Foreign Direct Investment (FDI) flow into the country registered a rise last fiscal by official count although there had been a little fall in it during the past calendar year.

Provisional estimation, as revealed in the central bank's latest balance-of-payments statistics, shows net inflow of FDI amounted to $1700 million ($1.7 billion) in the fiscal year (FY) 2014-15.

It was 18.7 per cent higher than the amount, $1432 million ($1.4 billion), the country received as foreign investment in FY14.

In the last calendar year, the net inflow of FDI stood at $1526 million against $1600 million of 2013. Thus, on the basis of calendar year, the net inflow of FDI marked a decrease by 4.6 per cent in 2014.

Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka in its latest quarterly economic review, said the investment was not enough for the country's development. "It needs US$7.4 billion to US$10.0 billion annually to spend for infrastructural development in line with its target of graduating to a middle-income country by 2021."

The central bank statistics also show that during the first half of FY15, July-December period of 2014, net inflow of FDI was $754 million. Thus, in the second half of the last fiscal (January-June period of 2015) net FDI was $946 million.

But, the country faced political turmoil in the third quarter (January-March 2015) of the last fiscal year due to hartal and blockade that cast a damper on economic activities. So, increase in FDI amid political chaos remains otherwise a question.

Dr Biru Paksha Paul, the chief economist at the Bangladesh Bank, however, said FDI would have been much higher had there been no political turmoil.

"The political turmoil definitely hit the inflow of FDI last fiscal year," he said. "Otherwise, total inflow might have crossed $2.0billion level."

Dr Paul also said the current amount of FDI was very small compared to the gross domestic product (GDP) of the country.

According to the World Bank's estimation, Bangladesh's FDI-GDP ratio is 1.0 per cent.  

The full data of FDI for last fiscal year were yet to be available. On the basis of calendar-year data, the country received in 2014 the highest amount of FDI from the United Kingdom, which was $181 million, followed by South Korea ($134.7 million), Pakistan ($130.74 million), Singapore ($117.13 million), Hong Kong ($111.41 million) and Norway ($103.58 million).

The central bank data also show that in 2014, the highest amount of FDI came to the textile sector which was $390.92 million followed by banking sector ($311.9 million) and telecommunications ($226.8 million).

MCCI also said in order to attract FDI, the government would have to solve problems of infrastructure bottlenecks and policy inadequacies.

These include scarcity of land, lack of policy continuity, bureaucratic red tape, weak governance, political instability, poor skills of the labour force, administrative impediments and inadequate utilities like gas, electricity and water.

"A step in the right direction is the government's recent offer of a lucrative incentive package for investors and developers of the country's economic zones," it noted. 

Source: The Financial Express, 17 August 2015

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