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Opportunities & Challenges of FDI in Bangladesh

Objective: The purpose of this literature is to provide informative knowledge on the opportunities that are available for foreign direct investment (FDI) in Bangladesh and also providing information on the challenges regarding FDI in the country. In this literature there will be brief notifications on factors that affects FDI and also what are the competitive advantage that are present regarding this issue. Opportunities that are present in this country and the challenges that are met in this aspect, also providing recommendations in regards to what should be done to overcome the challenges. Introductions: Foreign Direct Investment (FDI) is considered as one of the vital ingredient s for overall development process of a developing country like Bangladesh . Industrial development is an important pre- requisite for economic growth of a developing country. Bangladesh is basically a country of agrarian economy. For her economic development, industrial economy is imperative. So Bangladesh is gradually moving from agrarian economy to industrial economy. In the age of globalization, it has become a burning issue to exchange views, ideas, capital and human resources. Government of Bangladesh is trying to create a favourable investment environment through introducing economic policies, incentives for investors, promoting privatization and so on. Therefore, the contribution of FDI is necessary in the enhancement of a countrys economic growth. Factors Affecting FDI: Infrastructure Macroeconomic environment Governance International integration Political stability Human resource Technological infrastructure

Competitive Advantage: Language Social stability Human Resources Natural resources Location Market access GSP facility Cost of business

Opportunities: Unique opportunities in energy and power Infrastructures

Opportunities & Challenges of FDI in Bangladesh


manufacturing and knowledge- based sectors will attract substantial investment Bangladesh has become a least cost producer in the world low - cost workforce strategic location regional connectivity and worldwide access strong local market and growth low cost of energy proven export competitiveness competitive incentives positive investment climate Challenges: Poorly developed socio-economic and physical infrastructure Complicated Bureaucracy Lack of skilled people at various levels Unreliable energy supply Insufficient power supply Lack of effective cooperation of Board of Investment (BOI) Disrupting fiscal policy Corruption Administrative complexity and non-transparency Poor implementation of existing policies Low labour productivity Frequent change in govt. policies Unhealthy trade union practices Underdeveloped money and capital markets and regulations on these markets Less improved seaport facilities & malpractices at the port Deteriorating law and order situation Political instability and disturbances High cost of doing business Time wasting customs policy Redtapism and corruption in getting infrastructural facilities Unfriendly legal system

Recommendation & Conclusion: FDI is viewed as a major stimulus to economic growth in developing countries as it brings prosperity to the recipient countries through technological transfer, increasing volume of exports, enhancing job opportunities and increasing government revenue. Realizing the importance of FDI, Bangladesh offers one of the most liberal regimes for FDI in South Asia and these policies are producing results in terms of increased inward investment. Despite, FDI inflow in the SAARC region particularly in Bangladesh is not satisfactory. Furthermore, the lions share of FDI is being repatriated.

Opportunities & Challenges of FDI in Bangladesh


To attract FDI, Bangladesh has to reinforce its infrastructure facilities, and improve the quality of services. Furthermore, a consistent incentive package should be implemented which may include fiscal measures (such as rationalization of para tariffs, elimination of non-tariff barriers), financial measures (such as reducing interest rates, access to financing), and institutional measures (such as enhancement of competitiveness through capacity building). It is true that FDI follows domestic investment, and if the level of domestic investment is low, it will not help FDI to rise at the desired level. Thus, to boost foreign investors confidence and encourage them to invest in Bangladesh, the domestic investment rate, which is closely related to improvement of the business environment and of economic governance, should be increased. Simply providing incentive packages and liberalization measures will not attract FDI, nor has FDI always proved to have a positive impact on the economic growth of the country. Last but not the least; good governance is crucial to ensuring increased flow of FDI and thereby sustaining pro-poor growth. But policy alone is not sufficient to attract the handsome flow of FDI. We have to overcome the aforesaid impediments towards the inflow of FDI in Bangladesh. If it is possible, definitely Bangladesh would be able to attract a lions share of FDI among South Asian regions and thereby achieve its target of higher economic growth and poverty alleviation.

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