S M Faiyaz Hossain: Foreign direct investment (FDI) can sustain and strengthen the balance of payments, it is crucial for addressing foreign currency deficits. FDI inflows provide a source of foreign money that may be used to pay for imports and external debt commitments, they can aid in the reduction of foreign exchange deficits during the shrinking era of Bangladesh Bank Reserve. BB data reveals that, in the face of a declining foreign reserve, net foreign direct investment (FDI) in Bangladesh fell to $670 million in the July-September quarter from $1.1 billion in the corresponding period of the previous year. The recommended FDI to GDP ratio for Bangladesh, as per economic experts is 2% which is currently way underneath.
Significant rise in FDI inflows were expected after Bangladesh’s Mega infrastructure development projects were completed, given the country’s substantial investment in these initiatives. Instead, there has been a decline in FDI inflows, which is aggravating the balance of payments issue. During this crucial quarter the nation was preparing for a new election, protests and turmoil were expected in Bangladesh by every prominent political expert. The drop in FDI suggests that this opportunity has been seized by other markets. Prevailing Unstable exchange rate in last six months is a major disadvantage for investors, for which new Monetary Policy will be the key.
Foreign investors often assess a nation based on its overall economic climate and ease of doing business rankings. Even though Bangladesh moved to 168 out of 190 countries in the World Bank’s 2020 ranking for ease of doing business, there are still challenges left to attract Foreign direct investors. Foreign investors that are already operating in Bangladesh frequently lament the bureaucratic bottlenecks that impede their ability to conduct business and secure necessary licenses. There are unstated miscellaneous expenses associated with infrastructure, legal requirements, policy, and procedure and corruption that significantly raise operating costs. The World Bank estimates that it takes a new firm in Bangladesh 150.2 days to receive an electrical connection. 2023 was one of the worst years for Bangladesh’s energy crisis since 2013, marked by widespread blackouts and shortages of coal and gasoline.
Along with policy changes and incentives meant to foster a competitive environment for FDI, extra promotional efforts including as investment summits, road shows, and so on are required to advocate investment and brand a politically stable Bangladesh to attract investors. To support improved investment standards, the government must increase the quality of promotional efforts and interact with top-tier public relations companies and international business consultancy firms in both traditional and non-traditional markets.
The Writer: S M Faiyaz Hossain is a Graduate Research Student at University of Tasmania. He is also a Former Senior Executive at a 100% Export Oriented Manufacturing Industry. He can be reached at smfhr@utas.edu.au.
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