Post on 07-May-2015
FDI in Bangladesh
TREND AND IMPACT ANALYSIS OF FOREIGN DIRECT INVESTMENT:A CASE OF BANGLADESH
Student presentation in the module INTMAN
Winter semester 2012/2013
Rifat Ibne Jamal
10/01/2013 1/15
FDI in Bangladesh
Introduction
Why is today’s Presentation important?
• Bangladesh - a potential FDI destination with interesting developing scenario
• A scope for matching theoretical knowledge
Objective/Learning Target
• To give audience a bird’s eye view about FDI in Bangladesh
• To generate discussion:
in order to explain the impact of FDI trend in light of theoretical knowledge of
Spillover Effect
To brainstorm furnishing any suitable recommendation that might be helpful in
future 2/15
3/15
Outline
Key Economic Indicators
Incentives Offered for the Foreign Investors
FDI Trend –Bird’s Eye Views
Components of FDI inflow
Export Processing Zone (EPZ)
Sectors for Prospective FDI
FDI Inflows by sectors
Factor Affecting FDI Growth
Spill over Effect of FDI
FDI in Bangladesh
4/15
FDI in Bangladesh
Location of Bangladesh
(source: BOI,BD)
5/15
Key Economic Indicators
GDP Growth Rate- 6.3% ( 2011) GDP Per Capita Income- 772 USD (2011-12) Inflation Rate- 7.41% (Nov, 2012) Investment Contribution to GDP- 19.3% ( July 2011-May
2012) FDI- 1136.38 Million (Jan-Dec 2011), 462.77 million
(Jan-June 2012) Export- 24.287Billion (2011-12) Import- 35.44 Billion (2011-2012)
Source: BOI
FDI in Bangladesh
6/15
FDI in Bangladesh
Incentives Offered for the Foreign Investors
Tax Exemptions
Generally 5 to 7 years.
For power generation exemption is
allowed for 15 years
Double taxation can be avoided on the basis of
bilateral agreements.
Duty
No import duty for export oriented industry
For other industry it s @ 5% ad valorem
Remittance and Exit
Full repatriation of invested capital, profit
and dividend
Wind up on investment either through a
decision of the AGM or EGM
Repatriation of the sales proceeds after securing
proper authorization from the Central Bank
Export Processing Zone (EPZ)
Four EPZ so far
Directly supervised by Prime ministers office
Specially allocated for FDI of manufacturing
sectors
7/15
UnemployedIn thousends
FDI in Bangladesh
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment.
FDI inflow of Bangladesh (1996-2010)
8/15
UnemployedIn thousends
FDI in Bangladesh
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment.
GDP Growth in Different Years(1996-2010)
9/15
UnemployedIn thousends
FDI in Bangladesh
Source:Bangladesh Economic Update ,Vol. 3, No. 2, February 2012
FDI Trends as Percentage of GDP
10/15
UnemployedIn thousends
FDI in Bangladesh
Source: Bangladesh Economic Update ,Vol. 3, No. 2, February 2012
FDI Inflows (in million USD) by components in Bangladesh during 1996-2010
11/15
UnemployedIn thousends
FDI in Bangladesh
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment.
Export Processing Zone (EPZ)
- export oriented industrial enclaves
- administered by Bangladesh Export Processing Zones Authority (BEPZA)
- provide the infrastructures and administrative facilities -support services for a wide variety of enterprises
- primary objective is to provide special areas for congenial investment climate, and location free from cumbersome procedures
- So far 8 EPZs
- Investors from 32 different countries
12/15
UnemployedIn thousends
FDI in Bangladesh
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment.
Overhead Costs- EPZ
Cheap Utility Services : Water Supply : Tariff : 22.43 euro cents / cu-m.
Gas Supply : Tariff : 6.45 euro cents / cu-m.
Power Supply : Tariff : 6.11 euro cents / kwh.
• Good ranking in FDI magazine by CTG EPZ (2010/11) among 200 out of 700 global economic zones
-cost effectiveness category (3rd position)
-Best economic potentials (4th position)
•
13/15
UnemployedIn thousends
FDI in Bangladesh
Source:
FDI Inflows by EPZ and non EPZ area in Bangladesh
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment.
14/15
Sectors for Prospective FDI
• Textile
• Frozen Foods
• Leather
• Agro-based Industry
• Information Technology
• Power and renewable energy
FDI in Bangladesh
15/15
UnemployedIn thousends
FDI in Bangladesh
Source:
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment.
FDI Inflows (in million USD) by sectors in Bangladesh during 1996-2010
16/15
UnemployedIn thousends
FDI in Bangladesh
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment.
FDI Inflows (in million USD) by sectors in Bangladesh during 1996-2000.
17/15
UnemployedIn thousends
FDI in Bangladesh
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment.
FDI Inflows (in million USD) by sectors in Bangladesh during 2001-2005.
18/15
UnemployedIn thousends
FDI in BD
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment.
FDI Inflows (in million USD) by sectors in Bangladesh during 2006-2010
19/15
UnemployedIn thousends
FDI in Bangladesh
Source: Board of Investment,Bangladesh.
The country-wise FDI inflows in Bangladesh from top 10 investing countries during 1996-2010
[
20/15
UnemployedIn thousends
FDI in Bangladesh
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment
The country-wise FDI inflows in Bangladesh during 1996-2000
21/15
UnemployedIn thousends
FDI in Bangladesh
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment
The country-wise FDI inflows (in million USD) in Bangladesh during 2001-2005
22/15
UnemployedIn thousends
FDI in Bangladesh
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010), Board of Investment
The country-wise FDI inflows (in million USD) in Bangladesh during 2006-2010
23/[Enter sum]
Trend of GDP, GDP Growth, FDII/GDP and FDII/GDP, Export, Export/GDP, FDI Inflow and Domestic investment over time
Source of data: Bangladesh Board of Investment (BOI)
24/15
FDI in Bangladesh
Source:BOI,Bangladesh
25/15
FDI in Bangladesh
Political culture
Bureaucracy
Inadequate infrastructure
Sloth information flow
Sluggish administrative
bodies
Corruption
Power crisis
Inefficient port handling
Factor Affecting FDI Growth
26/15
FDI in Bangladesh
Ranking of Bangladesh:Doing Business
Overall ranking: 107 out of 183 countries (2010)
Subcategories:
Starting a business: 79 out of 183 countriesRegistering property: 172 out of 183 countriesPaying Taxes: 93 out of 183 countriesGetting credit: 72 out of 183 countriesProtecting investors: 20 out of 183 countriesTrading across border: 112 out of 183 countriesEnforcing Contracts: 179 out of 183 countries
27/15
FDI in Bangladesh
Spill over Effect of FDI
Demonstration effect : by way of imitating industry-specific technology (food, cement )
Competitive effect: Cost reduction ( telecommunication) Scale economies, crowding out (textile and
garments) Via foreign trade
-Exports: reduction in foreign market entry costs by way of imitation or cooperation with foreign affiliates; ‘learning-by-exporting’(light engineering)
-Imports: import capital goods with embedded technology (telecommunication, cement, mining)
28/15
FDI in Bangladesh
Spill over Effect of FDI in Graph
Source: Stephan, J. (2012), The Technological Role of Foreign Direct Investments in Central East Europe, forthcoming
FDI in Bangladesh
Sources:
• http://www.doingbusiness.org/rankings• http://www.bangladesh.gov.bd/• http://boi.gov.bd/• https://www.cia.gov/library/publications/the-world-factbook/geos/
bg.html• Bangladesh Economic Update ,Vol. 3, No. 2, February 2012• http://www.populstat.info/Asia/bangladc.htm• http://www.fdiintelligence.com/• Rahman,A.,(2012): Foreign Direct Investment in Bangladesh,
Prospects And Challenges, And Its Impact On Economy • Mottaleb, K.A., 2007, Determinants of Foreign Direct Investment and
Its Impact on Economic Growth in Developing Countries, MPRA Paper 9457, University Library of Munich
29/15
FDI in Bangladesh
Research/Discussion Question
Considering yourself as CEO of an MNC, if you choose any preferable sector for entering in the market of Bangladesh through FDI mode,
then how do you justify your motivation of strategy from the perspective of OLI paradigm?
30/15
31/15
Thank you for your attention!