The flow of foreign direct investment (FDI) to Bangladesh declined marginally by 4.0 per cent in 2014 after three years’ of upswing.
Provisional statistics available with the Bangladesh Bank revealed that the FDI inflow last year stood at $1.53 billion (153 crore), down from around $1.60 billion in 2013.
The fall in FDI last year reflects flagging confidence of foreign investors even in a year which passed off with almost no political instability.
Throughout the year after the national election on January 5, 2014, there was little disruption in economic and social life following 2013 that saw full-scale political violence.
Professor Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD), attributed the decline in FDI flow to the negative effect of political disturbances that took place in the second half of 2013.
“Many of the potential investors, who signed memorandums of understanding for investing in the country in 2012 and 2013 didn’t come later,” he told the FE. “The political instability makes them shaky.”
Professor Mustafiz, however, did not view the decline as a big setback. “What happened actually is we have lost the momentum the FDI flow gathered in the previous years,” he added.
The FDI flow crossed the $1.0 billion level for the first time in 2011 and stood at $1.13 billion. In next two years, the flow surged to around $1.3 billion and $1.6 billion respectively.
Aftab-ul-Islam, president of American Chamber of Commerce (Amchem) in Bangladesh, blamed the absence of a policy to prioritise FDI for the situation.
“2014 was a stable year and the country’s economic indicators were good to attract foreign investment. But our policy makers didn’t pay due attention to it,” he told the FE.
Referring to the current political turmoil, Mr. Aftab expressed his worry over the future of investment. “How can we expect an increase in FDI, when local investment is not taking place?” he questioned.
Analysis of the FDI component shows that around 50 per cent of the total inflow last year was reinvested earnings of the existing multinational corporations doing business in Bangladesh.
Less then 25 per cent of the total FDI was fresh injection of capital known as equity capital.
However, nine months’ (January-September, 2014) complete statistics on component, country and sector-specific FDI is available. Detailed statistics for the last quarter is yet to be finalised.
As statistics on the balance of payment for the first six months (July-December) of the current fiscal year (2014-15) has just been released, it shows $702 million FDI was recorded during the period.
Again the first six months (January-June) of 2014 saw the FDI inflow at $829.5 million.