Fdi in bangladesh problems & prospects

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The issue of Foreign Direct Investment (FDI) has been receiving phenomenal attention from many governments. Bangladesh is not lagging behind from it. Economic development for the developing countries like Bangladesh is largely dependent on FDI. The major challenges for the host country are to ensure an eye-catching and conducive investment climate to foreign investors for FDI inflow. In recent years, Bangladesh has been devoting efforts for attracting FDI offering a lot of lucrative incentives and benefits. Though attempts taken to increase FDI inflow, the result achieved is not appreciable enough for Bangladesh. This term paper will portray the FDI inflow since 1995 and finds out causes and reasons of low-inflow based on data available in web. Here different indices have been shown graphically which have substantial impact on investment decision of foreign investors. Recent indices are illustrated and briefly analyzed here collected from Doing Business Report 2011, Human Development Report 2010, Bangladesh Economic Review 2011, Major economic indicators: monthly update (volume 06/2010), Bangladesh Bank and Global Competitiveness Report by Center for Policy Dialogue. Export data and information on EPZs have also been stated here importantly. Incentives for foreign investors offered by Bangladesh Government and competitive advantages of doing business in Bangladesh are two very important parts stated in this paper. It also finds out the impediments and highlighted prospects for FDI in Bangladesh and provides some recommendations for its enhancements.

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Fdi in bangladesh problems & prospects

  1. 1. Welcome to the Presentation onFDI in Bangladesh: Problems & Prospects
  2. 2. Prepared for: Dr. Khondoker Bazlul Hoque ProfessorDepartment of International Business University of Dhaka Prepared by: MD. Mushfiqur Rahman Roll: 05 BBA 2nd BatchDepartment of International Business University of Dhaka
  3. 3. ECONOMY OVERVIEW GDP total: $100.00 bn (at current prices 2010-11) GDP per capita: $664 (at current prices 2010-11) GDP growth rate (%): 6.0 (at constant prices 2009-10) Total exports: $16.20 bn (2009-10) Total imports: $23.74 bn (2009-10) Total FDI: $0.913 bn (2010) Forex reserves: $10.700 bn (Nov 2010) Currency: BDT (1 BDT=$0.01438) (avg 2009-10)
  4. 4. GDP AND GNI RELATED DATA OF LAST FIVEFISCAL YEARS:GDP data 2006-07 2007-08 2008-09 2009-10 2010-11 (p*)GDP (bn taka) 4,724.77 5,458.22 6,147.95 6,943.20 7875.00GNI* (bn taka) 5,077.52 5,942.12 6,706.96 7,589.28 8528.22Per capita GDP 33607 38330 42628 47536 53236(in taka)Per capita GNI 36116 41728 46504 51959 57652(in taka)Per capita GDP 487 559 620 687 755(in US$)Per capita GNI 523 608 676 751 818(in US$) Table 1: GDP & GNI data of last five fiscal years. *P=provisional GNI=Gross National Income [Source: Bangladesh Economic Review-2011 (Bangla version), Ministry of Finance.]
  5. 5. MID-TERM MACROECONOMIC FORECAST 2011-2015 Real sector Projection 2011-12 2012-13 2013-14 2014-15 GDP at current 128.03 145.35 165.31 187.55 price (bn US$) GDP growth at 13.2 13.5 13.7 13.5 current price (%) GDP growth at 7.2 7.6 8.0 8.0 constant price (%) Inflation (%) 6.3 6.1 6.0 6.0 GDP deflator (%) 5.6 5.5 5.3 5.0 Total investment 28.4 30.0 31.6 32.0 (% GDP)
  6. 6. GDP at current price (bn US$) 54.5 43.5 32.5 GDP at current price (bn US$) 21.5 10.5 0 2011-12 2012-13 2013-14 2014-15 FIGURE 3: LINE CHARTS SHOWING PROJECTED GDP AT CURRENT PRICE COMPARISONS OVER YEARS.
  7. 7. 35302520 GDP growth at current price (%) GDP growth at constant price (%) Inflation (%)15 GDP deflator (%) Total investment (% GDP)10 5 0 2011-12 2012-13 2013-14 2014-15FIGURE 4: LINE CHARTS SHOWING PROJECTED GDP GROWTH AT CURRENT PRICE(%), GDP GROWTH AT CONSTANT PRICE (%), INFLATION (%), GDP DEFLATOR (%) &TOTAL INVESTMENT (% GDP) COMPARISONS OVER YEARS.
  8. 8. FIGURE 5: PIE CHART SHOWING SECTOR WISE CONTRIBUTION TO GDP
  9. 9. WORLD ECONOMY AND BANGLADESHEconomy growth rate (%) 2007 2008 2009 Projections 2010 2011 2015Bangladesh 6.3 6.0 5.4 5.4 5.9 6.2Developing Asian economies 10.6 7.9 6.6 8.7 8.7 8.5Emerging economies and developing 6.5 9.2 5.2 6.2 4.7 3.8economiesDeveloped economies 0.2 0.5 0.4 0.4 0.3 0.1World 5.2 3.0 -0.6 4.2 4.3 4.6
  10. 10. YEAR WISE INVESTMENT Investment in USD million 3500 3000 2500 2000 Investment in USD million 1500 1000 500 0 199019911992199319941995199619971998199920002001200220032004200520062007200820092010Figure 12: Line chart showing year wise Investment Inflow in USD million.
  11. 11. 25000 20000 15000 Employment opportunities (person) 10000 5000 0Figure 13: Bar chart showing year wise Employment opportunity from Investment Inflow.
  12. 12. KEY SECTORS: Agribusiness Ceramics Electronics Frozen Foods Garments and Textiles ICT and Business Services Leather and Leather Goods Life Sciences Light Engineering Power Industry
  13. 13. SECTOR WISE FOREIGN INVESTMENT (CY 1971- 2010) Agro Based Chemical Engineering Food & Allied Glass & Ceramics Printing Publishing & Packaging Tannery & Rubber Products Textile Services MiscellaneousFigure 14: Pie chart showing percentage of sector wise foreign Investment (CY1971-2010)
  14. 14. EPZ BENEFITS AND INCENTIVESThe following are just some of the special incentives offered to businesses located in an EPZ: 10 years tax holidays (5 years for new establishments commencing from 1st January 2012). Concessionary tax for five years, after the first ten. Duty and tax free exports from the zone. Intra and inter zone exporting and sub-contracting. Fully serviced plots. Readymade factory buildings. Available infrastructure facilities. Warehouses and bonded areas. Duty free import of machinery, raw materials, construction materials and spare parts. Sale of 10% finished product to domestic tariff area. Sale of 10% surplus raw material to domestic tariff area. Sale of 10% defective finished goods and domestic tariff area items. 100% backward linkage and accessories items are allowed to be sold in export oriented industries (deemed as exports). Sale of old/scrap machineries in domestic market. Business and administration support services. Customs clearances on site. Recreational amenities.
  15. 15. YEAR WISE INVESTMENT IN EPZS Investment(million US$)350300250200 Investment(million US$)150100 50 0 2006-07 2007-08 2008-09 2009-10 2010-11(April)
  16. 16. NO. OF INDUSTRIES IN EPZS 180 160 140 120 100 No. of Manufacturing Industries 80 Industries under implementation 60 40 20 0 Chittagong Dhaka Comilla Mongla Uttara Ishwardi Adamjee KarnaphuliFigure 17: Bar chart showing number of manufacturing industries and industries under implementations in EPZs.
  17. 17. SOME IMPORTANT INDICES FOR ATTRACTINGFDI : Doing Business Report Indices Human Development Report Indices Global Competitiveness Report Indices
  18. 18. DOING BUSINESS 2011
  19. 19. WHO IMPROVED THE MOST IN STARTING ABUSINESS? It’s a good indicator that Bangladesh is in number 9 among the countries which have improved significantly in starting a new business. These types of factors work as positive motivators to the foreign investors.
  20. 20. WHO MAKES REGISTERING PROPERTY EASY—AND WHO DOES NOT? Registering properties in Bangladesh is a long-tiring task, which can frustrate investors. So, in this sector Bangladesh has to concentrate very seriously to attract more FDI.
  21. 21. WHERE IS ENFORCING CONTRACTS EASY —ANDWHERE NOT? Another factor of concern is that enforcing contract is not easy rather situation is comparatively worse here. Steps should be taken to overcome situation and create positive impression among investors throughout the world.
  22. 22. GLOBAL COMPETITIVENESS INDEX
  23. 23. HDI VALUE ILLUSTRATION BY YEAR: HDI Value 0.50.45 0.40.35 0.30.25 HDI Value 0.20.15 0.10.05 0 1980 1990 1995 2000 2005 2009 2010
  24. 24. AVERAGE ANNUAL HDI GROWTH RATE(%) BYYEAR: Average annual HDI growth rate(%)2.05 21.95 1.9 Average annual HDI growth rate(%)1.85 1.81.75 1980-1990 1990-2010 2000-2010
  25. 25. FACTORS AFFECTING FDI Infrastructure Macroeconomic Environment Governance International integration Political stability Human resources Technology infrastructure
  26. 26. COMPETITIVE ADVANTAGES Language Social Stability Human Resources Natural Resources Location Market Access GSP Facility Cost of Business
  27. 27. IMPEDIMENTS OF FDI IN BANGLADESH Complicated Bureaucracy Political Unrest Corruption High Inefficiency Cost Absence of Autonomous Regulatory Bodies Differential Treatment Insufficient Power Supply Inconsistent Policy Implementation Tax Authority’s Discretion Lack of effective cooperation of Board of Investment (BOI) Legal Absurdity Disrupting Fiscal Policy Administrative coordination problem Time wasting customs processing
  28. 28. RECOMMENDATIONS Ensure of Good Governance Coordinated Government Agencies Dynamic and Independent Govt. Agencies Accountability and Transparency Developing Diplomatic Relation Devoting Efforts to Shift FDI Track Ensuring Power and Energy Political Reformation
  29. 29. THANK YOU

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