The document summarizes the current state of foreign direct investment (FDI) in Bangladesh in 2016. It discusses that Bangladesh saw record FDI inflows of $2.235 billion in 2015, a 44% increase over 2014. Several factors that attract investors to Bangladesh are highlighted, such as a large, young and educated workforce, increasing trade integration and urbanization, and a favorable investment environment and economic growth. Upcoming challenges for FDI in 2017 include a potential decline in global FDI flows. Overall, the document provides an overview of recent FDI trends and the factors driving investment in Bangladesh.

1. rifat ahsan
[COMPANY NAME] [Company address]
Foreign Direct Investment
situation in Bangladesh in 2016
Challenges of FDI in 2017

2. Introduction
As a developing country of third world, Foreign Direct Investment (FDI) plays an immense role
building up the country’s economic and infrastructure development of Bangladesh. The recent FDI
situation just touched a remarkable sign in the history of the country. In South Asia, Bangladesh
is ahead of all countries except India which was the 10th largest FDI recipient country in the world
in 2015, receiving $ 44 billion. Bangladesh has witnessed the highest growth among the South
Asian countries due to stable and favorable investment atmosphere prevailed in the country last
year. This report mainly focuses on the current situation of FDI in Bangladesh and upcoming
challenges it would face.

3. Current Macroeconomic condition of Bangladesh
GDP Growth:
The government has fixed 7.20 percent GDP growth target for FY17. In FY16, target growth rate
was 7 percent which is 0.2 percent less than the FY17 GDP growth target. Achieved growth in
FY16 (provisional) is 7.05%, an appreciable accomplishment considering the sluggish pace of
recovery in global economy. However, during this time the number of factors such as the
favorable political atmosphere, private sector credit growth (stood at 15.2 percent which
exceeded the target as of March 2016), garments export growth (increased significantly) and
private consumption (increased due to the salary increase of government employees) will help to
achieve growth target.
Revenue Collection:
The government has set the total revenue target at Tk.242,752 crore (tax and non-tax revenue)
for the FY17, which is around 12.4 percent of the total GDP. Projected deficit is Tk.97, 853
crores. Historically, the government has never achieved its revenue target and the dispersion is
rising in last three budgets. Only in FY12 the target revenue was achieved. The average deviation
of actual revenue from target revenue for the last five fiscal years (FY12-FY16) stands at 8.9
percent.
6.46 6.52
6.01 6.06
6.55
7.05
6.70
7.00
7.20 7.20 7.30
7.00
7.20
5
5.5
6
6.5
7
7.5
FY'11 FY'12 FY'13 FY'14 FY'15 FY'16 (P) FY'17
Figure 7: GDP Growth
Actual Target
Source:Ministry ofFinance

4. Government Expenditure:
Total expenditure has been estimated to be Tk.328, 624 crores in the proposed budget for FY17
which is 16.8 percent of total GDP and 27.9 percent higher than the revised budget for FY16.
Among total expenditures, the government has estimated Tk.117, 027 crores for development
expenditures which are around 6 percent of GDP and 22 percent higher than that of revised
budget FY16. On the other hand, the size of proposed ADP allocation is Tk.110, 700 crores
which is 5.6 percent of total GDP.
Foreign Grants / Aid:
The total foreign aid disbursements during July to April, FY16 increased by USD0.19 billion or
7.82 percent and stood at USD2.68 billion compared with USD2.48 billion during July to April,
FY15.
The net receipts of foreign aid were also higher and stood at USD1.94 billion during July to
April, FY16 compared with the same period of the preceding year.
Remittance:
Remittance receipts decreased by 3.05 percent and stood at USD13.45 billion during
July to May, FY16 compared with the same period of the previous year. Remittance
receipts decreased sharply by 8.79 percent (y-o-y) and stood at USD1.21 billion in May
2016 compared to the same month of the previous year. While remittance receipts
increased by 1.22 percent in May 2016 compared with that of April 2016.
0.00
1000.00
2000.00
3000.00
4000.00
5000.00
6000.00
Budget
FY'17
Budget
Revised
FY'16
Actual
FY'16 (Up
to April)
Budget
Revised
FY'15
Actual
FY'15
Figure 13: Yearly Foreign Aid (in crore Tk.)
Foreign Aid (Yearly)
Source: Ministryof Finance

5. Export and Import:
The performance of external sector of the economy during the first ten months of the current
fiscal year has been unsatisfactory due to sluggish growth in the export which led to the negative
trade balance as the previous year. So, it is easy to assume from the past data that the
performance might follow the same trend as now. Export earnings increased by 8.95 percent
during July-May, 2015-16 compared to the same period of the preceding year and stood at
USD30.67 billion.
Industrial term loans:
The disbursement of total industrial term loans during January to March 2016 increased by 36.81
percent and stood at Tk.18, 264.60 crores as compared to Tk.13,350.62 crore during January to
March 2015. On the other hand, the recovery of industrial term loans increased by 18.21 percent
and stood at Tk.12,436.75 crore during January to March 2016 against Tk.10,520.96 crore during
the same period of the previous fiscal year. The outstanding amount of industrial term loans at the
end of March 2016 stood at Tk.142,145.66 crore which is higher by 23.06 percent compared to
last year.
Inflation:
The rate of inflation has been declining since the beginning of the current fiscal year. The
twelve-month average general inflation moderated to 5.98 percent in May 2016 from 6.04
percent in April 2016 and 6.46 percent for the same period in FY15. The average food inflation
fell to 5.07 percent in May 2016 compared with 5.27 percent in April 2016 but at the same
period in FY15, it was recorded 6.81 percent or 1.74 percent higher than May 2016.

6. Reasons Behind choosing Bangladesh for Investment place
• Faster growth in industry (overtaken agriculture)
• Developing infrastructure – significant target for infra investment
• Export springboard – access to all the large markets of world
• High demand for technology transfer
• Continued business environment reforms on global investors spotlight
• Strong local market and growth
• Competitive utility cost
Current FDI situation in Bangladesh
Bangladesh has witnessed the highest foreign direct investment (FDI) in last year exceeding $ 2
billion mark, reports the BSS. The World Investment Report 2016, released today by the United
Nations Conference on Trade and Development (UNCTAD) showed that Bangladesh registered
44 percent growth in receiving record breaking FDI of $ 2.235 billion in 2015.The FDI receipt was
44.10 percent or $ 684 million higher compared to that in 2014.In terms of gross FDI inflows, the
amount stands at $ 2699.05 million which was 31.08 percent higher than in previous year to
$ 2058.98 million.
In South Asia, Bangladesh is ahead of all countries except India which was the 10th largest FDI
recipient country in the world in 2015, receiving $ 44 billion. Inflows to Pakistan and Sri Lanka
declined to $ 865 million and $ 681 million respectively while In Nepal, FDI inflows rose by 74
percent to $51 million last year. According to the report, country's power, gas and petroleum sector
received highest FDI of $ 574 million followed by textile and wearing $ 443 million,
telecommunication $ 255 million and banking $ 310 million. In 2014,the FDI receipt of power,
gas and petroleum sector was only $ 50 million.

7. The trend of reinvested earnings increased in 2015 by 15.74 percent which signified the confidence
of the investors to come in Bangladesh. Recovery in FDI was strong in 2015. Global FDI flows
jumped by 38 percent to $ 1.76 trillion, highest since the global economic and finance crisis of
2008-09. The report said a surge in cross-border mergers and acquisitions (M&As) to $ 721 billion,
from $ 432 billion in 2014, was the principal factor behind the global rebound.
Besides, the FDI outflows from Bangladesh rose slightly to $46 million last year from $44 million
the year ago. This year, the UNCTAD's report looks into global financial flows against the
background of stalling global growth, falling commodity prices and geopolitical tensions. The
report said global FDI flows are expected to decline by 10-15 percent in 2016. Over the medium
term, flows are projected to resume growth in 2017 and to surpass $1.8 trillion in 2018.

8. Attractive feature that allure the investors to invest in Bangladesh
Large educated and motivated youth
 57% of the population is under 25 years’ old
 High literacy rate (72%) among youths aged 15-24
 Inspired young, hungry for work and growth
 2 million youth entering in job market each year
Increasing trade integration
 Labor cost advantage (less than half the average of other Asian economies)
 Already the second largest garments exporter globally with other sectors coming up such
as IT outsourcing, ceramics, light engineering, etc.
 Progress on SAFTA, BIMSTEC talks
Increasing urbanization
 Urbanization rate is fast; will double over the next four
 decades
 rapid industrialization, infrastructure development and
 demographic shifts
 Dhaka will be the world’s 5th largest city with a
 population of 19 million by 2019 (UN forecasts
Investment Environment in Bangladesh
 Bangladesh is one of the top exporters of readymade garments to USA &
Europe
 Risk factors for FDI are the minimum in Bangladesh
 Bangladesh never posted negative economic growth during the past
30 years
 Bangladesh has ‘never defaulted in its debt repayments, nor asked for its
rescheduling
 Bangladesh has an open, market based economy led by a vibrant and
innovative private sector which provides the main stimulus to its growth
 Bangladesh is a homogeneous country with no religious, ethnic or other
forms of cultural conflicts
 Bangladesh is one of the largest contributors to UN peacekeeping

9. FDI in Bangladesh On the View of Foreign Reports at A Glance:
 Citi Investment Research & Analysis termed Bangladesh, China, Egypt,
India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and
Vietnam have the most promising (per capita) growth prospects.
 Goldman Sachs branded as Bangladesh is in ‘Next 11’ list after the BRIC
nations
 The International Monetary Fund (IMF) commented on the economy of
Bangladesh as Resilient export and remittance flows have bolstered growth
and external stability
 The Wall Street Journal (WSJ) dismissed the previous branding of
Bangladesh saying, 'Basket Case' No More - with a higher growth rate, a
lower birth rate, and a more internationally competitive economy.
 JP Morgan Chase commented Bangladesh The country ranks fourth in
growth in economically active population.
 Morgan Stanley has commented Bangladesh is at the very early stages of an
investment boom
 New York Times has termed Bangladesh as “an unlikely corner of Asia,
strong promise of growth”
 An HSBC report (2012), titled ‘TheWorld in 2050’, listed Bangladesh as one
of the top 7 countries expected to deliver the fastest growth enrooted to 2050.
 “World Economic Situation and Prospects2013” of United Nations
termed Bangladesh as “stronggrowth performances continued”.
 The Global Competitive Report 2013” of World Economic Forum (WEF)
reported that Bangladesh has elevated to 8 stages point this year
 McKinsey & Co. in its latest survey Viewed "Bangladesh is still No.1,”as
the global sourcing hub for RMG

10. Sector wise opportunities of investment

11. Investment Controlled Industries (consideredas strategic investment. Free to
invest but requires pre-approval from specific regulatoryagencies)
1. Fishing in the deep sea
2. Bank/financial institution in the private sector
3. Insurance Company in the private sector
4. Generation, supply and distribution of power in the private sector
5. Exploration extraction and supply of Natural gas/oil
6. Exploration, extraction and supply of coal
7. Exploration, extraction and supply of other mineral resources
8. Large-scale infrastructural project (e.g. flyover, elevated expressway, monorail,
economic zone, inland container depot/container freight station)
FDI POLICY of Bangladesh
The National Industrial Policy, 2010 of Bangladesh recognizes:
1. Private sector is treated as the engine of growth
2. No upper ceiling for foreign investors or performance requirements
3. 100% foreign equity is allowed
4. All industrial sectors are open for foreign investors for investment
5. except 4 reserve sectors for the government.
6. Equal treatment for both local and foreign investment
7. Export oriented industries are given top priority

12. FDI Policy Framework
Fiscal Incentives & Financial & Other Incentives
Fiscal Incentives Financial & Other Incentives
• Corporate tax holiday: 5 to 7 years
for selectedsectorsand areas
• Tax holiday for infrastructure
investment: up to 10 years
• Accelerateddepreciationon costof
machinery for new industries in lieu
of tax holiday
• Avoidance of double taxation under
bilateral tax convention
• Tariff concessions onimport of
capital machinery
• Tariff concessions onimport of raw
materials of the export oriented
industries
• Bonded warehousing facility
• Cashincentives and export
subsidies ranging from 5% to 20%
on the FOB value of selected
products
• Funds for export promotion, export
credit guarantee scheme, permission
for domestic sales up to 20% by
export-oriented company’s outside
EPZ.
• Remittance of royalty, technical
know-how and technical assistance
fees
• Citizenship by investing a
minimum of US$ 5,00,000
• Permanent resident permits on
investing US$ 75,000 And many
more.

13. Cash Incentives For FY 16-17
Sector Wise Incentives
• 0% and 1% customs duty rate is in force for the import of industrial capital
machinery and spare parts.
• Special concessionarycustoms duty rate for import of raw materials for Ship-
Building Industry, Pharmaceuticals Industry, Textile Industry, Toys
Manufacturing Industry, Telecommunication Industry, Handloom Industry
• Raw materials, machinery and spare parts of poultry and dairy farms, Solar
Panel Manufacturing Plants are exempted from customs duty
• Import of raw materials by Generator Producing and Assembling Industry is
exempted from customs duty

14. • Raw materials, machinery and spare parts imported by power generation
plants are exempted from customs duty
• raw materials, machinery and spare parts imported by Oil and Gas
exploration and extraction companies, and also by CNG filling station are
exemptions from customs duty
Medical equipment’s and medication materials are exempted from customs duty
• Technical grades imported by the pharmaceutical raw materials producing
industries are exempted from customs duty
• Specific utility goods imported by textile industry are exempted from customs
Duty
• Import of De-inking chemicals and waste paper by newsprint paper
manufacturing industries is exempted from customs duty
• Special concessionarycustoms duty rate is allowed for the machineries and
materials imported for the construction of residential hotels for the development of
tourism sector
• Special concessionarycustoms duty rate is in force for the import of chemical
materials by the leather industries
• Imports undertaken by 100% export-oriented industries are exempted from
customs duty

15. Problems of ForeignTrade in Bangladesh
Legal Constraints: The first and the foremost problems in foreign exchange operations arise
due to legal constraints. Since foreign trade indicates exchange of goods and services between
two countries and each country has its own laws, rules and regulations, which are different from
other countries, so problems arise in foreign exchange operations. For example, an exporter of
Bangladesh receives an L/C from the importer of England in which the goods will be shipped in
American ship and delivered in China. In this case according to which country’s law the dispute,
if arise, will be settled, is a problem
Geographical Location: From the geographical viewpoint, Bangladesh is not located in such a
place to trade vigorously. We have encompassed by India from three sides. And India enjoys a
strong industrial base compared to us. Due to economy of scale India can produce the same
quality products at a cheaper price. So this is a problem in foreign exchange operation
Limited Skilled Manpower: Performing the foreign exchange activities is a very tough job
because it involves proper communication with the client, various banks of the country as well as
abroad. A single error may cost thousands of dollars

16. Limited Export Base: Bangladesh has a very limited export base. It does not have the sufficient
supply of raw materials needed to use in the production process. If Bangladesh has the local raw
materials, it would be able to use them in the production process. But unfortunately the country
has to import the raw materials required in various production processes
Political Instability: Another major problem to conduct foreign Exchange business is the
political instability of a country, as the political stability is essential for smooth foreign exchange
operations.
Absence of Policy, Rules and Regulations of Foreign Exchange Operations as per Islamic
Shariah: There is no international Policy, Rules and Regulations of Islamic Banking Regarding
Foreign Exchange Operations, so the Islami Banks has to face problems in foreign exchange
operations
Factor affecting FDI
growth
Political
culture
Bureaucracy
Inadequate
infrastructure
Sloth
information
flow
Sluggish
administrative
bodies
Corruption
Powercrisis
Inefficient
port handling

17. Lack of Stable Policy: Policy and structure are an integral part of any kind of operation. It will
suggest us how to perform the operation. But if the policy continues to change frequently it is not
easy to plan and perform also. With the changes of Government new policies are formed, which
is very difficult to cope with. It is hard for the business organizations and businessmen to settle
themselves. They are always deviated from the old track, and have to run after the new track. This
is another problem of our country
Lack of communication and transportation facilities: The Lack of communication and
transportation facilities are more in Bangladesh as a result the foreign investor cannot establish
their business.

18. MAIN ISSUES TO OVERCOME
1. Strong political leadership
2. Ensuring utilities supplies
3. Reducing corruption
4. Strengthening diplomatic relationship
5. Arranging Trade Fairs
6. Infrastructural development
7. Political Stability
8. Reducing Bureaucratic Hassles
Providing One Stop Investment Facility Services to the Investors:
One stop investment services like Trade License, TIN, VAT registration, Environment
Clearance, Boiler Clearance, Joint Stock Registration, Export / Import Registration, Copyright,
Patents, Trade Marks, Industrial Designs etc. has to be offered digitally to avoid corruption and
delay in decision making.
Post investment services:
package of thousand days post investment services could be offered for the foreign investors to
monitor and guide sustainable investment.

19. 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
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