Bangla Desh flag Bangla Desh: Invertir a Bangla Desh

Inversió estrangera directa (IED) a Bangla Desh

FDI in Figures

Global foreign direct investment (FDI) flows showed a strong rebound in 2021, up 77% to an estimated USD 1.65 trillion, from 929 billion in 2020, surpassing their pre-COVID19 level. FDI flows in developing countries increased by 30% but almost three quarters of the total increase in global FDI (USD 500 billion) was recorder in developed economies, with developing economies showing a more modest recovery growth. FDI inflows to South Asia dropped by more than 24% in 2021 to 54 billion USD (UNCTAD, January 2022).

According to the UNCTAD’s World Investment Report 2021, FDI inflows to Bangladesh declined by 11 per cent to USD 2.6 billion in 2020 (compared to USD 2.9 billion in 2019). The decline reflects the general economic crisis triggered by the Covid-19 pandemic. The total stock of FDI was estimated at $19.4 billion in 2020 by UNCTAD. In Bangladesh, FDI inflows will take a long time to recover as investment commitments in this country have remained weak. For instance, greenfield investment projects announced in 2020, an indication of FDI trends in the coming years, have contracted significantly by -87 per cent in Bangladesh. This decline is driven by weak investment interest in garment production, one of the major export industries and recipients of FDI in these countries. Investment and garment production struggled badly in 2020, with no sign of recovery in early 2021. Garment factories in Bangladesh had to deal with about USD 3 billion of cancelled export orders in 2020.

The net inflow of foreign direct investment (FDI) into Bangladesh declined by around 4.74 per cent in the first half 2021, according to statistics released by Bangladesh Bank that showed that the net inflow of FDI stood at 1.13 billion USD in the January-June period while it was 1.18 billion USD in the same period in 2020 (The Business Standard, 2022). Notwithstanding, the export-oriented clothing industry is still an important recipient of FDI, with major investors from the Republic of Korea, Hong Kong and China. The main investors in the country are China, South Korea, India, Egypt, the United Kingdom, the United Arab Emirates and Malaysia.

Despite steady economic growth in the country over the past decade, foreign direct investment (FDI) has been comparatively low in Bangladesh compared to regional peers. The country ranked 168th out of 190 economies in the last World Bank's 2020 Doing Business ranking, rising eight spots compared to last year. Bangladesh suffers from a negative image: the country is seen as being extremely poor, under-developed, subject to devastating natural disasters and socio-political instability. However, the country has the advantage of being in a strategic geographical position between South and Southeast Asia. In addition, its domestic consumption potential and the wealth of its natural resources make the country a good candidate for investment.  The government promotes private sector-led growth, foreign currency is abundant due to remittances, and the central bank respects the transferability of foreign currency. A number of more developed Asian countries have outsourced their factory production, mainly textile, to the country. Moreover, in 2020, the government simplified a set of laws as part of its efforts to reduce barriers to foreign investment.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 2,8742,5642,896
FDI Stock (million USD) 17,78519,39521,582
Number of Greenfield Investments* 181615
Value of Greenfield Investments (million USD) 5,762795995

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Bangladesh South Asia United States Germany
Index of Transaction Transparency* 6.0 5.8 7.0 5.0
Index of Manager’s Responsibility** 7.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 7.0 7.4 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Bangladesh

Strong Points

The main assets of Bangladesh's economy are:

  • Good macroeconomic stability characterised by a high growth rate of 8.2% in 2019 and 3.8% in 2020 (IMF) as well as a satisfactory level of the public debt of 39.6% in 2020 (IMF)
  • An open and diverse economy
  • A very low-cost workforce
  • A strategic geographic position as a gateway to countries in the Asia-Pacific region
  • A strategic and competitive position in the value chain of the global economy
  • An economic and legislative environment globally favourable to business
  • Favourable biodiversity and weather conditions
Weak Points

The main obstacles to attracting investment include:

  • A business environment complicated by the country's weak infrastructure, burdensome bureaucracy, high risk of corruption, lack of transparency and the slow pace of the judicial system
  • Exports that are not sufficiently diversified and highly dependent on the textile sector
  • Fragile political stability threatened by recurrent social movements;
  • Weakness of the financial sector
  • Vulnerability to natural disasters (cyclones, severe floods) that result in substantial income losses
  • An economy dependent on the garment industry and characterised by a weak per capita income
Government Measures to Motivate or Restrict FDI
The Bangladesh government is actively seeking to attract foreign investment, particularly in the areas of energy and infrastructure. Many incentives have been implemented through industrial policy, growth strategy through exports and a public-private partnership (PPP) program launched in 2009. Although there is little discrimination against foreign investors, the government often favours local industries. For example, the importation of drugs that compete with locally manufactured pharmaceuticals is tightly controlled, and local majority ownership in new shipping companies is required.

In order to mitigate the risks of being too dependent on industrial production in the textile sector (over 86% of Bangladesh's exports earnings come from textiles according to Bangladesh Textile Mills Association's latest data available), the government is seeking to develop certain sectors by granting companies involved in these areas with incentives and favourable conditions. These include agricultural and agro-industrial products, light engineering, leather footwear and leather goods, pharmaceuticals, software and ICT products, as well as shipbuilding.

In recent years, the government has also launched numerous infrastructure projects: the project to build a road and rail bridge over the Padma River and the Dhaka metro, for example.

Bilateral investment conventions signed by Bangladesh
Bangladesh has signed 30 bilateral investment agreements. For more details, visit the site of the UNCTAD.

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Actualitzacions: November 2022

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