Bangladesh fares poorly attracting ‘green’ FDI



| Updated:
August 25, 2022 4:02:42 p.m.


Bangladesh has been considered one of the worst-placed countries to attract “new” foreign direct investment, as recorded in 2021, for factors including unharmonious regulations and unease over profit repatriation.

According to FDI’s Greenfield Performance Index on Global Ratings, Bangladesh scored 0.30 in the index in 2021, compared to top-performing Costa Rica with a score of 15.5 over the course of 2021. year under review.

Greenfield investing is a type of FDI in which a parent company sets up a subsidiary in a different country, building its operations from scratch. In addition to the construction of new production facilities, these projects may include the construction of new distribution centers, offices and housing.

The Greenfield Performance Index uses a methodology designed by UNCTAD for global FDI and applies it only to greenfield FDI, excluding mergers and acquisitions, intra-company loans and other forms of cross-border investment .

The 7th edition of the Greenfield FDI Performance Index, released in August, however, shows the score was 0.31 in 2020 for Bangladesh.

A score of 1.0 indicates that a country’s share of global greenfield inward FDI corresponds to its relative share of global GDP. A score above 1.0 indicates a larger share than indicated by its GDP and a score below 1.0 indicates a smaller share.

A number of studies conducted by different international development agencies show that such an influx of FDI can promote economic growth, develop human capital and create jobs by transferring management skills, knowledge and innovative technologies.

Prominent local economists, however, say that Bangladesh remains generally underperforming in attracting FDI due to unfavorable regulations, poor infrastructure and a lack of skilled labor.

“The hurdles are not new and have been spoken of many, many times, but there has been no improvement,” says Dr. Zahid Hussain, former senior economist at the World Bank.

He notes that there are some improvements in the relaxation of regulations. These are, however, in fact on paper, not in reality.

“We have seen some changes in the exchange regulations, but the actual experience is not good.”

Dr Hussain mentions that foreign investors are less confident about the repatriation of profits.

The 10 worst performing countries are China, Japan, Bangladesh, Pakistan, South Korea, Indonesia, United States, Norway, Russia and Taiwan.

Iraq, Italy and Ecuador were on the list of the 10 lowest ranked economies in 2021.

Japan, the United States and China perform poorly in the index because they stand out as the worst performing countries, given the size of their economies, and also for their typical hard and soft barriers to foreign investment.

In 2021, Costa Rica, the United Arab Emirates and North Macedonia were the top performing countries in terms of FDI in the world, relative to the size of their economies.

The other best are Singapore, Lithuania, Malta, Serbia, Poland, Hungary and Estonia.

In an analysis of the latest Greenfield FDI Performance Index report, FDI intelligence in its August edition indicates that the pandemic has redrawn the map of the world’s top FDI outperformers relative to the size of their product. global gross domestic.

In this regard, Costa Rica is both an outperformer and an outlier as the only Latin American country in the top 10, which is dominated by major business centers such as the United Arab Emirates and Singapore, and emerging European countries.

Global Perspectives analyzed 101 locations in 2020 when preparing the Greenfield Performance Index. Among them, 75 had an index score greater than 1.0, while 26 had an index score of 1.0 or less.

Bangladesh Bank reports net FDI in July-March of FY 2022 was $2.652 billion, up almost 35% from the corresponding period of the previous year.

In terms of components, of the total stock, equity is $1.12 billion, reinvested earnings is $1.44 billion, and intra-company loans are $90.3 million.

However, in 2021, the global trend was for countries to attract large projects in renewable energy, as well as in the software and IT sector.

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