1. FDI trends in Bangladesh over the last 5 years ?
Ans : Recent FDI trend: Foreign Direct Investment (FDI) has been playing a great role in modernizing the economy of Bangladesh for the last fifteen years. For developing countries like Bangladesh, moving from an agrarian economy to an industrial economy seems to be an imperative pre-requisite for economic development. The move towards an industrial economy needs an intensive saving and investment.. There are some determinants that attract FDI: As geographical location. Cheap labor cost. Government attitude towards liberalization of the existing laws of the host country. Skilled manpower. Incentives for investors. Exemption of taxes etc. Considering these determinants, among the emerging economies, India and China have become the desired place for investment. However, the Board of Investment (BOI) of Bangladesh claims that Bangladesh also offers an attractive attractive and unparalleled investment climate in comparison with other South Asian countries. According to BOI (2007), FDI has been contributing to revamping the economy since trade liberalization. Except nuclear energy, defense equipment, reserved forest area, security printing, and mining and railways, all other sectors have b een made open for FDI. Generally FDI is of three categories : Equity capital: direct investor's purchase of shares of an enterprise in anoth er country. Intra company loans: debt transactions between parent enterprises and affiliates. Reinvested earnings: direct investor's share of profits not distributed as dividend or remitted to it, which is reinvested.
Foreign Investment trends in Bangladesh:
Board of Investment of Bangladesh is the principal investment promotion agency engaged mainly in investment promotion, facilitation, and policy advocacy support for the policy makers. The Board of Investment Act 1989 (Act XII of 1989) has entrusted the Board of Investment with responsibility for inter alia "collection, compilation, analysis and dissemination of all kinds of industrial data and establishment of data bank for that purpose"BOI has endeavored in to portray a brief on Foreign Investment registered from 1977 to 2010 for Joint venture investment and from 1990-2010 for the 100% foreign investment projects.
2. 3 most attractive industries in Bangladesh for the foreign investors for FDI & why ?
Ans : Bangladesh has attracted USD 913 million foreign direct investments (FDI) in 2010 calendar year, a leap by 30 per cent. This upgrades the country's position to 114 from 119 out of 141 nations in the World Investment Report (WIR). During this period the telecom sector received USD 360 million FDI, the manufacturing sector received USD 238 million in investment from abroad, USD 145 million in the textile and clothing sector, while leather and leather products got USD 46 million. As a developing country, Bangladesh needs Foreign Direct Investment (FDI) for its ongoing development process. On this point of view the 3 most attractive industries are Telecom industry RMG industry Tourism industry
Telecom industry: The Bangladesh Telecoms sector has seen mobile penetration growth that has exceeded all expectations. A transformative impact on the economy in terms of aggregate investment, FDI and productivity levels. Connectivity helps social cohesion . Greater future Investor Focus on Telco Sector, With market expectations growing of further IPOs from other Telecoms players such as Banglalink, Robi and Teletalk, as well as potential industry consolidation, interest in the sector from investors, both locally and internationally, is set to growth further. RMG industry: The Bangladesh readymade garment (RMG) exporters have time and again raised their objection to the involvement of foreign direct investment (FDI) in certain segments of the industry. What they want is that the foreign investors who are willing to put in their money in the local RMG sector should choose only those areas where local entrepreneurs lack necessary expertise and funds. In the recent past, some foreign investors showed interest in lower segments of RMG where local exporters are mainly concentrated. But in the face of opposition from the industry people, such foreign investors had to go back disappointed. Tourism industry : In tourism industry of Bangladesh FDI investor are invested for some attractive reasons. That are ,natural beauty , historical place , good hospital and health management system Visit of religion places , security , safety, accommodation , easy transportation etc. . Also our government provide some other FDI facility for this sector.
3. Government rules and regulation for a specific industry in Bangladesh for FDI ?
Ans : During the FY 20052006 total actual investment made in RMG (readymade garment) US$ 112.89 Million. During the last FY 20062007 the actual investment is USD 152.37 which is 34% higher than the investment made in the previous financial year. RMG rules & regulation for FDI : A country’s general structure of governance and the institutions that govern interactions between business and government determine the burden that firms face in complying with government regulations, the quality of government services, and the extent to which corruption is associated with the procurement of these services. IN Bangla deshi Foreign Direct Investment follow Act. No.XI of 1980
An Act to provide for the promotion and protection of foreign private investment in Bangladesh. it is expedient to provide for the promotion and protection of foreign private investment in Bangladesh; It is hereby enacted as follows:
Short title. — This Act may be called the Foreign Private Investment (Promotion and Protection) Act, 1980. Definitions (i) In this Act, unless there is anything repugnant in the subject or context.(a) "foreign capital" means capital invested in Bangladesh in any industrial undertaking by a citizen of any foreign country or by a company incorporated outside Bangladesh. In the form of foreign exchange, imported machinery and equipment, or in such other form as the government ma y approve for the purpose of such investment; (b) "foreign private investment" means investment of foreign capital b y a person who is not a citizen of Bangladesh or by a company incorporated outside Bangladesh, but does not include investment by a foreign government or an agency of foreign government; (c) "industrial undertaking" means an industry establishment or other unde rtaking engaged in the production or processing of any goods, or in the development and extraction of such mineral resources or products, or in the providing of such services, as may be specified in this behalf by the government. (ii) Words and expressions used but not defined in this Act shall have the same meaning as in the Companies Act. 1913(VII of 1913).
Foreign private investment.- The government may for the promotion of foreign private investment, sanction establishment with foreign capital of any industrial undertaking:(a) Which does not exist in Bangladesh and the establishment whereof, in the opinion of the government, is desirable or (b) Which is not being carried on in Bangladesh on a scale adequate to the economic and social needs of the country or (c) Which is likely to contribute to-
(i) the development of capital, technical and managerial resources of Bangladesh or (ii) the discovery mobilization or better utilization of the natural resources or (iii) the strengthening of the balance of payment of Bangladesh or (iv) increasing employment opportunities in Bangladesh or (v) the economic development of the country in any other manner.
(2) Sanction of the establishment with foreign capital of an industrial undertaking under sub-section (1) may be subject to such condition as the government may deem fit to impose. Protection and equitable treatment.- The government shall accord fair and equitable treatment to foreign private investment which shall enjoy full protection and security in Bangladesh. Terms of sanction, etc.- The terms of sanction, permission or license granted by government to an industrial undertaking having foreign private investment shall not be unilaterally changed so as to adversely alter the conditions under which the establishment of such undertaking was sanctioned; nor shall foreign private investment be accorded a less favorable treatment than what is accorded to similar private investment by the citizens of Bangladesh in the application of relevant rules and regulations. Indemnification, etc.-In the event of losses of foreign investment owin g to civil commotion, insurrection, or riot, foreign private investment shall be accorded the same treatment with regard to indemnification, compensation, restitution, or other settlement as is accorded by investment by the citizens of Bangladesh. Expropriation and nationalization.(1) Foreign private investment shall not be expropriated or nationalized or be subject to any measures having effect of expropriation or nationalization except for a public purpose against adequate compensation which shall be paid expeditiously and be freely transferable. (2) Adequate compensation for the purpose of sub-section(1) shall be an amount equivalent to the market value of investment expropriated or nationalized immediately before the expropriation or nationalization.
Repatriation of investment. (1) In respect of foreign private investment, the transfer of capital and the returns from it and, in the event of liquidation of industrial undertaking having such investment, of the proceeds from such liquidation is guaranteed. (2) The guarantee under sub-section(1) shall be subject to the right which, in circumstances of exceptional financial and economic difficulties, the government may exercise in accordance with the applicable laws and regulations in such circumstances. Removal of difficulty.- If any difficulty arises in giving effect to any p rovision of this Act, the government may make such order, not inconsistent with the provisions of this Act, as may appear to it to be necessary for the purpose of removing the difficulty.
Facilities: Bangladeshi also provide some facilities for RMG sector throw EPZ.
The core competency areas of Bangladesh EPZs are its diversified and attractive packa ge of incentives and physical facilities. BEPZA provides fully serviced, secured industrial plots and Standard Factory Buildings with simplified licensing and permitting procedure. Onsite customs clearance, logistics, international couriers, offshore banking facilities have made EPZs of Bangladesh an attractive investment destination. The figure below would provide a bird’s eye view on the diversity of the facilities and incentives available in EPZs of Bangladesh.
4. Current challenges & threats are faced by foreign investors in Bangladesh ? Ans:
Major challenges: Private investment from foreign sources, with the exception o f the five industrial sectors (public sector reserve) as indicated above are welcome in all areas of the economy. 100% FDI and the two local sponsors or joint ventures with private and public sector investment is allowed. Foreign investment, however, especially desired in the following categories: • the export-oriented industries, export industries in the region; • The high-tech products which are either export oriented or import substitution will be undertaking in which a more diversified use of local natural resources is possible; • Basic industries based on local raw materials, mainly;
Major Threats for FDI :
Bureaucratic interference Irregularities in processing papers Overlapping administrative procedures Absence of a transparent system of formalities ,Continuity and prevent timely implementation of strategic, procedural, and even routine duties Frequent power failures Poor infrastructure support Labor unrest Political unrest Lack of professional personnel lack of commitment on the part of local investors Unexpected delays in selecting projects in studying feasibility Frequent changes in policies on import duties for raw materials, machinery and equipment etc.
