1. FDI in Bangladesh
TREND AND IMPACT ANALYSIS OF FOREIGN DIRECT
INVESTMENT:A CASE OF BANGLADESH
Student presentation in the module INTMAN
Winter semester 2012/2013
Rifat Ibne Jamal
10/01/2013
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2. FDI in Bangladesh
Introduction
Why is today’s Presentation important?
•
Bangladesh - a potential FDI destination with interesting developing scenario
•
A scope for matching theoretical knowledge
Objective/Learning Target
•
To give audience a bird’s eye view about FDI in Bangladesh
•
To generate discussion:
in order to explain the impact of FDI trend in light of theoretical knowledge of
Spillover Effect
To brainstorm furnishing any suitable recommendation that might be helpful in
future
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3. FDI in Bangladesh
Outline
Key Economic Indicators
Incentives Offered for the Foreign Investors
FDI Trend –Bird’s Eye Views
Components of FDI inflow
Export Processing Zone (EPZ)
Sectors for Prospective FDI
FDI Inflows by sectors
Factor Affecting FDI Growth
Spill over Effect of FDI
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5. FDI in Bangladesh
Key Economic Indicators
GDP Growth Rate- 6.3% ( 2011)
GDP Per Capita Income- 772 USD (2011-12)
Inflation Rate- 7.41% (Nov, 2012)
Investment Contribution to GDP- 19.3% ( July 2011-May
2012)
FDI- 1136.38 Million (Jan-Dec 2011), 462.77 million
(Jan-June 2012)
Export- 24.287Billion (2011-12)
Import- 35.44 Billion (2011-2012)
Source: BOI
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6. FDI in Bangladesh
Incentives Offered for the Foreign Investors
Tax
Exemptions
Generally 5 to 7 years.
No import duty for
export oriented
industry
For power generation
exemption is
allowed for 15 years
Double taxation can be
avoided on the basis
of bilateral agreements.
For other industry it s
@ 5% ad valorem
Export
Processing
Zone (EPZ)
Full repatriation of
invested capital, profit
and dividend
Four EPZ so far
Wind up on investment
either through a
decision of the AGM
or EGM
Duty
Remittance
and Exit
Directly supervised by
Prime ministers office
Repatriation of the
sales proceeds after
securing proper
authorization from the
Central Bank
Specially allocated for
FDI of manufacturing
sectors
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7. FDI in Bangladesh
FDI inflow of Bangladesh (1996-2010)
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (19712010), Board of Investment.
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8. FDI in Bangladesh
GDP Growth in Different Years(1996-2010)
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010),
Board of Investment.
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9. FDI in Bangladesh
FDI Trends as Percentage of GDP
Source:Bangladesh Economic Update ,Vol. 3, No. 2, February 2012
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10. FDI in Bangladesh
FDI Inflows (in million USD) by components in
Bangladesh during 1996-2010
Source: Bangladesh Economic Update ,Vol. 3, No. 2, February 2012
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11. FDI in Bangladesh
Export Processing Zone (EPZ)
-export oriented industrial enclaves
-administered by Bangladesh Export Processing Zones Authority
(BEPZA)
-provide the infrastructures and administrative facilities -support
services for a wide variety of enterprises
-primary objective is to provide special areas for congenial
investment climate, and location free from cumbersome procedures
-So far 8 EPZs
-Investors from 32 different countries
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (19712010), Board of Investment.
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12. FDI in Bangladesh
Overhead Costs- EPZ
Cheap Utility Services :
Water Supply : Tariff : 22.43 euro cents / cu-m.
Gas Supply :
Tariff : 6.45 euro cents / cu-m.
Power Supply : Tariff : 6.11 euro cents / kwh.
•Good ranking in FDI magazine by CTG EPZ (2010/11)
among 200 out of 700 global economic zones
-cost effectiveness category (3rd position)
-Best economic potentials (4th position)
•
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (19712010), Board of Investment.
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13. FDI in Bangladesh
FDI Inflows by EPZ and non EPZ area in Bangladesh
Source:
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh
(1971-2010), Board of Investment.
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14. FDI in Bangladesh
Sectors for Prospective FDI
• Textile
• Frozen Foods
• Leather
• Agro-based Industry
• Information Technology
• Power and renewable energy
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15. FDI in Bangladesh
FDI Inflows (in million USD) by sectors in Bangladesh during 1996-2010
Source:
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (19712010), Board of Investment.
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16. FDI in Bangladesh
FDI Inflows (in million USD) by sectors in Bangladesh during 1996-2000.
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (19712010), Board of Investment.
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17. FDI in Bangladesh
FDI Inflows (in million USD) by sectors in Bangladesh during 2001-2005.
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010),
Board of Investment.
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18. FDI in BD
FDI Inflows (in million USD) by sectors in Bangladesh during 2006-2010
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (19712010), Board of Investment.
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19. FDI in Bangladesh
The country-wise FDI inflows in Bangladesh from top 10 investing countries
during 1996-2010
[
Source: Board of Investment,Bangladesh.
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20. FDI in Bangladesh
The country-wise FDI inflows in Bangladesh during 1996-2000
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010),
Board of Investment
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21. FDI in Bangladesh
The country-wise FDI inflows (in million USD) in Bangladesh during 20012005
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (19712010), Board of Investment
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22. FDI in Bangladesh
The country-wise FDI inflows (in million USD) in Bangladesh during 20062010
Source: Survey Report, Statistics Department of Bangladesh Bank and Foreign Direct Investment in Bangladesh (1971-2010),
Board of Investment
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23. Trend of GDP, GDP Growth, FDII/GDP and
FDII/GDP, Export, Export/GDP, FDI Inflow and Domestic investment over
time
Source of data: Bangladesh Board of Investment (BOI)
23/[Enter sum]
25. FDI in Bangladesh
Factor Affecting FDI Growth
Political
culture
Inefficient
port handling
Bureaucracy
Inadequate
infrastructure
Power crisis
Sloth
information
flow
Corruption
Sluggish
administrative
bodies
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26. FDI in Bangladesh
Ranking of Bangladesh:Doing Business
Overall ranking: 107 out of 183 countries (2010)
Subcategories:
Starting a business: 79 out of 183 countries
Registering property: 172 out of 183 countries
Paying Taxes: 93 out of 183 countries
Getting credit: 72 out of 183 countries
Protecting investors: 20 out of 183 countries
Trading across border: 112 out of 183 countries
Enforcing Contracts: 179 out of 183 countries
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27. FDI in Bangladesh
Spill over Effect of FDI
Demonstration effect : by way of imitating industryspecific technology (food, cement )
Competitive effect:
Cost reduction ( telecommunication)
Scale economies, crowding out (textile and
garments)
Via foreign trade
-Exports: reduction in foreign market entry costs by
way of imitation or cooperation with foreign affiliates;
‘learning-by-exporting’(light engineering)
-Imports: import capital goods with embedded
technology (telecommunication, cement, mining)
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28. FDI in Bangladesh
Spill over Effect of FDI in Graph
Source: Stephan, J. (2012), The Technological Role of Foreign Direct
Investments in Central East Europe, forthcoming
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29. FDI in Bangladesh
Sources:
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http://www.doingbusiness.org/rankings
http://www.bangladesh.gov.bd/
http://boi.gov.bd/
https://www.cia.gov/library/publications/the-worldfactbook/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
Mottaleb, K.A., 2007, Determinants of Foreign Direct Investment and
Its Impact on Economic Growth in Developing Countries, MPRA
Paper 9457, University Library of Munich
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30. FDI in Bangladesh
Research/Discussion Question
Considering yourself as CEO of an
MNC, if you choose any preferable
sector for entering in the market
of Bangladesh through FDI
mode, then how do you justify
your motivation of strategy from
the perspective of OLI paradigm?
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