FOREIGN DIRECT INVESTMENT: A SCENARIO OF BANGLADESH

GROUP MEMBERS

NameIDMonija Khatun17-001Sanzida Begum17-002Mst. Samsunnaher Begum17-003Shatabdi Chowdhury17-024Erfanul Alam Siddiquee17-056

SAMSUNNAHER BEGUMID- 17-003

FDI AND ITS TYPEFDI is an international financial flow with the intention of controlling or participating in the management of an enterprise in a foreign country.

IMPORTANCE OF FDIMAJOR DETERMINANTS OF FDI INFLOW

ERFANUL ALAM SIDDIQUEEID: 17-056

DISADVANTAGESTransfer of capital and technologyPromotes competition in the domestic input market Contribute to the corporate revenue in the host country.Human capital development of the host country.Reducing UnemploymentIncreasing purchasing power .Improvement in communication system, transportation facilities, and education.Increase in GDPExploits the cheap laborUse natural resources recklesslyNo reinvestInfluencing power in government decisionADVANTAGES

PRESENT SCENARIO OF FDI IN BANGLADESHThere is no regular trend in the flow of FDI .The flow of FDI increased in 2005 but decreased in 2006 & 2007.It again increased in 2008, 2009, 2011 & 2012 with a drop in 2010.Last year, Bangladesh got the most of its FDI from Malaysia, Egypt, United Kingdom, South Korea, Netherlands, Thailand and Hong Kong.

Values are in Million

Chart1

578.6

354.5

328.3

350.2

460.4

854.3

772.9

666

1080

1110

910.3

1130

1410

FDI Inflow in BD

FDI Inflow in BD

Sheet1

Column1FDI Inflow in BDSeries 2Series 3

2000578.62.42

2001354.54.42

2002328.31.83

2003350.22.85

2004460.4

2005854.3

2006772.9

2007666

20081080

20091110

2010910.3

20111130

20121410

FDI IN AGRICULTURE SECTORIn our country the most preferable sector is agriculture which is mostly elaborated in the national budget and others. Though this sector is the most preferable FDI contribution is not very strong in this sectorValues are in Million

Chart1

1.1

1.6

4.1

1.7

2.3

1.8

2.4

14.43

11.79

21.7

13.63

FDI in Agriculture sector

Sheet1

Column1FDI in Agriculture sector200320042005200620072008200920102011

20011.12.42

20021.64.42

20034.11.83

20041.72.85

20052.3

20061.8

20072.4

200814.43

200911.79

201021.7

201113.63

Our country has the natural resources of Gas but we are poor in power and petroleumAs a result we expect a bulky contribution on this sector. So we get 208.3 in 2005 out of 845.3 and 208.2 in 2006 out of 792.5. In 2006 it was 26.3% through the FDI contribution.

FDI IN POWER, GAS AND PETROLUEMValues are in Millions

Chart1

192.4

57.9

88.1

124.1

168.74

181.86

204.99

101.02

51.15

92.06

238.21

FDI in power, Gas and Petroluem

Sheet1

FDI in power, Gas and PetroluemSeries 2Series 3

2001192.42.42

200257.94.42

200388.11.83

2004124.12.85

2005168.74

2006181.86

2007204.99

2008101.02

200951.15

201092.06

2011238.21

SANZIDA BEGUMID- 17-003

Traditionally the FDI contributions devoted to this sector expecting the huge profit and enlarge business facilities. So every country wants to contribute this sector in case of FDI decision. In Bangladesh this sector has the magnitude contribution in total FDI. In the year of 2005 this sector contribution 219.3 out of 845.3 million $US and in the year of 2006 contribution is 104.9 out of 792.5 million $US. The percentage contribution of 2006 is 13.2%

FDI IN MANUFACTURING SECTOR

Chart1

132.2

142.9

165.2

139.4

219.3

240

289

168.49

211.29

238.78

140.39

FDI in Manufacturing sector

Sheet1

FDI in Manufacturing sectorSeries 2Series 3

2001132.22.42

2002142.94.42

2003165.21.83

2004139.42.85

2005219.3

2006240

2007289

2008168.49

2009211.29

2010238.78

2011140.39

Many foreign investors are now interested to do business in telecom sector in Bangladesh which reveals that Bangladesh has become a significant hub for telecoms. It has been forecasted that the average revenue from telecoms sector will be Tk. 1500 crore a year.In the year of 2006 the contribution was 347 million $US out of 792.5 million $US where almost the full contribution diverted to telecommunication sectorFDI IN TELECOMMUNICATION SECTOR

Chart1

0.9

48

45

127

261

278

346

641

250

360

180

FDI in Telecommunication

Sheet1

FDI in TelecommunicationSeries 2Series 3

20010.92.42

2002484.42

2003451.83

20041272.85

2005261

2006278

2007346

2008641

2009250

2010360

2011180

COUNTRY WISE FDI CONTRIBUTION

Chart1

29.1117.74

52.9116.32

1.6120.43

16.8113.06

5.8104.84

0152.3

024.26

2001

2011

Sheet1

20012011Series 3

USA29.1117.742

UK52.9116.322

Singapore1.6120.43

S. Korea16.8113.065

Hong Kong -China5.8104.84

Egypt0152.3

Norway024.26

Malaysia0.3

Category 10

0.93

FDI INFLOW BY COMPONENTSEQUITY CAPITALREINVESTED EARNINGINTRA-COMPANY LOANLOCATIONNATURAL RESOURCESHUMAN RESOURCESSOCIAL STABILITYLANGUAGEMARKET ACCESSGSP FACILITY

COMPETITIVE STRENGTH OF BANGLADESH FOR INVESTMENT

COMPOSITE TEXTILES AND LINKAGE INDUSTRIESTELECOMMUNICATIONINFORMATION AND TELECOMMUNICATION TECHNOLOGY (ICT)ENERGY AND GAS SECTORINFRASTRUCTURE

PROSPECT OF FDI IN BANGLADESH

MONIJA KHATUNID- 17-001

IN BANGLADESH

DEPENDENT VARIABLES GDP EXPORT DOMESTIC INVESTMENT

INDEPENDENT VARIABLE FDI INFLOW

THE RELATIONSHIP BETWEEN FDI AND ECONOMIC GROWTH IN BANGLADESH

Model Specification Y1= a+b1x1 Y1 = Gross Domestic Product in million USD

Y2= a+b2x2Y2 = Export in million USD

Y3 = a+b3x3Y3 = Domestic Investment in million USD

IMPACT OF FDI ON GDP The following regression equation is found, Y1 = 56987 + 158.757 FDI R=.757R square = .57

IMPACT OF FDI ON EXPORT The following regression equation is found, Y2 = 934.8 + 15.7 FDII R=0.811 R square = 0.658

IMPACT OF FDI ON DOMESTIC INVESTMENT The following regression equation is found, Y3 = 934.8 + 15.7 FDIR=0.750 R square = 0.563

SHATABDI CHOWDHURYID- 17-024

Poorly developed socio-economic and physical infrastructure Lack of skilled people at various levels Unreliable energy supply Corruption Administrative complexity and non-transparency Poor implementation of existing policies Low labor productivity Frequent change in govt. policies

Unhealthy trade union practices Underdeveloped money and capital markets and regulations on these markets Less improved seaport facilities & malpractices at the portDeteriorating law and order situation Political instability and disturbances High cost of doing businessRedtops and corruption in getting infrastructural facilitiesUnfriendly legal system

PROBLEMS OF FDI

BUREAUCRACYPOLITICAL UNRESTCORRUPTIONLACK OF GOOD GOVERNANCEINEFFECTIVE JUDICIARY SYSTEMLACK OF ADEQUATE INFORMATIONINFRASTRUCTUREINFLATIONLACK OF GOOD IMAGEINDECISION OF GOVERNMENTLACK OF PROPER POLICY REGARDING FDIOBSOLETE TECHNOLOGY

REASONS BEHIND FLUCTUATIONS IN FDI

QUALITY OF BUREAUCRACY AND GOVERNANCEIMPROVEMENT OF LAW AND ORDER SITUATIONIMPROVEMENT OF PORT SERVICESPRIVATIZATION AND FURTHER REFORMS

RECOMMENDATIONS

THANK YOU