Bangladesh has registered a record level of Foreign Direct Investment (FDI) inflow last year riding on the current development of economic zones, said a United Nations trade report.
The United Nations Conference on Trade and Development (UNCTAD) in its World Investment Report (WIR) 2019 published Wednesday night said the FDI inflow to Bangladesh rose by 68 percent to a record level of $3.6 billion which will continue in the years to come.The report said the current development of Special Economic Zones (SEZs) through Public-Private Partnership in Bangladesh and other Asian countries is likely to help attract more FDI in coming years.
FDI to India—which has historically accounted for 70-80 percent of inflows—increased by 6 percent to $42 billion while Pakistan, the fourth largest recipient of FDI in the sub-region, registered a 27 percent decrease in investment to $2.4 billion.
“In Bangladesh, the gains were mostly the result of a $1.5 billion M&A (merger and acquisition) deal in tobacco and new investments in power generation. Also, reinvested earnings in the country, mainly by MNEs in banking, textiles and apparel, more than trebled to $1.3 billion,” said the report.
The UNCTAD noted that the special zones are one of the most important tools to draw foreign investment in different countries.
“The ongoing SEZ developments through PPP in Bangladesh and other Asian LDCs may contribute to attracting and retaining more FDI, not only from potential zone tenants in manufacturing, but also from zone developers or service operators to build infrastructure,” it said.
The report also criticized the FDI inflow target of $9.6 billion as ambitious, given the country’s annual average FDI flows of $2.2 billion in 2015–2017, 15 to 20 percent of which was attracted by the eight EPZs.Besides the need to build infrastructure, key challenges in the rapid development of the economic zones include delays in the acquisition of land, the limited availability of long-term finance for private developers and the lack of expertise in zone marketing, the UNCTAD report opined.
As a flagship publication of the UN body, UNCTAD generally provides the global FDI and also focused a theme linked with FDI. This year it focused on SEZs.
The global FDI flows slid by 13 percent in 2018 to USD $1.3 trillion from $1.5 trillion the previous year - the third consecutive annual decline, said the latest report.
Bangladesh became the top host LDC to attract FDI in the past year followed by Myanmar ($3.58 billion), Ethiopia ($3.30 billion), Cambodia ($3.10 billion) and Mozambique ($2.70 billion).