New foreign investment not coming in Bangladesh

Mahfuaj Mukul: Bangladesh Bank publishes the statistics and dynamics of foreign direct investment (FDI) flows based on the financial survey of foreign institutions investing in Bangladesh using banking channels. In this case, the central bank calculates the flow of FDI in three parts: new foreign capital (equity capital investment), reinvestment of income (reinvested earnings) and inter-company loans (intra-company loans).
Yesterday, the central bank published a report in this regard. According to the report prepared during January-June 2023, the net FDI inflow for the fiscal year ended 2022-23 was $324.97 crore. The net FDI inflow in the previous financial year was $343.97 crore. As a result, the net FDI inflow decreased by 5.52 percent.
In the financial year 2021-22, the equity capital inflow was $134.69 crore. At the end of the financial year 2022-23, the equity capital flow stood at $795.9 million. As a result, new foreign capital investment has decreased by 40.91 percent.
At the end of June 2021, the amount of equity capital stock in the country was $1 thousand 370 crore 25 lakh 10 thousand. At the end of December of that year, which stood at $1 thousand 460 million 10 lakh 90 thousand. At the end of June 2022, the amount of equity capital stock is $1,393.78 million. At the end of June of this year, the amount is $1,327.78 million. Accordingly, the equity capital stock has decreased by 4.7 percent in one year.
Experts say that the equity capital of net FDI is the new capital. This flow of money indicates the extent to which existing or new investors in the country are bringing in new capital as foreign investment. Recent figures show that equity capital inflows have slowed down, meaning new investments are not coming in. It can be said roughly, new investment cannot be attracted to improve the investment situation in the country. These statistics also indicate that the initiatives taken to attract foreign investment in the country have not yet shown any effectiveness.
When asked, Professor Mostafizur Rahman, Honorary Fellow of Center for Policy Dialogue (CPD) told, “Decreasing equity capital is a very bad indication.” Equity that comes in fresh is called greenfield investment, such investment is decreasing. Whatever is happening is coming in a different way. Newly we want to attract investment, that is, new investors, from new countries, no one is showing enthusiasm in these areas. We are doing Special Economic Zones, we were hoping that at least the big barrier of free land has been removed. But quality electricity and gas supply services including one stop service are not guaranteed. That’s why the picture is so negative. Our financial account could have been a little stronger if the equity capital came in. Because the main issue of balance of payment (BOP) has become financial account.
Bangladesh Bank’s report shows that foreign investment is not being attracted even after the establishment of economic zones. 87.4 percent of the net FDI inflows into the country in the last financial year came from export processing and non-economic zones. Last financial year net FDI in Beja was only $41 lakh 60 thousand. And the FDI flow in the export processing sector was $406.41 million.
Executive Chairman of Bangladesh Economic Zone Authority (BEZA) Sheikh Yusuf Harun told, “If we think about the economic zone, we received $2 million of FDI from Thailand two days ago. Total investment in BEZA is $1.7 billion. And I got an investment proposal of about $26 billion. The investment projects are already generating a huge amount of employment. All in all, our position is good. The information given by Beza in the Bangladesh Bank report is wrong. We have written to them asking them to correct this information. It is necessary to increase the support from the government and government agencies to improve the overall investment situation.
Although Beja has reported success in attracting foreign investment, the Bangladesh Investment Development Authority (BIDA), the sponsoring organization of investment in the country, is reporting a different reality. According to them, several foreign investment proposals have come in the country last year. Many groups have also come. There have been several investment conferences. In this way, foreign investment proposals are coming but are not being implemented or any activities are seen at the field level.
BIDA Executive Member (Strategic Investment) Additional Secretary Abhijit Chowdhury told, “The first reason for not coming in new investment is the dollar crisis in the international context after the Russia-Ukraine war. In view of that, teams from abroad are coming with investment proposals in Bangladesh but the implementation has not yet come. Second, political stability matters. Especially in the last one-two months our meetings, discussions, these have reduced. Proposals are coming less. Hope to see good inflow of foreign investment soon after election. This attitude is understood in discussion and observation with the foreign teams who are coming. Two to three teams were supposed to come, but they did not come, they postponed. In fact, foreign investors are monitoring the situation. All the teams that have come in the last two years want to see two things. One is law and order situation and political stability. Secondly, whether foreigners can easily take the profits they make through investment.
According to the Foreign Investors Association, FDI inflows and equity capital stocks are declining in the global context. They say, globally, the flow of foreign investment is on the downward trend. As the foreign exchange market is now volatile, the possibility of FDI inflow naturally decreases. Not only in Bangladesh, but in countries where there is a liquidity crisis in terms of foreign exchange, investors are being conservative in investing, according to the representatives of foreign investment institutions.
Nasser Ejaz Vijay, President of The Foreign Investors Chamber of Commerce and Industry (FICCI) and CEO of Standard Chartered Bank told, “According to the UNCTAD report, global FDI fell by 12 percent in 2022 due to reduced global demand due to geopolitical uncertainty and high inflation.” The OECD report indicates that global FDI inflows in the first six months of 2023 were 30 percent lower than the same period in 2022. Bangladesh has always had relatively low FDI as a percentage of GDP, so it is not surprising to observe a contraction of existing foreign exchange liquidity and low FDI in the year before elections. FICCI seeks to attract identified anchor investors after the election in partnership with bidders.