FDI in Bangladesh: Prospects and Challenges (Part-02)- Importance of FDI in Bangladesh

Global FDI flows have been on a declining trend during this pandemic COVID-19 crisis and will remain volatile next couple of years. Most of the countries will fiercely compete for attracting foreign investment to recover the country-specific and world economy. 

Bangladesh's socio-economic progress over the past three decades (1990-2020) with average annual GDP growth of 6%, the economy grow from approximately 35 billion to 330 billion, per capita income increases from $300 to $2200 approximately and headcount poverty fell from 50% to 20% approximately. Bangladesh’s socio-economic condition improves from low income to lower middle income. During the last two decades, Bangladesh’s challenge is both export expansion and export diversification. Bangladesh's export concentration is four times the developing country average and is also higher than the average of LDC but Bangladesh concentrates only on the garments sector for export. Export expansion and diversification are very low in this country. FDI plays a strong role in export diversification and smooth LDC graduation. FDI increases the export, enhances competition to serve consumer interest, it brings in new technology and management practice, ensures better price as well as creates modern job opportunities. So FDI is more important in the current scenario of Bangladesh because after LDC graduation, pressure on export competitiveness will increase.

Keywords: export expansion, export diversification, LDC