Factors Influencing FDI

1. Political factors:

 Stability of the government: it is one of the most important prerequisite

for FDI in any country. It is essential to check whether current
government of the country supports investments or not. There should
be no fear that the government can take over the business.
 Flexibility in government policies: certain investments are not allowed
by the country’s government. According to the WTO there are some
regulations that tell there should be flexible policies for the investments.
 Pro-active measures by the government: pro action is always favorable.
Proactive measures such as expansion of ports and other developing
programs that favors the infrastructure.

2. Economic factors:
 Exchange rate policy: it is important to ensure that the currency of the
country does not drop abnormally. Stability of the exchange rate is
important.
 Tax policies: moderate tax policies should be there in the country.
Heavy tax or custom duties will become barrier for FDI.
 Return on investment: One of the major attractions for FDIs is the profit
or the return they get for the investment made. Unless the return is
substantially higher than what they could have obtained in other
countries, they will not venture for investment.
 Market access: The size of the market is another factor that affects FDI.
Investors look for countries that have a large and growing market for
their products and services.

3. Social factors:
 Wage rates: wages are very important to go for FDI. It is very important
incentive for the investors to invest in the countries with low wage rates.
 Skills: literacy rate and skills of people is also important to assess before
going for investment.
4. Legal factors: there are certain legal factors such investment
laws, labor laws and intellectual property rights. All these are important
before going for investment.

Bangladesh
In recentyears, Bangladesh has attracted a significant amount of FDI, which
has contributed to its economic development.
1. Political Stability:
Political stability is a crucial factor that affects FDI in Bangladesh. Foreign
investors look for a stable political environment that assures them that
their investments are secure. The current government of Bangladesh, led by
Prime Minister Sheikh Haseena sheikh and her Awami League party, has
been in power since 2009. While there have been some criticisms of the
government's policies and human rights record, it has been able to maintain
a relatively stable political environment. The country has also seen
economic growth and development under the current government.

2. Economic Reforms:
The economic policies of a country can significantly affect FDI. Investors
prefer countries that have liberalized economic policies, provide incentives,
and reduce bureaucratic hurdles. Bangladesh has implemented various
economic reforms to attract foreign investors, such as tax holidays,
simplified regulations, and a one-stop service for investors. These reforms
have created an investor-friendly environment, leading to an increase in
FDI.
3. Infrastructure:
Investors require proper infrastructure such as transport, communication,
energy, and water supply to conduct their business operations smoothly.
Bangladesh has been investing in its infrastructure to provide a better
environment for investors. The government has implemented various
projects to upgrade the country's infrastructure, such as constructing new
highways, ports, and airports. The improvement in infrastructure has
helped attract foreign investors.
4. Market Access:
The size of the market is another factor that affects FDI. Investors look for
countries that have a large and growing market for their products and
services. Bangladesh has a large domestic market of over 160 million
people, with a growing middle class. The country's strategic location
between South and Southeast Asia also provides access to a wider regional
market.

5. Skilled Labor:
Investors look for a skilled workforce that can meet the demands of their
businesses. Bangladesh has a significant advantage in this area. It has a
large and growing population with a high literacy rate. The government has
also implemented various programs to provide training and education to
the workforce, making them more skilled and employable.
6. Natural Resources:
Investors often look for countries with abundant natural resources.
Bangladesh has a diverse range of resources, including natural gas, coal,
and minerals. The government has been implementing policies to
encourage foreign investment in sectors such as energy, mining, and
agriculture. These policies have made Bangladesh an attractive destination
for foreign investors.
7. Investment Laws:
Bangladesh has enacted several laws to regulate foreign investment in the
country, such as the Foreign Private Investment (Promotion and Protection)
Act, the Bangladesh Economic Zones Act, and the Special Economic Zone
Act. These laws provide incentives and protections for foreign investors,
such as tax holidays, repatriation of profits, and dispute resolution
mechanisms.
8. Intellectual Property Rights (IPR):
Investors require adequate protection for their intellectual property rights
(IPR), such as patents, trademarks, and copyrights. Bangladesh has enacted
laws to protect IPR, such as the Patents and Designs Act, the Trademarks
Act, and the Copyright Act. However, enforcement of IPR laws in
Bangladesh is still a challenge, and investors must be cautious in protecting
their IPR.