Assignment on

Foreign Direct investment on Bangladesh

BUS510: International Business

Section: 01

Submitted by:

Nawshin Ahasan ID-22164094

Poninna Baroi ID-22164080

Humaiya Kabir ID-22164047

Yeanath Afroz ID-21264032

Satu Bhat ID-20364049

Submitted to:

Dr. Rafiuddin Ahmed

Associate Professor

Brac Business School

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 Date of submission: 2nd September, 2023

Table of Contents

Details Page
Abstract 3
Introduction 3
II. Potential Areas for Foreign Direct Investment: 4

1. Manufacturing and Export-Oriented Industries: 4

2. Information Technology and Software Services: 5
3. Pharmaceuticals and Healthcare: 5
5. Infrastructure Development: 6
Conclusion: 8
Referrence 9

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Abstract

Foreign Direct Investment (FDI) stands out as a pivotal catalyst for economic advancement
across the globe. In this context, Bangladesh is rapidly solidifying its status as a captivating
FDI hub, leveraging its strategic assets, pro-investment policies, and continuous endeavors to
enrich its commercial landscape. This scholarly composition undertakes an in-depth
exploration of the latent sectors primed for FDI inflow in Bangladesh, while also delving into
the intricate tapestry of governmental tactics and enterprises aimed at nurturing an even more
favorable milieu for overseas investments.
Bangladesh's FDI appeal extends to various sectors, with its burgeoning technology and IT
industry standing as an exemplar. The nation's pool of skilled professionals, coupled with its
proactive strides in digital innovation, beckons foreign investors seeking promising tech
ventures. Additionally, the renewable energy sector garners attention due to Bangladesh's
commitment to sustainable development and its increasing demand for clean energy sources.
Underpinning this allure is the government's multi-pronged approach. The administration's
efforts encompass streamlining bureaucratic procedures, fortifying legal frameworks, and
establishing special economic zones tailored for diverse industries. Moreover, collaborations
with international organizations and the pursuit of bilateral trade agreements further amplify
the nation's attractiveness to foreign investors.
In conclusion, Bangladesh's journey toward becoming an FDI magnet is characterized by
meticulous sectoral targeting and astute policy implementations. The nation's proactive stance
in creating an investment-friendly ecosystem paves the way for accelerated economic growth,
ultimately shaping a narrative of mutual prosperity for both Bangladesh and its international
partners.

1.0 Introduction:

Foreign Direct Investment (FDI) serves as a pivotal driver of global economic integration,
involving investments that traverse national borders as companies extend their operational
footprint. Within this context, Bangladesh has emerged as a beacon of opportunity for FDI,
drawing attention through its burgeoning economy, abundant workforce, and proactive
governmental assistance. This scholarly exposition endeavors to scrutinize the pivotal sectors
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poised to beckon FDI and dissect the multifaceted strategies undertaken by the government to
create an environment conducive to such investments.
Intrinsically linked to Bangladesh's appeal for foreign investors are its thriving sectors, with
the ready-made garment (RMG) industry standing as a quintessential example. The country's
competitive advantage in labor-intensive industries, coupled with its extensive textile
infrastructure, offers an ideal landscape for FDI inflow. Furthermore, the pharmaceutical
sector, fueled by a growing domestic market and increasing export potential, remains an
enticing prospect for overseas investors seeking stable returns.
Central to Bangladesh's FDI magnetism is the government's comprehensive approach. A
diverse array of measures, ranging from policy revisions to infrastructural developments,
underscore the nation's commitment to becoming an investment-friendly destination. The
establishment of special economic zones (SEZs) tailored for various industries, along with
the implementation of streamlined regulatory procedures, exemplifies the government's
proactive role in expediting FDI entry.
As Bangladesh charts its course toward enhanced FDI prominence, collaborative initiatives
with international financial institutions and trade partners further enhance its allure. The
government's endeavor to foster innovation and entrepreneurship through startup incubation
programs adds an innovative dimension to the nation's investment landscape.
In summation, Bangladesh's ascent as an FDI magnet rests on its strategic sectors and
governmental interventions. As it continues to fine-tune its policies and infrastructural
capacities, the nation not only positions itself as a conduit for foreign investments but also as
a harbinger of mutual economic prosperity on the global stage.

II. Potential Areas for Foreign Direct Investment:

1. Manufacturing and Export-Oriented Industries: The manufacturing and
export industries are attractive to foreign direct investment due to their substantial economic
impact and potential for development. This article will examine the reasons why these
industries draw in foreign investment, as well as the advantages and difficulties associated
with them.
Manufacturing Industry:
 Cost-effectiveness: Many countries have lower labor and manufacturing costs than
developed countries, making them an attractive destination for manufacturing foreign
direct investment (FDI). Foreign investors can benefit from lower labor, utility, and
manufacturing costs.
 Access to new markets: Setting up manufacturing facilities in other countries can
help companies reach new customers and expand their reach. This is especially true in
regions with rising economies and populations.
 Natural resource availability: Many countries have abundant raw materials and
renewable energy sources that foreign investors can tap into to reduce production
costs and ensure supply chains are secure.
 Skilled workforce: Investment in countries with highly educated and skilled labor
can lead to increased productivity and innovation in manufacturing operations,
resulting in higher-quality products and technological breakthroughs.
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  Incentives and government support: Many governments have government
incentives to attract foreign direct investment in manufacturing. These could include
tax incentives, subsidies, and grants, as well as streamlined regulatory processes that
can reduce the upfront financial burden of foreign investors.

Export Industry:
 Access to global markets: Foreign direct investment (FDI) can make it easier to
export by setting up local manufacturing facilities in other countries. This can result in
lower shipping costs, faster delivery, and wider market reach.
 Trade agreements and tariffs: Certain countries have trade agreements that provide
preferential treatment to locally produced products. By setting up manufacturing
facilities in those countries, businesses can benefit from lower tariffs and trade
obstacles.
 Risk diversification: Diversifying production and exports across multiple countries
can reduce the risk of an economic downturn in any one market.

2. Information Technology and Software Services: IT and Software Services are

one of the top FDI sectors in terms of growth rate, technological innovation, and demand for
digital solutions around the world. The digital transformation of business and society has
created a global demand for IT solutions & software services. Foreign direct investment
(FDI) allows companies to expand into new markets and meet the needs of different
industries. Here are the top reasons why IT and Software Services are FDI sectors and some
of the benefits and challenges associated with them:
 Innovation: The IT & software sectors are constantly innovating and developing new
technologies. Foreign investors benefit from working with local talent & resources to
develop innovative products & services.
 Skilled workforce: Many countries have well-educated & skilled workforce in IT-
related fields. The quality of software development & other IT services can be
improved by investing in regions with a good talent pool.
 Cost savings: Outsourcing software development & IT services to countries where
labor costs are lower can significantly reduce the costs for foreign companies. The
cost advantage is one of the main drivers of FDI in the IT sectors.
 Global Connectivity: The IT industry is connected to the rest of the world.
Companies can manage operations remotely and work with teams in different
locations seamlessly.

3. Pharmaceuticals and Healthcare: Pharma and healthcare are really important

industries that make a big difference in making sure people are healthy and happy. They're
also great for attracting foreign direct investment because of all the benefits and challenges
that come with it. Let's take a look at why pharma and healthcare are so popular with foreign
investors.

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  The Global Demand for Pharmaceuticals, Medical Devices, and Healthcare
Services: As the world’s population ages and becomes more health conscious, the
demand for health-related products and services is on the rise. This makes FDI in
these sectors increasingly attractive.
 Medical Technological Advancements: The rapid development of medical
technology, from personalized medicine and biotechnology to digital health solutions
and more, creates the right conditions for FDI in the healthcare sector.
 Unmet medical Needs: Many regions still lack access to critical healthcare services
and treatments. Foreign investors are able to fill these gaps by investing in research
and development, which leads to the development of new drugs and therapies, as well
as medical breakthroughs, that are beneficial to global health.
 Government initiatives: Governments often encourage foreign direct investment
(FDI) in healthcare by improving healthcare infrastructure, improving access to
medical care, and promoting medical tourism.

5. Infrastructure Development: Infrastructure development refers to the process of

planning, constructing, and maintaining essential physical and organizational structures that
support economic and social activities within a region or country. This includes a wide range
of facilities such as roads, bridges, airports, ports, energy systems, water supply,
telecommunications, and public transportation. The goal of infrastructure development is to
create a solid foundation for economic growth, enhance the quality of life, and ensure the
efficient movement of goods, services, and people. It often involves collaboration between
governments, private sector entities, and other stakeholders to design and implement projects
that address the needs of a growing population and changing technological demands.
Infrastructure Needs: Modern infrastructure is essential for economic development due to
its multifaceted role in facilitating growth, improving quality of life, and attracting
investments. Here are some key points that highlight the need for modern infrastructure and
its role in economic development:

 Enhanced Connectivity: Modern infrastructure, such as well-maintained roads, bridges,

and transportation networks, improves connectivity between regions and cities. This
seamless movement of goods, services, and people fosters trade, boosts market access,
and stimulates economic activities.
 Efficient Logistics: Infrastructure like ports, airports, and logistics centers streamline the
movement of goods both domestically and internationally. Efficient logistics reduce
transportation costs, minimize delays, and contribute to overall competitiveness.
 Energy Infrastructure: A reliable and modern energy grid is crucial for powering
industries, homes, and businesses. Energy infrastructure investments ensure a stable
energy supply, which is vital for industrial production and technological advancements.
 Communication Networks: High-speed internet and advanced communication networks
are integral to today's economy. They support e-commerce, remote work, digital services,
and innovation, fostering economic diversification and growth.
 Attracting Investments: Countries with robust infrastructure often attract higher levels
of foreign direct investment (FDI). Investors are more likely to commit capital to places

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 with efficient transportation, energy, and communication systems, as they enable cost-
effective operations.
 Job Creation: Infrastructure projects generate jobs in construction, maintenance, and
related sectors. These employment opportunities contribute to reducing unemployment
rates and improving overall economic conditions.

Investment Opportunities: Certainly! There are several investment opportunities in the

transportation, ports, and logistics sectors that could offer promising returns. Public-private
partnerships (PPPs) can play a crucial role in these projects, combining government
resources with private sector expertise. Here are a few potential projects and their benefits:

 Modernizing Ports and Terminals: Upgrading port facilities and terminals to

accommodate larger vessels, improve cargo handling efficiency, and enhance security
can lead to increased trade volume and economic growth. PPPs could help fund
these developments while sharing operational risks and returns.
 Urban Mass Transit Systems: Investing in urban transit systems like subways, light
rail, and bus rapid transit can alleviate traffic congestion, reduce pollution, and
improve mobility. PPPs can provide funding for construction and operation, sharing
costs and potential revenue.
 Logistics Parks and Warehousing: Establishing logistics parks and modern
warehousing facilities can streamline supply chains and reduce transportation costs.
Private investors can partner with governments to develop and manage these
facilities.
 Highway and Road Infrastructure: Upgrading and expanding road networks can
enhance connectivity and facilitate efficient movement of goods. PPPs can help
finance road projects, while private entities might operate and maintain them.
 Smart Transportation Solutions: Implementing smart technologies such as
intelligent traffic management, electronic tolling, and real-time tracking can optimize
transportation systems. PPPs can aid in the implementation and operation of these
technologies.
 Intermodal Connectivity: Projects that integrate various modes of transportation
like rail, road, and sea can enhance efficiency and reduce congestion. Public-private
collaboration can fund and manage these integrated systems.
Agriculture and Agro-processing: Agriculture involves the cultivation of plants and the
rearing of animals for various purposes, including food, fiber, medicinal plants, and more.
Agro-processing, on the other hand, refers to the transformation of raw agricultural
products into processed or value-added goods. Agro-processing plays a crucial role in adding
value to agricultural products and extending their usability.
Agriculture Potential: Bangladesh's agrarian economy plays a vital role in the country's
development, contributing to employment, food security, and export earnings. The sector
employs around 40% of the population and contributes about 14% of the GDP. The
country's main agricultural products include rice, jute, tea, fruits, and vegetables to

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modernize agricultural practices and enhance productivity, several strategies could be
considered:

 Technology Adoption: Introducing modern farming technologies like precision

agriculture, sensor-based irrigation, and mechanization can increase efficiency and
reduce input waste.
 Crop Diversification: Promoting diversification into high-value crops like fruits,
vegetables, and spices can boost income and reduce the risk associated with mono-
cropping.
 Irrigation Improvement: Expanding irrigation coverage and optimizing water use
can mitigate the impact of changing rainfall patterns.
 Research and Extension: Investing in agricultural research and extension services
can provide farmers with the latest knowledge and best practices.
 Access to Finance: Providing easy access to credit and financial services can enable
farmers to invest in modern equipment, seeds, and fertilizers. Microfinance
institutions can play a crucial role in this aspect.
 Climate Resilience: Given Bangladesh's vulnerability to climate change and natural
disasters, adopting climate-resilient farming practices and promoting the use of
drought-resistant and flood-tolerant crops is essential.

Agro-Processing for Export: Agro-processing industries hold significant potential as they

involve transforming raw agricultural materials into value-added products. This can lead to
increased shelf life, reduced post-harvest losses, and creation of diverse product lines.
Exporting processed products offers several opportunities:

 Higher Value: Processed goods generally command higher prices compared to raw
materials, contributing to higher economic returns.
 Job Creation: Agro-processing creates employment in rural areas, boosting local
economies and reducing urban migration.
 Foreign Exchange: Export revenues from processed goods can contribute to foreign
exchange reserves, stabilizing a nation's economy.
 Technology Transfer: Developing agro-processing capabilities necessitates
technology adoption and knowledge sharing.
 Sustainable Agriculture: Processing can encourage sustainable agricultural practices
as farmers focus on producing raw materials of higher quality for processing.
 Supply Chain Development: The sector drives infrastructure development and
enhances supply chain efficiency.
However, there are challenges like infrastructure gaps, access to finance, market access,
and quality control. Overcoming these challenges is vital for successful agro-processing
and export ventures.

Conclusion: As of last knowledge update in September 2021, here is an conclusion

with an analysis of the factors that typically influence the attractiveness of a country for
foreign direct investments (FDI), specifically in the case of Bangladesh. It should be kept

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 in mind that the situation may have evolved since then, so it's important to consider more
recent sources and data for the most up-to-date assessment. In conclusion, Bangladesh has
made strides in attracting foreign direct investments due to its growing economy, low-
cost labour, and presence in the textile and garment industry. However, challenges related
to infrastructure, bureaucracy, political stability, and corruption remain important
considerations for potential investors. It's recommended to consult more recent sources
and data to get a comprehensive and up-to-date view of the attractiveness of Bangladesh
for foreign direct investments.

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