Barriers to foreign direct investment in the power sector: evidence from Bangladesh

Abstract

Purpose

The purpose of this study is to investigate factors that deter firms from pursuing foreign direct investment (FDI) in Bangladesh’s power sector.

Design/methodology/approach

The study uses a mixed-method approach comprising semi-structured interviews and questionnaires. A quantitative analysis including a one-way analysis of variance and analytical hierarchy process is also included.

Findings

The results reveal that political aspects are the most influential barriers impeding FDI in the power sector, followed by economic and financial, societal and regulatory aspects. Of the individual factors, land acquisition/rent/lease, corruption, political interference, an inadequate gas transmission system and a long independent power producers’ approval process are key obstacles deterring FDI in the power sector. The ownership structure matters in ranking decisions to conduct FDI.

Practical implications

The study can assist managers in identifying key factors that deter FDI in the power sector. It can also assist the government to establish the right policies for the sustainable development of FDI in the power sector.

Originality/value

This study is the first of its kind in Bangladesh’s power sector that analyzes the key barriers hindering FDI systematically. It also discusses policies on removing these barriers for sustainable development of FDI in the power sector.

Citation

Mahbub, T. and Jongwanich, J. (2019), "Barriers to foreign direct investment in the power sector: evidence from Bangladesh", International Journal of Development Issues, Vol. 18 No. 3, pp. 310-333. https://doi.org/10.1108/IJDI-11-2018-0182