FOREIGN DIRECT INVESTMENT IN BANGLADESH: AN ANALYSIS OF PERCEPTIONS OF PROSPECTIVE INVESTORS

Abstract

Bangladesh achieved its independence in 1971. Since that time, the country has gone through several major policy changes regarding the ownership and control of industries with a view to promoting economic growth. One of the strategies the Government of Bangladesh (GOB) followed to accelerate economic growth was to attract foreign direct investment (FDI) into the country. Immediately after the independence, the Government obtained control of a large number of industries abandoned by non‐Bangladeshi owners. Through the Nationalization Order of 1972, all key industries including jute, cotton textiles and sugar were vested upon the public sector. The wholesale nationalization of industries resulted in a low growth of the economy. The Gross National Product (GNP) per capita of the country grew at an average annual rate of 0.4 per cent until 1985 compared to 3.8 per cent for the group of “low income countries” (The World Development Report, 1989). The low growth performance of the economy put pressures on GOB to privatise major industries and to undertake economic reforms. As Karim (1996) mentions, external pressure from donors had a significant impact on the Government's investment policy. As a result, the GOB has taken a number of measures to attract FDI including the establishment of the Board of Investment (BOI) and wide publicity in foreign countries. Many believe that GOB has maintained an over‐valued exchange rate in order to attract FDI. These policy changes, along with other traditional factors (such as financial, political, regulatory and tax risks) have significant impact on foreign direct investment (FDI) in Bangladesh.

Citation

MONDAL, W.I. (2003), "FOREIGN DIRECT INVESTMENT IN BANGLADESH: AN ANALYSIS OF PERCEPTIONS OF PROSPECTIVE INVESTORS", Studies in Economics and Finance, Vol. 21 No. 1, pp. 105-115. https://doi.org/10.1108/eb028771