Bangladesh has long been hungry for foreign direct investments (FDI) but that has also been coupled with the outflow of funds through local companies seeking to generate business abroad.
Initially, outbound FDI came about through some Bangladeshi bank branches and exchange houses operating abroad. Over time, businesses also took the initiative to invest overseas, subject to government approval.
In September 2015, the government amended The Foreign Exchange Regulation Act, 1947 by adding a “conditional provision” that permitted export-related enterprises to invest abroad.
This helped Bangladeshi firms expand their enterprises to more than 18 countries to date.
According to data released by Bangladesh Bank (BB) recently, outbound FDI from Bangladesh in the past six years till fiscal year (FY) 2023-24 stood at $2.07 billion.
During the first six months of this year, total FDI outflows amounted to $13.02 million.
This was $24.82 million lower compared to the July-December period of 2023 and $9.1 million lower than in the January-June period of 2023.
In FY24, it amounted to $328.89 million, 3.65 percent lower than in FY23.
On the other hand, FDI inflow into Bangladesh in FY24 stood at $1.47 billion, a year-on-year decrease of 8.8 percent.
“Bangladesh is walking very carefully for investing abroad,” states a biannual report titled “Foreign Direct Investment and External Debt” of the central bank for the January-June period this year.
Interestingly, among the countries receiving FDI from Bangladesh, India took the top position with $31.51 million in FY2023-24.
It was followed by the United Arab Emirates ($10.81 million), Ireland ($1.32 million), Malaysia ($0.97 million) and the Maldives ($0.25 million).
Sector-wise, financial intermediaries received the highest amount of $70 million, followed by chemical and pharmaceuticals ($15.24 million) and mining and quarrying ($9.39 million).
Moreover, $0.58 million went to manufacturing, $0.31 million to trading, $0.18 million to textile and apparel, $0.03 million to metal and machinery products and $0.02 million to service and others.
The outflow of FDI proves that local companies are building up their capacity, which is allowing them to invest outside the country, said M Masrur Reaz, chairman and chief executive officer of the Policy Exchange of Bangladesh.
Some companies have made adequate improvements to expand investments globally, Masrur added.
There is no scope to view the outflow of FDI in an unfavourable light since it is helping to build the country’s image, he said.
Without a window to make investments offshore, there can never be a global Bangladeshi brand, said Ashraf Ahmed, president of the Dhaka Chamber of Commerce & Industry.
“We will be stuck as an OEM (original equipment manufacturer) for big brands and sell t-shirts for $4 while they sell for $40 at a branded store in the US,” he said.
Daily Star