Foreign investments nosedive, 71pc fall in 6 months

The first half of the current fiscal year 2024–25 has seen a sharp decline in foreign direct investment (FDI) in Bangladesh from July to December.

Comparing the time to the same period of the previous fiscal year, foreign investment in the nation fell by over 71%, or about three quarters.

The admission was made by the finance ministry in its macroeconomic condition report that was delivered to the top adviser on Sunday.

Foreign investment was only $213 million in the first half of the current fiscal year, compared to $744 million in the same period last year, according to official figures.

The business environment hasn’t improved much, and foreign investment has been slow for a while. Experts feel that a major contributing element to the drop in foreign investment is the stagnation of local investment.

Local business owners believe that foreign investment is unlikely to expand until domestic investment increases.

Mustafizur Rahman, distinguished fellow of the Center for Policy Dialogue (CPD), told Prothom Alo, “We have institutional weaknesses when it comes to ease of doing business. Besides, there is the issue of ongoing political uncertainty, which  is deterring new foreign investments. Here, the few foreign investors who are still here are simply reinvesting their undistributed profits. With private sector credit growth at just 7 per cent, attracting foreign investment remains a challenge.”

He underscored that to attract foreign investments, the authorities must focus on a wide range of issues, including law and order situation, corruption, good governance, and lack of accountability. 

In its report, the finance ministry noted that the country received an average of $1.5 billion in foreign investment annually, where only $668 million was in new equity investment.

In the first quarter (July-September) of the current fiscal year, total foreign investment – both new investment and reinvestment – stood at around $150 million. It dropped further to around $70 million in the second quarter (October-December).

A substantial portion of the country’s foreign direct investment (FDI) comes from reinvested earnings of companies already operating in the country, rather than fresh capital inflows.