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Covid 19 impact: FDI inflow into Bangladesh drops

Covid 19 impacts FDI flows

Inflow of foreign direct investment (FDI) into Bangladesh has fallen by 11 per cent last year as the Covid 19 pandemic hit the global economy forcing many countries to cancel their orders.

This took FDI in the country to $2.56 billion in 2020 from $2.87 billion in 2019, Dhaka Tribune said. As of April 2020, the country’s garment manufacturers and exporters association estimated that more than $3 billion worth of exports had been canceled or suspended, it added.

Also read: 50th budget showcases Bangladesh's breakout from extreme poverty

According to data portal Santandertrade, China, South Korea, India, Egypt, UK UAE and Malaysia are the top investors in the country. The data portal also said that while the country ranked 168th out of 190 countries in the World Bank’s Ease of Doing Business index, the government has been actively promoting private sector-led growth. The country also has a healthy foreign currency kitty due to remittances, “and the central bank respects the transferability of foreign currency.”

A number of more developed Asian countries have outsourced their factory production, mainly textile, to the country.

“The global flow of FDI has decreased due to the disruptions of the pandemic. But the flow of FDI will largely depend on how we improve the ease of doing business, competitiveness, support mechanisms, infrastructure and ports,” Dhaka Tribune quoted Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD) as saying. Rahman also said that special economic zones,one-stop-service for investors, and infrastructure development would facilitate FDI, only if those are properly developed and implemented, the news organisation reported.

Also read: India and Bangladesh likely to sign free trade deal by year-end despite Covid blues

Meanwhile, according to the Daily Star the World Bank said that Bangladesh's manufacturing sector risks becoming uncompetitive because of lower productivity and reliance on low labour costs. Wages are rising locally besides the use of labour-saving technologies is also growing globally. The World Bank report also noted that the export-led manufacturing growth model will remain central to Bangladesh's sustained growth and job creation, but continued reliance on low labour costs to maintain the competitive edge is increasingly untenable as the country consolidates its middle-income status and its wage costs rise.