Bangladesh posts $3.48bn FDI inflow last year, up by 20.16%

Bangladesh has got $3.48 billion foreign direct investment (FDI) in 2022, which is 20.16% higher than the previous year, according to a report of a UN agency. In 2021, the FDI flows were $2.89 billion.

Outward FDI from Bangladesh, however, declined by 42.7% to $53 million last year against $92 million in 2021, according to the 'World Investment Report 2023' of the United Nations Conference on Trade and Development (UNCTAD) published on July 5.

"In South Asia, FDI flows to India rose by 10% to $49 billion as the country became the third-largest host country in terms of green field project announcements and the second-largest for international project finance deals. FDI in Bangladesh grew by 20% to $3.5 billion," read the report.

FDI in least developed countries (LDCs) declined by 16% to $22 billion in 2022, according to the UNCTAD report.

The top five FDI recipient countries are Ethiopia, Cambodia, Bangladesh, Senegal and Mozambique, accounting for about 70% of the total.

"Because FDI flows are driven in part by investments already present in a country, for example through reinvested earnings, the rankings are different for project announcements," it added.

However, the picture is different for new project announcements. In international project finance the top recipients are Cambodia, Niger, the Lao People's Democratic Republic, the United Republic of Tanzania and Sudan.

"For Greenfield projects the top recipients were the United Republic of Tanzania, Bangladesh, Senegal, Cambodia and Rwanda."

Regarding legal and institutional reforms to promote and facilitate FDI, the report said, several countries adopted new or enhanced legal and institutional mechanisms in 2022.

Citing an example, it said Bangladesh enacted the Bangladesh Patents Bill 2022, which extended the duration of patent protection from 16 to 20 years.

A number of developing economies, including Bangladesh, China, Egypt, India and Malaysia, also introduced measures requiring financial institutions and companies to report on sustainability, including carbon emissions, it added.

However, disclosure measures at the product level remained rare in 2022. The EU and Singapore were among the few economies that implemented new regulations on sustainability disclosure for financial products such as sustainable investment funds.

FDI in developing countries in Asia remained flat at $662 billion in 2022, about half of global inflows.

Inflows were highly concentrated in five economies--China, Singapore, Hong Kong (China), India and the United Arab Emirates and in that order accounted for almost 80 per cent of FDI in the region.

Inflows to China rose by 5 per cent to $189 billion, mainly in manufacturing and high-tech industries and mostly from European multinational enterprises (MNEs). Flows to Hong Kong (China) fell by 16 per cent to $118 billion.

Singapore registered another record as the inflow was up 8.0 per cent to $141 billion.

The report shows that global FDI declined by 12 per cent in 2022 to $1.3 trillion, after a strong rebound in 2021 following the steep drop induced by COVID-19 in 2020.

"The decline was mainly a result of lower volumes of financial flows and transactions in developed countries. The slowdown was driven by overlapping crises: the war in Ukraine, high food and energy prices and debt pressures."

The fall in FDI flows was mostly caused by financial transactions of multinational enterprises in developed economies, where FDI fell by 37 per cent to $378 billion.

The global environment for international business and cross-border investment remains challenging in 2023, the report said. "Geopolitical tensions are still high. Recent financial sector turmoil has added to investor uncertainty," it added.

The UNCTAD expects the downward pressure on global FDI to continue in 2023.