FDI in Bangladesh jumped 13% after two years: Unctad

Foreign direct investment (FDI) in Bangladesh rose by 12.9% to $2.9 billion – around the pre-pandemic level – in the last calendar year (2021).

In the same year, the number of international project finance deals in Bangladesh tripled to 14, reaching $4.7 billion.

The largest project was the construction of a container terminal in Ananda Bazar in Halishahar, Chattogram for $2 billion, according to the World Investment Report 2022 prepared by the United Nations Conference on Trade and Development (Unctad) released on Thursday.

Meanwhile, outward FDI from Bangladesh rose nearly seven times to $92 million in 2021.

In 2017, outflow of FDI was the highest – $142 million – since 1990.

Despite successive waves of Covid-19, FDI flows to the developing countries in Asia grew for the third consecutive year, with developing economies in Asia receiving 40% of global foreign investment inflows, said the report.

FDI flows to developing countries in Asia rose by 19% to an all-time high of $619 billion in 2021.

This marked the third consecutive year that investment flows to developing Asia grew despite the Covid-19 pandemic, which led to a 35% plunge in global FDI in 2020.

"FDI flows to developing economies in Asia during the pandemic have bucked the global trend and underscored the resilience of developing economies in Asia," said James Zhan, director of Unctad's investment and enterprise division.

In 2021, FDI in least developed countries (LDCs) increased by 13% to $26 billion and flows remained concentrated, with the top five recipients (Mozambique, Ethiopia, Cambodia, Bangladesh and Senegal, in that order) accounting for 69% of total FDI in the group.

Investing in Sustainable Development Goals

After taking a significant hit in the first year of the pandemic, international Sustainable Development Goals (SDG) investment jumped by 70% last year. But most of the recovery growth came in renewable energy and energy efficiency, where project values reached more than three times the pre-pandemic level.

In 2021, the Association of Southeast Asian Nations (ASEAN), China, Japan and Malaysia launched or revised their sustainable finance taxonomies on sustainable finance. Together with Bangladesh and the European Union (EU), six of the 35 economies in the Unctad sustainable finance regulation database have developed a taxonomy.

A number of countries have started incorporating social development into their taxonomies.

The Bangladesh taxonomy pursues both climate and social development objectives, and covers cottage, micro and SME development and socially responsible investment, said the report.

Bangladesh along with China, Colombia, Nigeria and Turkey have developed guidelines for sustainable banking with the aim of directing more investment into key sustainable development areas, including SME development, job creation, social infrastructure and agriculture.

"While the 2021 recovery in value terms is positive, investment activity in most SDG-related sectors in developing economies, as measured by project numbers, remained below pre-pandemic levels," the report said.

"Across developing Asia, investment in sectors relevant for the SDGs rose significantly," the report said. "International project finance values in these sectors increased by 74% to $121 billion, primarily because of strong interest in renewable energy."

FDI in South Asia fell by 26% to $52 billion

South Asia was the only sub region in Asia to suffer a drop in FDI inflows in 2021 as the $28 billion merger and acquisitions registered in the previous year were not repeated.

Flows to India declined by 30% from its record level in 2020 to $45 billion in 2021.

Despite the slowdown, India jumped one position to seventh recipient of global FDI.

However, a flurry of 108 new international project finance deals were announced in the country, compared with an average of 20 in the last 10 years. The largest number of projects – 23 – was in renewables.

Major projects in India include the construction of a $13.5 billion steel and cement plant by Arcelormittal Nippon Steel and the construction of a $2.4 billion car manufacturing facility by Suzuki Motor. Both companies are based in Japan.

FDI inflow was the highest in the USA in 2021. The country attracted foreign investments of $367 billion, a 143% jump from 2020.

China and Hong Kong received $181 billion and $141 billion claiming the second and the third-highest amount of FDI.