Today we will discuss An insight into foreign direct investment in Bangladesh
An Insight into foreign direct investment in Bangladesh
Foreign Direct Investment (FDI) plays a crucial role in accelerating the development and economic growth of a country. Most of the developing countries rely on FDI to promote their economy as they face capital shortages for their development process.
FDI can enable a country to build up capital, develop productive capacity, reduce unemployment, and ensure overall economic development. With this background in mind, this study was undertaken to give an insight into the determinants and role of FDI in the economic development process of Bangladesh.
The present study examines the factors that potentially affect the Foreign Direct Investment (FDI) of a country and identifies the key determinants of the FDI in Bangladesh. This study also explores the FDI theories and how they explain the FDI decisions of a developing country like Bangladesh.
Based on the data from 1999–2013 on FDI factors, this study uses the statistical estimation method to identify the determinants of FDI. In this study, we have identified the potential determinants of FDI in Bangladesh. For the empirical analysis, eleven independent variables have been taken. These are market size, gross national income, inflation, openness, corporate tax rate, domestic investment, external debt, labor force, average exchange rate, average wage in manufacturing, and urbanization.
As for the estimates out of eleven variables nine variables were significant and had the expected positive sign. Based on the correlation and regression analysis, it is observed that market size, gross national income, inflation, openness, external debt, labor force, average exchange rate, average wage in manufacturing, and urbanization have positive relations and relevant factors of FDI.
The other factors corporate tax rate and domestic investment have negative signs and irrelevant factors in determining FDI inflow in Bangladesh. It is observed that there are some administrative loopholes and policy issues that hinder the inflow of FDI in Bangladesh. It may be argued that addressing those issues and making a favorable environment, rules and regulations are to be enacted to overcome that problem and to build up confidence for existing and new investors.
We are optimistic that Bangladesh will undertake a positive move to reduce these barriers and take appropriate measures to attract sizable FDI in Bangladesh to maintain the development wheel of the economy in the years to come.
Description:
Thesis submitted in partial fulfillment of the requirements for the degree of Master of Philosophy (Finance).
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