Determinants of Foreign Direct Investment: A Study on Bangladesh

Abstract

Foreign direct investment (FDI) enables a capital-poor country like Bangladesh to build up capital, avoid the threat of unemployment, develop productive capacity, involve local labor and help integrate the domestic economy with the global economy. Bangladesh’s investment incentives and regulations for FDI are sometimes found competitive with those offered by other countries. Rapid industrialization is essential in Bangladesh to keep pace with its development needs. But the low rate of Investment hampers the expected industrialization process. Foreign aids and grants had been serving to bridge the gap. The main focus of this paper is to reveal the determinants of FDI. This is a qualitative study and is based on secondary data. Author tried to find out the main determinants of FDI in Bangladesh. Actually there is no widely accepted set of variables that can be regarded as the “true” determinants of FDI. This study focused on ten determinants of FDI in Bangladesh which are determinant: 1- market size, determinant: 2- economic environment, determinant: 3- growth, determinant: 4- trade performance, determinant: 5- competitiveness, determinant: 6- labor Costs and productivity, determinant: 7- infrastructure, determinant: 8- political risk, determinant: 9- tax, and determinant: 10- regulatory policies. Author also found out that there are some problems faced by the foreign direct investor and tried to give some suggestions to overcome these problems from the perspective of Bangladesh.

Keywords: Determinants, Foreign Direct Investor (FDI), Board of Investment (BOI), Developing countries, Bangladesh.