Foreign Direct investment,A Comparative Study on South Asian Countries

3. Our Presentation About

5. FDI?
Foreign Direct Investment

6. TYPES OF FDI

8. DETERMINANTS Of FDI FLOWS

9. Are there have Any Benefit of FDI?
FDI is instrumental in bridging resource gaps that exist
in host country’s economy:
 Resource gap
 Skill and knowledge gap
 Gap between targeted foreign exchange
 Create demand in other industries through backward
and forward linkages etc

10. Are there have Any Cost of FDI?
 MNEs by using their economic clout influence host
government policies in such a
 way that it is inimical to the development of the country
 Due to their preponderant influence the development that
takes place tends to be lopsided as the dualistic economic
structure is reinforced
 Sometimes control of MNEs over local assets is increased
to such an extent that they start exerting influence over
political decisions
Example In Bangladesh: KAFCO

11. ROLE OF FDI IN ECONOMIC DEVELOPMENT
 Provides different support
 Filling the saving gap
 More employment
 Revenue to Government
 Encourage entrepreneur
 Infrastructural development
 Raising productivity and real wage
 To brings superior technology
 Increase competition
 Increase domestic investment
 Give opportunity to enter export market
 Foreign Currency Earning
 Ensure favorable balance of payment and many more………

13. FDI target and actual inflow (millions$)
1200
1000
800
600 Target
400 Actual
200
0
2005 2006 2007 2008 2009

14. TRENDS OF FOREIGN DIRECT INVESTMENT IN
BANGLADESH
Foreign Investment project Rej with BOI during July
1991 - July 2007
$3,500
$3,000
$2,500
Million $ US
$2,000
$1,500
$1,000
$500
$0
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Year

16. Some notable foreign investment either in
implementation or under discussion
Company /GROUP Amount Industry/sector Status
Orascom 300 Telecommunication In implementation
Sing Tel 185 Telecommunication In implementation
Dhabi Group 1000 Telecommunication, Already invested 17
Banking million dollar in bank
Pharmaceuticals and Alfalah And 10 million
tourism in Warid Telicom
TATA 2500 Steel, power, and Under discussion
Fertilizer
Global Vulcan energy 1600 Energy and power Submitted proposal,
under discussion

17. The incentives
Fiscal Non-fiscal
1. The tax holiday for 10 years followed by 1. Investment protected under foreign
reduced rate of next 5 years private investment act 1980
2.duty free import of consumer materials 2. 100% foreign ownership is permissible
machinery/spare parts/Equipments
3.Relief from double taxation 3. Enjoy MEN status
4. exemption from dividend tax 4. No ceiling on foreign investment
5.Gas facility available 5. Full repatriation of capital and dividend
6. Duty free import of 3 vehicles 6. Foreign currency loan from abroad under
7.Expartiates exempted from income tax for direct automatic route
3 years 7. Non resident Foreign currency deposit
8. Accelerated depreciation on machinery (NFCD) allowed of ‘A’ type industry
or plant allowed 8. Operation of fc account by ‘B’ type
9. Remittance of royalty, Technical and industries allowed
consultancy fees allowed 9. Residency /citizenship
10. Duty and quota free access to EU, , , ,
etc and process

18. INDIA
FDI is not permitted in the following industrial sectors:
 Arms and ammunition.
 Atomic Energy.
 Railway Transport.
 Coal and lignite.
 Mining of iron, manganese, chrome, gypsum, sulphur,
gold, diamonds, copper, zinc.

19. Investment in India
 S. Korea increased its flow of investment in India from a
meager U.S.$ 6.3 million in 1996-97 (0.2 per cent of total
FDI) to U.S.$ 333.1 million in 1997-98 (10.4 per cent share).
 There has been a sharp rise in the number of FDIs
approved in 2004.
 During the first seven months of 2004, between January
and July, Rs 5,220 crore worth of FDI was approved.
 Almost a third share of the investment in India is by NRI.
 According to the latest Reserve Bank of India figures,
outflows through various NRI deposits schemes amounted
to $903 million since May 2004, as against net inflows of
$1.2 billion in the corresponding period last year.

24. NEPAL
 Up to 100 per cent equity participation by foreigners is allowed into
almost all the sectors except those in cottage industry, arms and
ammunition industries, energy, real estate business, security
printing, currency and coinage, retail business, travel and trekking
agencies, consultative services;
 Non-discriminatory treatment for foreign investment;
 Full repatriation of equity, profits or dividends and interest on loans;
 A guarantee against nationalization;
 Generous and attractive income tax allowances with minimum five
year tax holiday for most of the industries;
 No tax on dividends, export earnings and interest on foreign loans
 Corporate tax rate of 33 per cent and income from royalty and
technical management services is taxed at a standard rate of 15 per
cent;
 Only 1 percent duty on import of capital goods;
 Residential and business visa is provided for foreign investors and
their dependants;
 Bonded warehouse and duty-draw back facilities on export

25. PAKISTAN
 Relaxation of foreign exchange controls, and a general policy of
permitting foreign investors to participate in local projects on a 100 per
cent equity basis;
 Allowing of foreign companies registered in Pakistan to undertake
export and import trade;
 Provision of full safeguards to protect foreign investment;
 Withdrawal of work permit restrictions on expatriate managers and
technical personnel working in an industrial undertaking and easing of
remittance restrictions;
 Abolition of the ceiling on payments of royalties and technical fees;
 Elimination of the requirement of obtaining a "No Objection
Certificate" (NOC) from the appropriate provincial government, except
for areas which are classified as negative areas;
 No requirement of government approval to set up an industry in any
field, place and size, except for the following industries: Arms and
ammunition; High explosives; Radio-active substances; Security
printing, currency and mint.
 Exemptions or relief from import duties has been allowed on imported
plant and machinery
 Tax relief in shape of first year allowance has been provided for a
number of industries.

26. SRILANKA

27. MALDIVES
 Area (‘000 km2): 0.3
 Population (millions): 0.3(2000)
 Capital city: Male
 Official language: Dhivehi
 Currency: Maldivian rufiyaa
 Exchange rate (period average): 1999 Rf11.8=$1
 GDP in current prices (millions of dollars): (1999) 348.6
 Exports of goods and services (millions of dollars): (1998) 426.7
 Imports of goods and services (millions of dollars): (1998) 410.1
 Official development assistance (millions of dollars) :( 1999) 25.5
 External debt (millions of dollars): (1998 ) 179.9

28. BHUTAN
Bhutan has the potential to improve her FDI performance. The main Advantages
of Bhutan are:
1. Privileged access to a neighboring country like India and Bangladesh with large
markets; If FDI can reach Indian shore, given the attractiveness it can also
travel a few miles to Bhutan;
2. Best Political stability in the region as compared to India, Bangladesh, and
Nepal
3. Almost negligible social problem with strong social bond and patriotic feeling
4. corporate like Government structure with non-existent political Party system
and Low corruption level. The country’s political set-up is gradually moving
towards participative representation of the common people in the country’s
assembly with decentralized development and authority structure.
5. Least Power Cost in the region equivalent to INR 0.90 per KWH and abundant
power supply
6. A low wage, trainable English-speaking workforce;
7. A flourishing local entrepreneurial culture in both small and large business;
8. A growing international recognition in terms of tourist landmarks
9. Unique temperate climate suitable for work and also ideal for cultivating
medicinal herbs and horticulture with great market potential.

29. Policies and Incentives of Foreign
Direct Investment in South Asia in
comparison with Bangladesh

31. PROBLEMS FOR INFLOW OF FDI IN BANGLADESH
 Bureaucratic red tapism
 Weak domestic court system
 Inadequate infrastructure facilities
 Excess procedure formalities
 Poor economic performance
 Political instability
 Inadequate privatized industrial base

32. SUGESSION(s)
Tax exemptions
Duty
Location
Natural resources
Social stability
Language
Market access
GSP facility
Cost of business

33. POLICY RECOMMENDATION TO ATTRACT FDI
Improve quality of bureaucracy and governance
Coordinated government agencies
Dynamic and independent government agencies
Political reformation
Improvement of law and order situation
Development of infrastructure and human resources
Ensuring power and energy
Improvement of port services

34. POLICY RECOMMENDATION TO ATTRACT FDI
 Privatization and further reforms
 Modernization of business law
 Revision of tax law
 Setting up of industrial parks and new EPZs
 Improving the country’s image abroad
 Policies regarding macroeconomic stability
 Economic and commercial diplomacy
 Devoting efforts to shift FDI track

35. CONCLUSION

36. The role of FDI has become increasingly important, during the first three decades, FDI turned
out to be the major dynamo for stimulating international resource flows from the
developed countries to the developing and underdeveloped ones. In Bangladesh there are
no specific FDI. It is include with foreign investment. So the current foreign investment
situation in Bangladesh does not a clear and confident picture. It is short out by the
statistics presented by the BOI itself. However the country must be an attractive location
for foreign investors. An FDI enabling framework is a precondition. The administrative
system for FDI also needs to be effective in dealing with foreign investors and their needs.
Economic conditions conductive to investment are the key determinants but they rely more
on political stability and dissemination of facts. However, most of the developing countries
including Bangladesh have been realizing the importance of FDI for the industrial
development, employment generation and correcting adverse balance of trade of a country.
An enormous number of policies are formulated, reforms in the sector of economic, legal,
administration and fiscal have been made and various facilities and incentives have been
provided by the Govt. of Bangladesh to create a favorable climate of foreign investment in
the country. But the inflow of FDI in the country over the last few years is not remarkable
and it is very much insignificant in comparison to the inflow of FDI in other developing
countries as well as neighboring countries. A number of reasons are identified for the poor
inflow of FDI in the country. Among them bureaucratic red-tapism, inadequate
infrastructural facilities, excessive procedural formalities, weak domestic court system,
poor economic performance, political instability and inadequate privatization base are
note-worthy. In order to overcome these problems as well as to create a congenial
environment for foreign investment some strategic measures have been recommended.
These are development of adequate infrastructural facilities, reduction of procedural
formalities, reform in public administration, easing of legal system, re-design of taxation
system, creation of EPZs, regional zones, improvement of law and order situation, ensure
political stability, aggressive privatization programs, strengthening the capital market,
empowering of BOI. The implementation of these suggestions would help to a large to
boost FDI inflows in Bangladesh.