Bangladesh News

Foreign direct investment (FDI) in the power sector has declined by 30 percent a year on average in the last four years as the government failed to press through new power schemes for lack of decisions and leadership.

However, FDI in the telecom sector, which repatriates several hundred million dollars each year, posted a 148 percent average yearly growth in the last two years. In the same period, foreign capital in service sector also has increased by 73 percent, on average, a year.

In terms of money, the total FDI flow in the first two years showed no signs of increase. But in the last two years, it grew dramatically thanks to investment in telecoms and service sectors.

FDI in the manufacturing sector, which among the other types of FDIs adds the most value directly to local economy, marked some increase only in the last one year.

Bangladesh Bank at a board meeting Wednesday reviewed the present state of FDI flows in the country. BB sources said they have discussed the whole situation against the backdrop of a recent debate over the FDI inflow.

FDI inflow in 2005 rose by a significant 84 percent, amounting to $845 million while it totalled $460 million in 2004, 31 percent more than that of the previous year.

In 2003, the country’s FDI inflow grew by 6.70 percent and stood at $350 million while in the preceding year, it declined by 7 percent and totalled $328 million.

Foreign investment in the power sector has been experiencing a continuous dip over the last four years. It stood at $119 million in 2001, but plummeted to $54 million the following year. Foreign investment in this sector was $30 million in 2003, $31 million in 2004 and only $27 million in 2005.

The government could not push ahead with any new power project other than 80 MW Tongi and 250 MW Barapukuria plants in the last five years. Since its commissioning the Tongi plant tripped nearly 90 times while Barapukuria is not functioning properly. Incompetent Chinese companies set up both the plants.

On the other hand, foreign investors lost their interests in the power sector also for frequent cancellations of tenders.

The main reason behind a substantial increase in the overall FDI in 2004 and 2005 was higher investment by the private telecom operators.

In 2005, investment in telecommunications grew by 118 percent to $279 million against a total FDI flow of $845 million. It grew by 178 percent to $128 million in 2004. The telecommunications sector was the highest FDI recipient in both these years.

Foreign investment in this sector, which was only $1 million in 2001, rose to $49 million in 2002 and $46 million in 2003.

It shot up in the recent years mainly because of huge profit making by the private operators and the sector saw a sharp increase in its customer base in the last two years.

At the same time, profit repatriation also rose significantly in the last two years. It was $418 million in 2005 and $338 million in 2004. A major portion of this remitted amount was from the telecom sector.

In recent years, the service sector including trade and commerce too has experienced faster rise. Foreign investment in this sector rose by 95 percent to $151 million in 2005 while 52 percent to $90 million in 2004.

The central bank high officials said that in future they will encourage more FDI inflow in manufacturing sector as growth in this sector is accompanied by employment generation and export promotion.

But BB statistics show that foreign investment in this sector increased moderately by 13 percent to $122 million in 2002 and 0.81 percent to $123 million in 2003. It however went down by 5 percent to $117 million in 2004 before rising by 76 percent to $207 million the following year.