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The Financial Express
Swasti Lankabangla Swasti Lankabangla

FDI-related net financial transfers from Bangladesh rise modestly in last decade

| Updated: September 30, 2020 09:43:12


FDI-related net financial transfers from Bangladesh rise modestly in last decade

Though the net financial transfers related to Foreign Direct Investment (FDI) in Bangladesh increased modestly in the last decade, it is still lower than the net inflows of foreign direct investment.

Measured in terms of the ratio between inflows of FDI and FDI-related payment outflows, it showed that the ratio was 0.85 during 1990-2008 which modestly increased to 0.90 during the period of 2009-2019, according to the UNCTAD's Trade and Development Report (TDR) 2020.

The report, released by the United Nations Conference on Trade and Development (UNCTAD) this week in Geneva, showed that some 30 developing countries recorded a ratio larger than one (1.0) during the post-Global Financial Crisis (GFC) period, indicating that they experienced net payment outflows since 2009.

“By contrast, the ratio of payment outflows to new FDI-inflows is low in countries with a more recent history of FDI,” it added.

Countries like Bangladesh, India and Turkey are included in this category although net inflow of FDI in Bangladesh is still very low compared to its many peers.

FDI-related income payments are: Remitted profits, royalties, and licence fees.

“These payments can cause net financial transfers on FDI to be negative, particularly when inward FDI becomes significantly lower than in previous years, while income payments need to be made on a large existing stock of FDI,” added the report.

UNCTAD report also added that countries with a long history of FDI inflows, and hence a relatively large stock of foreign capital, are ‘most susceptible to the risk of negative net transfers’.

Countries with a relatively recent history of FDI-inflows and countries with continuously high, or even rising, FDI-inflows are, however, less exposed to this risk.

UNCTAD report does not provide any detail on the amount of FDI related net financial transfer from Bangladesh or other countries.

The data on financial transfer related to FDI in Bangladesh is not readily available as the country’s central bank does not unveil such statistics though it regularly publishes data on inflows of FDI.

Average inflows of net FDI in Bangladesh during the last decade (2009-2019) stood at US$ 1.85 billion.

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