Assignment on Foreign Direct Investment in Bangladesh

The Government of Bangladesh has put in place a comprehensive array of policies aimed at bringing about significant socioeconomic improvements to the people of Bangladesh and ultimately self-reliance, for the nation. In recognition of the private sectors ability to contribute towards achievement of these goals, the government has recently implemented a number of significant policy reforms. These are designed to create a more open and competitive climate for foreign investment. Unstable economy, labor unrest, non availability of trained labor force, bureaucracy, corruption, absence of rule of law, unethical practices in the stock market and poor living conditions in Bangladesh are the problems. Bangladesh is now trying to establish itself as the next rising star in South Asia for foreign investment. There are some prospective area are labor intensive industries, energy, telecommunication etc. We need effective decision to increase the foreign investment.

Foreign Investment:
Foreign investment, with particular preference to foreign direct investment will be encouraged in all industrial activities in Bangladesh including service industries and toll manufacturing, excluding those in the list of "Reserved Industries" and ready made garments, banks, insurance companies and other financial institutions. Such investments may be undertaken either independently or through joint ventures, either with the local private or public sector. The capital market will also remain open for portfolio investment.
Foreign direct investment (FDI) occurs when a firm invests directly in facilities to produce and/ or market product in a foreign country. When discussing FDI it is important to distinguish between the flow of FDI and the stock of FDI (both indicate growth of FDI).
FDI take two main forms (a) green field investment and (b) acquiring or merging with an existing firm in a foreign country. Once a firm undertakes FDI it becomes multinational.

There is an important distinction between foreign direct investment (FDI) and portfolio investment (FPI).

FPI is investment by individuals, firms or public bodies in foreign financial instruments (e.g. govt-bonds, foreign stocks).

Two types of FDI:
(I) HORIZONTAL FDI: Horizontal FDI is FDI in the same industry abroad as a firm operates in at home.
(II) VERTICAL FDI: Vertical FDI takes two forms (a) backward vertical which means investment in an industry abroad that provides inputs for a firm’s domestic production processes and (b) forward vertical which means an investment in an industry abroad that sells the output of a firm’s domestic production processes.
Conducive Investment Climate: Doing Business in Bangladesh today is easier than many developing economies. A report entitled "Doing Business in 2008: Creating Jobs" published jointly by the World Bank and EFC ranked Bangladesh in the 65th position in terms of Ease of Doing Business among 155 economies.

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