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Bangladesh can be a major hub for FDI

BTJ Desk Report
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Bangladesh can be a major hub for FDI

An American think tank suggests that Bangladesh has the potential to become a major hub for foreign direct investment (FDI) by addressing infrastructure, bureaucratic hurdles, and corruption. Despite its large, young workforce and strategic location within Asia, Bangladesh attracts significantly less FDI compared to its neighbors, with FDI standing at only 0.4% of GDP, far below the global average of 1.7%.

The think tank emphasizes the importance of implementing reforms to bolster investment freedom and attract more foreign investment. It cites an IMF report highlighting the growing trend of “friendshoring,” where countries prefer trusted allies as economic partners, potentially shifting global FDI dynamics away from China.

The report identifies security, property rights, and bureaucracy/corruption as key factors influencing FDI decisions. Bangladesh’s property rights framework is criticized for stagnating over the past three decades, hindering entrepreneurship and long-term investment.

Data shows a correlation between FDI and freedom, with “free” countries attracting the most FDI per capita, while “mostly unfree” countries like Bangladesh receive less. However, Bangladesh’s investment freedom is considered the best among its South and Central Asian peers, although progress in trade freedom has plateaued, leading to a decline in overall economic freedom.

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