Since the beginning of the current fiscal year, Bangladesh has been experiencing political instability. Throughout July, protests erupted against the reinstatement of quotas in Bangladesh. On August 5, Prime Minister Sheikh Hasina left for India. Subsequently, on August 8, an interim government led by Dr. Muhammad Yunus was sworn in. However, the unrest in the country did not subside even after Yunus took office. His inefficiency led to severe chaos in the country. Simultaneously, with the tacit support of Yunus’s government, repression of Awami League leaders and activists, persecution of minorities, and destruction of Awami League-owned businesses began. Many factories shut down due to indirect backing from Yunus’s government. Additionally, various organizations repeatedly took to the streets with demands, creating further uncertainty in the economy.
Altogether, the economic structure faced significant risks, directly impacting foreign direct investment (FDI). In the first quarter of the current fiscal year (July-September), FDI declined by 71% compared to the same period last fiscal year.
This data was revealed in the latest report published by the Bangladesh Bank on January 20, 2025. It shows that during July-September, FDI amounted to only $104.33 million, marking the lowest quarterly FDI in the last five and a quarter years.
Over the past five years, quarterly FDI fell below $200 million only twice. In the July-September quarter of the 2019-20 fiscal year, FDI was $156.67 million, while in the April-June quarter of the 2020-21 fiscal year, it was $199.23 million.
According to the central bank, uncertainty surrounding the national election led to a decline in foreign investments last fiscal year. In the 2023-24 fiscal year, net FDI was $1.4154 billion. Of this, $360.54 million came in July-September, $379.26 million in October-December, $403.44 million in January-March, and $272.22 million in April-June. Compared to the same quarter last year, FDI in the first quarter of the current fiscal year decreased by $256.21 million or 71.06%. Additionally, compared to the April-June quarter of last year, FDI dropped by $137.89 million or 50.65% in July-September this year. Experts believe that political instability is unlikely to improve the flow of foreign investment in the current fiscal year.
In the first quarter of this fiscal year, total foreign investment (gross inflow) was below $1 billion, the lowest in three years. During this period, total foreign investment was $969.90 million, while the outflow was $865.57 million. In the same quarter of the 2021-22 fiscal year, total foreign investment was $903.35 million, but the outflow was lower at $505.94 million. According to the Bangladesh Bank, the highest foreign investment in the last five fiscal years came in 2021-22, amounting to $1.7105 billion. During that year, net FDI in the July-September quarter was $397.41 million, October-December was $676.65 million, January-March was $489.24 million, and April-June was $147.23 million.
Although FDI declined in the following fiscal year, 2022-23 saw the second-highest FDI in five years at $1.6055 billion. During that fiscal year, net FDI in July-September was $497.14 million, October-December was $383.99 million, January-March was $297.34 million, and April-June was $426.99 million.
In the first quarter of the current fiscal year, foreign investment in economic zones was $8.37 million, in export processing zones (EPZs) was $90.76 million, and in other areas was $5.20 million. This indicates that although Sheikh Hasina took initiatives to establish economic zones to attract investment, they have failed to bring significant foreign investments.
In the first quarter of the current fiscal year, the net FDI comprised $76.79 million in equity capital (new capital), $72.90 million in reinvested earnings, and negative $45.36 million in intra-company loans. This means more intra-company loans were repaid than received. In contrast, in the first quarter of 2023-24, net FDI included $144.81 million in equity capital, $271.25 million in reinvested earnings, and negative $55.52 million in intra-company loans.
The highest FDI in the first quarter of the current fiscal year came from the United Kingdom, amounting to $62.20 million. Additionally, $61.39 million came from South Korea, and $55.89 million came from China. Investments from other countries were below $35 million. Most of the investment in this quarter went to the ready-made garment sector, totaling $74.62 million. The banking sector received $65.42 million in foreign investment, while other sectors received less than $40 million. As of the end of September, FDI stock in the country dropped to $17.677 billion from $17.727 billion at the end of June.