FOREIGN DIRECT INVESTMENT AND ITS IMPACT ON THE ECONOMIC DEVELOPMENT OF BANGLADESH

Foreign Direct Investment and its impact on the Economic Development of Bangladesh

Chapter 1: Introduction

Rationale

This study highlights many issues related to Foreign Direct Investment and gives a broad analysis of its impact on the Economic Development of Bangladesh. The effect of Foreign Direct Investment (FDI) on economic growth in a cross-country regression framework utilizing data on FDI flows from industrial countries to 64 developing countries ever the last two decades. FDI is an important vehicle for the transfer of technology contributing relatively more to growth than domestic investment (Journal of International Economics, vol. 45, issue 1, 1 June 1998, and page 115-135)

Researcher chose this topic because researcher wants to analyze the effects of FDI and its role in driving economic development in Bangladesh because I am a Bangladeshi citizen. FDI flows have increased dramatically in recent decades and continue to be driving factor of economic globalization. As a growth pole in the world economy , large part of Asia particular have become an attractive place for market seeking FDI (Chaisse Julien,Philippe Gugler, Expansion of Trade and FDI in Asia: Strategic and Policy Challenges,1st Edition, 2009). Contemporary thinking recognize that economic growth and development are highly dependent on improving not just the availability of capital but also access to technological capabilities infrastructure and resources.(Rajnesssh Narula,Sanjaya Lall Understanding FDI-Assisted Economic Development,1st Edition,2006)

There are several benefits of Foreign Direct Investment (FDI) on a macroeconomic level, particularly for a Third World Nation such as Bangladesh, where inflows of foreign investment can expand economic production and growth. In an era of volatile flows of capital, the stability of FDI and its emergence is an important source of foreign capital for any developing economy. As a developing country, Bangladesh needs foreign direct investment (FDI), one of the important factors in the development process and the economy of country can foster in a great way. FDI and economic prosperity of a country are related terms, it is necessary to know about FDI, it affect and the future prospects though there may be some argument against it present. (Monash Business Review Volume 2, Issue 1- April 2006 “Foreign Direct Investment and Development: The Bangladesh Scenario”) Bangladesh is virtually located as a bridge between the emerging markets of South Asia and fastest growing markets of South East Asia and Association of South East Asian Nations (ASEAN) countries.

The recognition of the role of knowledge capital in economic growth creates a basis for analyzing the role of Foreign Direct Investment (FDI), which brings new technology and knowledge along with capital (The impact of FDI on economic growth, Marco Neuhaus, 1st edition, September 25, 2006).

UNCTAD and its World Investment Report 2006 which states that, “FDI is an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise resident in an economy other than that of the foreign direct investor (FDI ...