Despite a significant decline in foreign direct investment (FDI) inflows to Bangladesh last year, the country witnessed a remarkable surge in foreign-investment proposals for greenfield projects.
According to the World Investment Report (WIR) 2024, released by the UN Conference on Trade and Development (UNCTAD) on Thursday in Geneva, greenfield investment announcements in Bangladesh increased by 345 percent in 2023 compared to 2022.
The report highlights that Bangladesh received approximately $2.89 billion in greenfield FDI proposals in 2023, a substantial increase from the $650 million recorded in the previous year. This growth rate is the highest in South Asia, surpassing Bhutan’s 258.70 percent jump in greenfield investment projects.
Greenfield investments involve a parent company creating a subsidiary in another country, building operations from the ground up, which can include new production facilities, distribution hubs, offices, and living quarters.
The WIR noted that Least Developed Countries (LDCs) saw a substantial increase in the number and value of greenfield project announcements in 2023, with values rising by almost 300 percent.
A significant portion of this increase is attributed to a $34 billion green hydrogen project in Mauritania. Excluding this outlier, the total value of announced greenfield projects in LDCs rose by 51 percent, reaching $42 billion.
Bangladesh emerged as one of the leading destinations for greenfield project values among LDCs, alongside Guinea, the Democratic Republic of the Congo, Ethiopia, and Mozambique.
These countries collectively accounted for about 60 percent of the total greenfield project values for LDCs in 2023, excluding the exceptional project in Mauritania.
The report also underscored that the primary sector has accounted for about one-fourth of greenfield project values in LDCs in recent years, compared to about 10 percent for developing countries overall. This highlights LDCs’ significant exposure to global commodity cycles, affecting both trade and investment.
Despite the positive trend in greenfield investments, Bangladesh’s net inward FDI declined by 13.70 percent in 2023, falling to $3.0 billion from $3.48 billion in 2022. This decline is part of a broader global trend, with global FDI decreasing by 2.0 percent to $1.3 trillion. Excluding a few exceptional cases, the decline in global foreign investments was over 10 percent for the second consecutive year, driven by increasing trade and geopolitical tensions amid a slowing global economy.
The report suggested that while FDI prospects remain challenging in 2024, modest growth is possible due to easing financial conditions and concerted efforts towards investment facilitation, a key feature of national policies and international agreements.
UNCTAD Secretary-General Rebeca Grynspan emphasized that investment is not just about capital flows but also about human potential, environmental stewardship, and the pursuit of a more equitable and sustainable world.
FDI flows to developing countries fell by 7.0 percent to $867 billion in 2023, reflecting an 8.0 percent decrease in developing Asia, a 3.0 percent dip in Africa, and a 1.0 percent decline in Latin America and the Caribbean.
Conversely, inflows to developed countries were significantly impacted by financial transactions of multinational enterprises, partially due to the implementation of a global minimum tax rate on corporate profits. Inflows to Europe and North America were down by 14 percent and 5.0 percent, respectively.
