Assignment On:-

Foreign Direct Investment: Global & Bangladesh

Perspective
Submitted o:
Dr! S"ed Golam #aola
Pro$essor
%niversit" o$ Dha&a
Facult" o$ Business Studies
Department o$ #anagement Studies

Submitted B":
Md. Osman Goni 126
Md.Wahidud JamanTusher 147
Department o$ #anagement Studies'
()
th
Batch' Section B
Submission Date :- *
th
september' +,(-
able o$ .ontents
S!/ 0o! 0ame o$ the topic Page 0o!
(!
FDI:
Types
1
1
+!
Global rends in FDI:
Volume & Trends of F!
"#onomi#s of F!
$our#es of F!
ire#%ions of F!
es%ina%ions of F!
F! Fore#as% 2&1'
(on#lusion
*
*
)
2
(-
(1
(2
(2
-! FDI : Bangladesh Perspectives
F! in )an*ladesh
Go+,% -oli#y !ns%rumen%s
Ma.or $our#es
Trends & Volumes
!ndus%ry is%ri/u%ion
(on#lusions
(3
(3
+,
+,
+,
++
+2
1! Global 4nvironment o$ #0.s
-oli%i#al "n+ironmen%
0e*al "n+ironmen%
Te#hnolo*i#al "n+ironmen%
(ul%ural "n+ironmen%
Glo/al Trade !ns%i%u%ions
(on#lusions
+2
+2
+3
+3
+5
+5
-(
*! Bibliograph" -+
.46ecutive Summar"
Foreign Direct Investment 1F!2 is a #a%e*ory of in+es%men% %ha% refle#%s %he o/.e#%i+e of es%a/lishin* a
las%in* in%eres% /y a residen% en%erprise in one e#onomy 1direct investor2 in an en%erprise 1direct investment
enterprise2 %ha% is residen% in an e#onomy o%her %han %ha% of %he dire#% in+es%or. The las%in* in%eres% implies
%he e3is%en#e of a lon*4%erm rela%ionship /e%5een %he dire#% in+es%or and %he dire#% in+es%men% en%erprise and
a si*nifi#an% de*ree of influen#e 1no% ne#essarily #on%rol2 on %he mana*emen% of %he en%erprise. The dire#% or
indire#% o5nership of 1&6 or more of %he +o%in* po5er of an en%erprise residen% in one e#onomy /y an
in+es%or residen% in ano%her e#onomy is %he s%a%is%i#al e+iden#e of su#h a rela%ionship.
FDI statistics are on a dire#%ional /asis 1in5ard or ou%5ard2 and rela%e %o FDI flows7 FDI positions 1s%o#8s2
and FDI income. Outward investments are #ross4/order in+es%men%s /y dire#% in+es%ors residen% in %he
repor%in* #oun%ry 5hile inward investments are in+es%men%s /y non4residen% in+es%ors in %he repor%in*
#oun%ry.
FDI flows are #ross4/order finan#ial %ransa#%ions 5i%hin a *i+en period 1e.*. year7 9uar%er2 /e%5een affilia%ed
en%erprises %ha% are in a dire#% in+es%men% rela%ionship. FDI positions rela%e %o %he s%o#8 of in+es%men%s a% a
*i+en poin% in %ime 1e.*. end of year7 end of 9uar%er2. F! flo5s and posi%ions in#lude equity 11&6 or more
+o%in* shares27 reinvestment of earnings and inter-company debt. F! in#ome is %he re%urn on dire#%
in+es%men% posi%ions of e9ui%y 1dividends and reinvested earnings2 and de/% 1interest2.
:s for )an*ladesh in :sian ;e*ion7 i% is /ein* #onsidered as %he mos% li/eral and /usiness friendly e#onomy
in %his re*ion. !% is an a%%ra#%i+e des%ina%ion for /usiness and in+es%men%. !%s in+es%men% #lima%e offer *enerous
and a%%ra#%i+e pa#8a*es of in#en%i+es %o in+es%ors. There is no dis#rimina%ion /e%5een %he lo#al and forei*n
in+es%ors.
(! Introduction
FDI:
F! is defined as an in+es%men% in+ol+in* a lon*4%erm rela%ionship and refle#%in* a las%in* in%eres% and
#on%rol /y a residen% en%i%y in one e#onomy 1forei*n dire#% in+es%or or paren% en%erprise2 in an en%erprise
residen% in an e#onomy o%her %han %ha% of %he forei*n dire#% in+es%or 1F! en%erprise or affilia%e en%erprise or
forei*n affilia%e2. F! implies %ha% %he in+es%or e3er%s a si*nifi#an% de*ree of influen#e on %he mana*emen% of
%he en%erprise residen% in %he o%her e#onomy. $u#h in+es%men% in+ol+es /o%h %he ini%ial %ransa#%ion /e%5een
%he %5o en%i%ies and all su/se9uen% %ransa#%ions /e%5een %hem and amon* forei*n affilia%es7 /o%h
in#orpora%ed and unin#orpora%ed. F! may /e under%a8en /y indi+iduals as 5ell as /usiness en%i%ies. Flo5s
of F! #omprise #api%al pro+ided 1ei%her dire#%ly or %hrou*h o%her rela%ed en%erprises2 /y a Forei*n dire#%
in+es%or %o an F! en%erprise7 or #api%al re#ei+ed from an F! en%erprise /y a Forei*n dire#% in+es%or.
.omponents o$ FDI:
"9ui%y #api%al<
ire#% in+es%or=s pur#hase of shares of an en%erprise in ano%her #oun%ry. ;emi%%an#es re#ei+ed /y
%he in#orpora%ed or unin#orpora%ed dire#% in+es%men% en%erprises opera%in* in )an*ladesh on a##oun% of
e9ui%y par%i#ipa%ion in %hose /y %he nonresiden% dire#% in+es%ors. "9ui%y #api%al #omprises of <
1. Ordinary Shares
This i%em represen%s %he %o%al paid4up #api%al a*ains% issue of ordinary shares.
!. "evaluation # $apital "eserves
This i%em #omprises re+alua%ion reser+e7 #api%al reser+e7 non4remi%%a/le spe#ial #api%al reser+e7
non4dis%ri/u%a/le spe#ial reser+e and premium on shares.
%. Share &oney Deposits
These are %he deposi%s of %he shareholders %o *e% ordinary shares in fu%ure.
4. Other "eserves
This i%em #omprises %a3 holiday reser+e7 reser+e for /onus share7 *eneral reser+e.
Intra compan" loans:
e/% %ransa#%ions /e%5een paren% en%erprises and affilia%es. !n%ra4#ompany loans or in%ra4
#ompany de/% %ransa#%ions refer %o shor% or lon*4%erm /orro5in* and lendin* of funds /e%5een dire#%
in+es%ors 1paren% en%erprises2 and affilia%e en%erprises. The %radi%ional dis%in#%ion /e%5een shor% and lon*
%erm ma%uri%y /ased on %he formal #ri%erion of ori*inal ma%uri%y re%ained.
7einvested earnings:
ire#% in+es%or=s share of profi%s no% dis%ri/u%ed as di+idend or remi%%ed %o i% 5hi#h is rein+es%ed.
"pes o$ FDI :
Greenfield F! entails es%a/lishmen% of ne5 produ#%ion fa#ili%ies and mo+emen% of in%an*i/le #api%al 1in
ser+i#es2 #on%ri/u%in* %o #api%al forma%ion and employmen% *enera%ion.
(ross4/order M&: end up %ransferrin* produ#%ion asse%s %o forei*n in+es%ors and does no% in#rease #api%al
s%o#8.
;ound4%ripped in+es%men%s in+ol+e #hannelin* of lo#al in+es%or=s funds a/road and su/se9uen% re%urn %o
lo#al e#onomy in %he form of dire#% in+es%men%.
Trans4shipped in+es%men% or in+es%men% mainly in%ended for F! in some o%her #oun%ry does no% in#rease
#api%al s%o#8.
+! Global rends In FDI
a8 9olume and rends o$ FDI
.ountries :ith the #ost FDI
"a#h year more %han >1 %rillion in F! flo5s in%o #oun%ries around %he 5orld7 /u% %he dis%ri/u%ion is far from
e9ual. :##ordin* %o %he ?@ (onferen#e on Trade and e+elopmen% 1?@(T:27 %he #oun%ries 5i%h %he
*rea%es% share of F! %o G- in 2&11 5ere<
1. 0i/eria
2. Mon*olia
'. Aon* Bon* $:; 1(hina2
4. $ierra 0eone
C. 0u3em/our*
6. $in*apore
7. (on*o repu/li#
D. )el*ium
E. (had
1&. Guinea
Wha%,s s%ri8in* a/ou% %his lis% is %ha% %he e#onomies fall in%o %5o #amps< #oun%ries 8no5n for na%ural resour#e
de+elopmen% and #oun%ries 8no5n for finan#ial /usiness ser+i#es. Mon*olia7 0i/eria7 Guinea7 and (on*o
ha+e si*nifi#an% mineral resour#es and ha+e *arnered %he a%%en%ion of /i* minin* #ompanies su#h as :r#elor
Mi%%al 1@F$"<MT2. O%hers are 8no5n for %he sor% of offshore /an8in* #ompanies %ha% indi+iduals use %o
a+oid %a3es else5here.
4conomies b" otal FDI
Vie5in* F! as a per#en%a*e of G- does no% indi#a%e %he siGe of %he e#onomy /ein* in+es%ed in. $ome of
%he e#onomies lis%ed a/o+e are mu#h lar*erHsmaller %han o%hers in %erms of G- alone7 and 5hen you ran8
e#onomies /y %o%al F! dollars re#ei+ed %he pi#%ure #han*es almos% #omple%ely.
1. ?ni%ed $%a%es< >2CD /illion
2. (hina< >22& /illion
'. )el*ium< >1&2 /illion
4. Aon* Bon* 1(hina2< >E& /illion
C. )raGil< >72 /illion
6. :us%ralia< >66 /illion
7. $in*apore< >64 /illion
D. ;ussia< >C' /illion
E. Fran#e< >4C /illion
1&. (anada< >4& /illion
These 1& #oun%ries %o*e%her re#ei+ed more %han half of %he *lo/al F!7 5i%h %he ?ni%ed $%a%es and (hina
a##oun%in* for o+er 2&6. While se+eral of %hese #oun%ries do ha+e na%ural resour#es %ha% #ould en%i#e forei*n
in+es%men%7 %he real dra5 is %he siGe of %heir popula%ions. : lar*e popula%ion means a lo% of #onsumers7 and a
mul%ina%ional #ompany *enerally 5an%s %o /e near i%s #onsumers. -ro3imi%y allo5s a #ompany %o redu#e %he
#os% of shippin* *oods and allo5s i% %o 8eep a #lose eye on shif%in* #onsumer %as%es. $i%%in* in an offi#e half
5ay a#ross %he 5orld #ould #ause a #ompany %o lose ou%.
Sources o$ FDI
The %hree /asi# %ypes of F! are7 firs%7 and mos% #ommon7 a paren% firm 1%ha% is7 a dominan% firm usually
lo#a%ed in a po5erful e#onomy2 /uyin* sa%elli%e firms in forei*n #oun%ries. $e#ond7 %here is %he #on#ep% of
rein+es%in* %he pur#hased #ompany=s profi%s /a#8 in%o %he hos% #oun%ry. Finally7 %here is %he more %e#hni#al
finan#in* of forei*n affilia%es %hrou*h loans and *uaran%ees.
:##ordin* %o preliminary es%ima%es7 *lo/al F! flo5s ha+e de#lined in 2&12 /y 146 from 2&11 %o ?$ 1.4
%rillion in spi%e of %he 226 in#rease in %he las% 9uar%er /u% remain #ompara/le %o *lo/al F! flo5s in 2&1&.
O"( in+es%men%s a/road de#lined /y 1C6 %o ?$ 11&& /illion in 2&12 a##oun%in* for 776 of *lo/al F!
1D&6 in 2&112 and O"( a%%ra#%ed only ?$ 6D6 /illion of F! 1or 4D6 of *lo/al F!2 represen%in* an
annual de#rease of 216. !n+es%men% %o and from %he "uropean ?nion7 in a**re*a%e7 de#lined /y around 2C6.
(hina /e#ame %he firs% F! des%ina%ion in 2&12 and %he ?ni%ed $%a%es main%ained i%s posi%ion as %he leadin*
in+es%in* e#onomy.
!n 2&127 446 of *lo/al FDI inflows 5ere hos%ed /y only fi+e #oun%ries. (hina a%%ra#%ed %he lion,s share /y
?$ 2C' /illion 1or 1D6 of %o%al2 follo5ed /y %he ?ni%ed $%a%es 1?$ 17C /illion27 )raGil 1?$ 6C /illion27
%he ?ni%ed Bin*dom 1?$ 6' /illion2 and Fran#e 1?$ 62 /illion2.
:% ?$ 11&& /illion7 O"(,s FDI outflows represen%ed 776 of *lo/al ou%flo5s for 2&127 represen%in* a
1C6 de#rease from 2&11. !n %he same period7 %he ?ni%ed $%a%es7 %he lar*es% sin*le in+es%in* e#onomy 5orld4
5ide7 re#orded ?$ 'C1 /illion ou%5ard F! 5hi#h a##oun%ed for 2C6 of *lo/al ou%flo5s 1or '26 of O"(
or '76 of G2& e#onomies2. O%her si*nifi#an% in+es%in* #oun%ries in 2&12 5ere Japan 1?$ 122 /illion27
)el*ium 1?$ DC /illion27 %he ?ni%ed Bin*dom 1?$ 72 /illion27 Germany 1?$ 67 /illion27 (hina 1?$
62.4 /illion2 and Fran#e 1?$ 62.2 /illion2.
.O%07;-<IS4 SO%7.4S OF FDI
(oun%ry45ise sour#es ha+e shif%ed 5i%h %he #han*e of se#%oral dis%ri/u%ion of F!. The emer*en#e of ne5
sour#es of F! may /e of par%i#ular rele+an#e %o lo54in#ome hos% #oun%ries li8e )an*ladesh. !ndeed7 %he role
of de+elopin* and %ransi%ion e#onomies as sour#es of F! is in#reasin* 5i%h %he passa*e of %ime.
Transna%ional (orpora%ions 1T@(s2 from de+elopin* and %ransi%ion e#onomies ha+e /e#ome impor%an%
in+es%ors in many 5ays. )an*ladesh has so far re#ei+ed F! from more %han C' de+eloped and de+elopin*
#oun%ries a#ross %he *lo/e. !n FF 2&&&4&17 ?$ 2&.C6 million #ame from ?.$.:.7 ?$ 26.DE million from
Aon* Bon*7 ?$ 4&.'7 million from $ou%h Borea 7 ?$ 1.2' million from -a8is%an 7 ?$ &.DC million
from $in*apore7 ?$ D.D& million from !ndia and ?$ 17.1D million from Japan.
Source: Bangladesh Ban&' +,(+
!n FF 2&1&4117 )an*ladesh re#ei+ed %o%al ?$ 77E.&4 million F! from 44 #oun%ries amon* 5hi#h %he share
of ?.B. is %he hi*hes% a% ?$ 144.6 million. !n %he same fis#al year7 ma.or sour#es of F! inflo5 5ere<
@e%herlands 1?$ 71.41 million27 Aon* Bon* 1?$ E'.CD million27 ?.$.:. 1?$ E4.1D million27 !ndia
1?$ 2&.71 million27 $ou%h Borea 1?$ 7'.D4 million27 Japan 1?$ 'C.&C million27 ?.:.". 1?$ 22
million2 and -a8is%an 1?$ 24.CE million2.
!f %he #urren% %rend e3is%s7 %he inflo5 of F! mi*h% /e ?$ 24.2 million from $in*apore7 ?$ 147.2 million
from ?.B7 ?$ ED.7 million from Aon* Bon*7 ?$ E1.D million from ?.$.:.7 ?$ 7'.' million from
$ou%h Borea and ?$ 76.4 million from @e%herlands in %he #urren% fis#al year.
Directions o$ FDI
The sour#es of forei*n in+es%men% are also %he primary des%ina%ions of i%. !n o%her 5ords7 %he ma.or
e#onomies in+es% in %hemsel+es *lo/ally. $o 5hile a ma.or sour#e of F!7 @or%h :meri#a is %he re#ipien% of
rou*hly '' per#en% of all F! flo5s. Wes%ern "urope7 a*ain7 is %he re#ipien% of a/ou% '7 per#en% of all F!
mo+emen%. :% %he same %ime7 %he poorer eas%ern "uropean7 :fri#an and 0a%in :meri#an s%a%es re#ei+e a pal%ry
14 per#en% of all F! flo5s #om/ined.

Ais%ori#ally7 mos% F! has /een dire#%ed a% %he de+eloped na%ions of
%he 5orld as firms /ased in ad+an#ed #oun%ries in+es%ed in o%her mar8e%s
I The ?$ has /een %he fa+ori%e %ar*e% for F! inflo5s
While de+eloped na%ions s%ill a##oun% for %he lar*es% share of F! inflo5s7 F! in%o de+elopin* na%ions has
in#reased.
4 Mos% re#en% inflo5s in%o de+elopin* na%ions ha+e /een %ar*e%ed a% %he emer*in* e#onomies of
$ou%h7 "as%7 and $ou%heas% :sia
Destinations o$ FDI
)a#8 in 1ED7 %he main re#ipien%s of forei*n dire#% in+es%men% 5ere de+eloped mar8e%s7 plus some of :sia=s
mira#le e#onomies. "mer*in* mar8e%s /arely fea%ured. Today ;ussia and -oland are in %he %op 2C alon* 5i%h
!ndia7 and of #ourse (hina has mo+ed far up %he ran8in*s for F!. The *lo/al finan#ial #risis of 2&&D
a##elera%ed %he s5i%#h from a fo#us on de+eloped %o de+elopin* #oun%ries. 0as% year for %he firs% %ime7
de+elopin* and %ransi%ion e#onomies a#9uired more %han half of all *lo/al F! inflo5s.
FDI pro=ects into Asia-Paci$ic
espi%e a 14.E66 de#line in %he num/er of pro.e#%s in :sia4-a#ifi# in 2&127 i% 5as s%ill %he leadin* 5orld
re*ion7 a%%ra#%in* '74& pro.e#%s 5i%h a '1.726 *lo/al mar8e% share. :s in 2&117 (hina7 !ndia and $in*apore
5ere %he %hree leadin* #oun%ries for in5ard F!7 a%%ra#%in* more %han half of all pro.e#%s in :sia4-a#ifi#. This
5as despi%e F! in (hina and !ndia fallin* sharply /y 27.&C6 and 2&67 respe#%i+ely.
FDI pro=ects into 4urope
The num/er of F! pro.e#%s in%o "urope de#lined in 2&127 mirrorin* *lo/al %rends. : %o%al of 'DE1 pro.e#%s
5ere re#orded7 represen%in* a 2&.D26 de#rease in #omparison 5i%h 2&11. !n 2&127 %he %op 1& #oun%ries
a##oun%ed for 72.1E6 of F! pro.e#%s in%o "urope.
FDI pro=ects into 0orth America
The num/er of F! pro.e#%s in%o @or%h :meri#a de#lined /y E.4D6 in 2&127 5i%h %he re*ion a%%ra#%in* 1671
F! pro.e#%s durin* %he year. (api%al in+es%men% in 2&12 de#reased /y an es%ima%ed 12.616 and .o/ #rea%ion
/y an es%ima%ed 2.'66 #ompared 5i%h 2&11. espi%e %hese de#lines7 @or%h :meri#a 5as %he /es% performin*
re*ion of %he 5orld in 2&127 5i%h %he de#line in F! mu#h sharper in %he res% of %he 5orld.

FDI pro=ects into /atin America and .aribbean
!n 2&127 %he num/er of F! pro.e#%s in%o 0a%in :meri#a and %he (ari//ean de#lined /y 1E.C267 5i%h %he
re*ion a%%ra#%in* 1117 F! pro.e#%s. (api%al in+es%men% de#reased /y an es%ima%ed C4.E76 and %he re*ion
also e3perien#ed an es%ima%ed 42.2D6 de#line in .o/s #rea%ed.

FDI pro=ects into #iddle 4ast and A$rica
The num/er of F! pro.e#%s in%o %he Middle "as% and :fri#a 1M":2 de#lined /y 11.7D6 in 2&12 %o 1'7&
pro.e#%s. (api%al in+es%men% in %he re*ion fell /y an es%ima%ed 4'.'16 and .o/ #rea%ion /y an es%ima%ed
2'.'26.
FDI into B7I. countries
)raGil7 ;ussia7 !ndia and (hina ha+e all /e#ome ma.or players in *lo/al F!. From 2&&' %o 2&127 %he );!(
#oun%ries a%%ra#%ed 22.2E6 of *lo/al F! pro.e#%s. (hina alone a%%ra#%ed more %han one4%en%h of *lo/al F!
pro.e#%s and has %opped %he re*ional ran8in*s e+ery year sin#e 2&&'. );!( #oun%ries ha+e a%%ra#%ed 267&27
pro.e#%s sin#e 2&&'7 5i%h es%ima%ed #api%al in+es%men% of >22'&/n7 #rea%in* appro3ima%ely D million .o/s
dire#%ly. The hi*hes% +olume of F! in%o %he );!( #oun%ries 5as in 2&&D7 5i%h a %o%al of '2&C pro.e#%s
re#orded
FDI $orecast $or +,(-
For 2&1'7 5orld G- *ro5%h is e3pe#%ed %o /e lo5er %han in 2&127 5i%h e#onomi# s#lerosis in "urope and
e3pe#%ed slo5er *ro5%h in %he ?$ and many emer*in* mar8e%s. This 5ill impa#% ne*a%i+ely on F! de#isions
as 5ill %he #on%inued de/% #risis in "urope and un#er%ain%y o+er /ud*e%s in %he ?$. We %herefore e3pe#% a
sharp de#line in *reenfield F! of a/ou% 2&6 in 2&1'7 5i%h all re*ions of %he 5orld impa#%ed. We e3pe#%
mos% lo#a%ions 5ill s%ru**le %o main%ain %heir 2&12 le+els of F!. While in pre+ious years %here 5ere *ro5%h
indus%ries su#h as #rea%i+e indus%ries or rene5a/le ener*y helpin* %o 8eep up o+erall F! +olumes7 in 2&1'
5e do no% see any indus%ry offerin* s%ron* *ro5%h prospe#%s I 5i%h perhaps %he e3#ep%ion of oil and *as and
hea+y indus%ry in @or%h :meri#a and in o%her #oun%ries #ommer#ialiGin* %heir shale *as deposi%s on a lar*e
s#ale. ;o/us% and sus%ained *ro5%h in F! 5ill re9uire a resolu%ion of %he de/% #risis in "urope7 poli#y
#er%ain%y in %he ?$7 and *rea%er poli%i#al s%a/ili%y in %he Middle "as% and par%s of :fri#a. "ffe#%i+e poli#y
responses %o %he e#onomi# and poli%i#al #hallen*es /ein* fa#ed /y ma.or emer*in* mar8e%s su#h as )raGil
also need %o /e found. The F! mar8e% is %herefore only li8ely %o *ro5 a*ain in 2&14 a% %he earlies%.
.onclusion
The shif% of F! %o emer*in* mar8e%s #on%inued %o *a%her pa#e in 2&117 5i%h :fri#a and 0a%in :meri#a and
%he (ari//ean re#ordin* %he fas%es% *ro5%h in in5ard F!. From a *lo/al perspe#%i+e7 F! is lar*ely mar8e%4
see8in*7 5hi#h e3plains 5hy %he e#onomi# re*ions 5i%h %he /es% e#onomi# *ro5%h prospe#%s are a%%ra#%in* a
lar*er share of *lo/al F!. This %rend is amplified /y resour#e4see8in* F!7 5i%h :fri#a7 0a%in :meri#a and
resour#e4ri#h #oun%ries in :sia a%%ra#%in* more in+es%men%. :s %he #ase of @or%h :meri#a sho5s7 %he shif% in
F! %o e#onomi# *ro5%h poles and resour#e4ri#h #oun%ries does no% ne#essarily resul% in less F! in %he
ad+an#ed e#onomiesJ F! in @or%h :meri#a #on%inued %o *ro5 in 2&11. Ao5e+er7 5i%hou% s%ron* e#onomi#
*ro5%h or na%ural resour#es 1su#h as +as% shale oil and *as reser+es in @or%h :meri#a27 %here are fe5er
in+es%men% oppor%uni%ies7 leadin* %o a de#line in F!. Wi%h limi%ed na%ural resour#es7 "urope is unli8ely %o
a#hie+e *ro5%h in F! 5i%hou% solid e#onomi# *ro5%h.
+! FDI : Bangladesh Perspectives
The #urren% issue of %he )an*ladesh "#onomi# ?pda%e fo#uses on %he ma*ni%ude7 dynami#s7 se#%oral
dis%ri/u%ion7 and #oun%ry45ise sour#es of F! inflo5 in %he #oun%ry. The flo5 of forei*n dire#% in+es%men% is
of u%mos% impor%an#e in %he #urren% /a#8drop of o+erall slump in in+es%men% in %he e#onomy in re#en% days.
!f F! falls7 i% 5ill redu#e in+es%men%7 5hi#h in %urn 5ill shrin8 employmen% *enera%ion. These may lead %o
de#line in #onsump%ion le+el and sa+in*s 5ill fa#e a do5n5ard %rend. There 5ould /e7 as a resul%7 a
#on%a*ious pressure on %he G- *ro5%h of )an*ladesh.
Forei*n ire#% !n+es%men% 1F!2 is #onsidered as one of %he #ru#ial in*redien%s for fos%erin* e#onomi#
de+elopmen% of a de+elopin* #oun%ry. (oun%ries %ha% are la**in* /ehind %o a%%ra#% F! are formula%in* and
implemen%in* ne5 poli#ies for a%%ra#%in* more in+es%men%. "+en #ompared %o o%her $ou%h :sian #oun%ries7
F! inflo5 %o )an*ladesh has %radi%ionally /een lo5er.
The fu%ure ou%loo8 of F! is *rim. )ased on %he re#en% years, performan#e7 i% is predi#%a/le %ha% %he share of
F! as per#en%a*e of G- may de#line /y 5idenin* *aps /e%5een %he pro.e#%ed medium %erm %ar*e%s /y %he
*o+ernmen% and %he a#%ual re#eip%s of %he inflo5. The F! inflo5s as per#en%a*e of %o%al in+es%men% may
de#line fur%her.
FDI F/O< I0 BA0G/AD4S>
There is no re*ular %rend in %he flo5 of F! 1Fi*ure 12. The flo5 of F! in#reased a% a s%a**erin* ra%e of
64.4C7 47.16 and 1D2.D6 per#en% in FF 1EE74ED7 FF 2&&&4&1 and FF 2&&44&C respe#%i+ely %han %ha% of FF
1EE64E77 FF 1EEE4&& and FF 2&&'4&4. The flo5 of F! %o%als a% ?$ 6&'.' million7 ?$ C6'.E' million
and ?$ D&'.7D million in FF 1EE74ED7 FF 2&&14&2 and FF 2&&44&C respe#%i+ely. :f%er FF 2&&44&C7 %he
flo5 of F! de#lined in %he ne3% %hree fis#al years. The #oun%ry re#ei+ed an in#reased amoun% of ?$ E6& .
CE million in FF 2&&D4&E /u% 5i%nessed a fall in F! inflo5 in ne3% fis#al years.
!n %he follo5in* %a/le %he $e#%oral is%ri/u%ion of pri+a%e #api%al inflo5s and ou%flo5s in%o )an*ladesh from
1EE6 %o 2&1& are *i+en<
'able ( 1 )rofile of $apital inflows *+ years average,
Sectors F; (55)-,, F; +,,(-,* F; +,,)-(,
Gas 1'4 21D 114
-o5er 11' 1E' 174
Tele#om 17 17 17
F! in "-K CD 12' 1EE
O%her F! 1C& 2&C 241
To%al F! inflo5 472 7C7 744
e/% inflo5 14E 1C4 1CE
To%al inflo5< F!Lde/% 621 E11 E&2
Source ( )ortfolio - "eview of $apital mar.et and national economy by
$hittagong stoc. /0change.
FDI AS A P47.40AG4 OF OA/ I094S#40
There is no %ar*e% of %he #on%ri/u%ion of F! in %o%al in+es%men% in *o+ernmen%,s Medium Term
Ma#roe#onomi# Frame5or8 1MTMF2. The share of F! in %o%al in+es%men% is follo5in* a do5n5ard %rend.
F! as per#en%a*e of %o%al in+es%men% 5as %he hi*hes% in FF 1EE74ED 5hile %he #on%ri/u%ion of F! in %o%al
in+es%men% 5as 7.' per#en%. :f%er %hen F! as per#en%a*e of %o%al in+es%men% 5as %he hi*hes% in FF 2&&&4&1
5hile %he #on%ri/u%ion of F! in %o%al in+es%men% 5as C.6 per#en%.
The share of F! in %o%al in+es%men% in FF 2&&D4&E in#reased af%er #on%inuous de#linin* in %hree su##essi+e
fis#al years. !n FF 2&&D4&E7 %he share of F! in G- 5as 1.&7 per#en%. Glo/al e#onomi# re#ession had an
ad+erse effe#% on %he flo5 of F! in %he #oun%ry. The share of F! in %o%al in+es%men% 5as 4.417 '.7' and 2.DC
per#en% in FF 2&&D4&E7 FF 2&&E41& and FF 2&1&411 respe#%i+ely. !f %he #urren% %rend of F! inflo5 persis%s7 %he
share of F! in %o%al in+es%men% mi*h% s%and a% 2.E4 per#en% in FF 2&11412 and '.&' per#en% in FF 2&1441C.
Bangladesh: Government polic" instrument
he ma=or incentives $or $oreign direct investment in Bangladesh are:
-ro.e#%ion of Forei*n in+es%men% from na%ionaliGa%ion and e3propria%ion
:/oli%ion of #eilin* on in+es%men% and e9ui%y share4holdin* /y forei*ners
Ta3 holiday /e%5een C I 1& years po5er *enera%in* #ompanies
:##elera%ed depre#ia%ion in lieu of %a3 holiday on #er%ain simple #ondi%ions
(on#essionary du%y and V:T on #api%al ma#hinery and spares
;a%ionaliGa%ion of impor% du%ies and %a3es
$i3 mon%h mul%iple +isa for prospe#%i+e in+es%ors
(i%iGenship /y in+es%in* ?$ C&&7&&& or %ransferrin* ?$ 17&&&7&&&
-ermanen% rela%ionship /y in+es%in* ?$ 7C7&&&
Ta3 e3emp%ion on #api%al *ains under #er%ain simple #ondi%ions
)onded 5arehouse and /a#8 %o /a#8 0H( for e3por%in* indus%ries
:+oidan#e of dou/le %a3a%ion 5i%h #er%ain #oun%ries
Fa#ili%ies for repa%ria%ion of #api%al7 profi%7 royal%y7 %e#hni#al fee e%#.
Ta3 e3emp%ion on royal%y7 %e#hni#al 8no54ho5 and e3pa%ria%es, salary
-ro%e#%ion of in%elle#%ual proper%y ri*h%s
Ta8a #on+er%i/ili%y in #urren% a##oun%
Trea%in* rein+es%men% of repa%ria/le di+idend as ne5 in+es%men%
Bangladesh : #a=or sources o$ FDI ?trends and volume o$ FDI in BD8
rends o$ FDI In$lo: b" Sources:
.ountr" :ise distribution o$ $oreign private investment
The ma.or sour#es of in+es%men% lead /y :sia 14C627 follo5ed /y "urope 1'262 and @or%h :meri#a 11762.
@or5ay 5as %he sin*le lar*es% in+es%or 11E627 follo5ed /y %he ?ni%ed $%a%es 117627 $in*apore 11462 and
Aon* Bon* 1(hina2 and Malaysia 1E6 ea#h2. Mos% of %he F! from @or5ay 5as in %ele#om and from %he
?ni%ed $%a%es in %he ser+i#es se#%or 1i.e. po5er *enera%ion7 oil and *as7 li9uefied pe%roleum *as /o%%lin*7
Medi#are ser+i#e2. !n+es%men%s from :sia7 par%i#ularly $ou%h7 "as% and $ou%h4"as% :sia7 5ere #on#en%ra%ed in
manufa#%urin*.
The ma.or in+es%ors in#lude :$" and ?no#al 1?ni%ed $%a%es27 ):$F 1Germany27 (eme3s 1Me3i#o27 Aol#im
and @es%le 1$5i%Gerland27 0afar*e and To%al Fina"lf 1Fran#e27 Taiheyo 1Japan27 Telenor 1@or5ay2 and TM!
1Malaysia2.
From 41E7742&1&
Sl
0o!
.ountr" 0o! o$
%nit
Investment In
%SD@million
Percentage
?A8
4mplo"ment
opportunities
?person8
1 :us%ralia ' 1.C61 &.&26 4E
2 )ri%ish Ver*in !sland 2 '.24E &.&C6 1E74
' (anada 1 1.&72 &.&26 C6C
4 (hina C4 CC.622 &.7E6 7&71
C enmar8 7 6.67' &.1&6 12E1
6 "*yp% 2 177.14E 2.C'6 24'
7 Finland 2 '.744 &.&C6 'C&
D Fran#e ' 1.DED &.&'6 2277
E Germany 4 2.C&D &.&46 11C
1& Gree#e 1 &.714 &.&16 C&4
11 Aon* Bon* 1D 4C.121 &.646 11147
12 !ndia 4' E'.D&' 1.'46 7ED2
1' !reland 2 &.'76 &.&16 6&
14 !%aly ' 1.&'E &.&16 D4'
1C Japan E 1E.C17 &.2D6 ''E7
16 Jordan 1 &.'E4 &.&16 22&
17 B$: 4 1DC&.4&6 26.'E6 21C4
1D Bu5ai% 1 &.1' &.&&6 7'
1E Malaysia 7 162.&&6 2.'16 D''
2& @e5 Keland 1 &.1'' &.&&6 62
21 -a8is%an 16 1'.14' &.1E6 146D
22 -hilippines 1 &.4E2 &.&16 C'
2' ;ussian Federa%ion 1 &.'7 &.&16 7E
24 $ou%h Borea DD 12'.7&D 1.766 46&DE
2C $in*apore E C1.6'6 &.746 1D42
26 $pain ' 1.&C &.&16 E26
27 $ri 0an8a 12 1&.D74 &.166 14&7
2D $5eden 6 '.E&D &.&66 72C
2E $5iG5lerland 6 24.4CC &.'C6 6&'
'& Tai5an 17 '7.6C2 &.C46 74EE
'1 Thailand D 4D.41D &.6E6 D&4
'2 The @e%herlands 7 'C1.1E7 C.&16 CEC
'' Tur8ey 2 1.441 &.&26 2&6E
'4 ?ni%ed :ra/
"mira%es
6 222E.DED '1.D&6 6C1'
'C ?ni%ed Bin*dom 4C EC2.&'C 1'.CD6 261E4
'6 ?$: 2' 7'C.'76 1&.4E6 'DD1
otal 1(3 2,(+!2)3 (,,A (1(5*2
Source Investment Implementation &onitoring $ell *II&$,1 2oard of Investment.
Country wise distribution of foreign private investment
On %he a/o+e %a/le7 a #oun%ry45ise analysis of forei*n in+es%men% pro.e#%s re*is%ered from FF 1E7742&1&
sho5s %ha% %op fi+e in+es%men% re*is%erin* #oun%ries are ?ni%ed :ra/ "mira%es 1'1.D 627 B$: 126.'E627 ?B
11'.CD627 ?$: 11&.4E62 and @e%herland 1C.&1 62.
"uropean ?nion and Wes%ern "uropeJ $ou%h7 "as% and $ou%h "as% :siaJ and @or%h :meri#a are %he main
sour#es of F! in )an*ladesh.
$ou%h7 "as% and $ou%h "as% :sia is %he se#ond lar*es% sour#e of F! led /y ?ni%ed :ra/ "mira%es
1'1.D 627 B$: 126.'E627
"urope as a 5hole is one of %he lar*es% sour#e of F! in )an*ladesh from 1E7742&1&. This 5as
mainly *eared up /y Fren#h in+es%men% in #emen% se#%or.
"uropean in+es%men%s spread o+er manufa#%urin* and ser+i#e se#%ors li8e %e3%ile7 #emen%7 a*ro
#hemi#al7 lea%her *oods7 dru*s and pharma#eu%i#als7 %ale4#ommuni#a%ion7 0-G /o%%lin*7 lu/ri#an%s7
po5er *enera%ion7 indus%rial *as e%#.
!n+es%men%s from $ou%h7 "as% and $ou%h "as% :sian na%ions li8e (hina7 Aon* Bon*7 !ndia7 Malaysia7
-a8is%an7 $in*apore7 $ri 0an8a7 Tai5an and Thailand are #on#en%ra%ed on manufa#%urin* se#%ors
Bangladesh: Industr" Distribution o$ FDI
Sectoral Distribution o$ FDI:
There ha+e /een se+eral shif%s *lo/ally in %he #on#en%ra%ion and #omposi%ion of F! amon* se#%ors.
(onse9uen%ly7 %he #oun%ry has also 5i%nessed a hu*e shif% in se#%or45ise and #oun%ry45ise flo5 of F! in %he
#urren% de#ade. The firs% ma.or #omposi%ional shif% 5as 5i%hin manufa#%urin* from impor%4su/s%i%u%es %o
e3por% orien%ed manufa#%urin*. : more re#en% shif% of F! has /een seen %o5ards ser+i#es.
@o re*ular %rend has /een found in se#%oral #on%ri/u%ion of F! inflo5 in %he #oun%ry in %he #urren% de#ade.
!n %he FF 2&&'4&4 %o FF 2&&64&77 F! inflo5 in po5er7 *as & pe%roleum in#reased due %o %he in+es%men% of
M:sia "ner*yN in Ful/ari #oal minin* pro.e#%. Ao5e+er7 F! in po5er7 *as and pe%roleum in FF 2&&64&7 5as
?$ 22E.E' million and af%er %ha% year7 i% s%ar%ed %o de#line and mi*h% follo5 an in#reasin* %rend in %he fis#al
year 5i%h an F! flo5 of only ?$ 12D.4& million. The re#eip% of F! in %ele#ommuni#a%ion se#%or in
#alendar year
The *ro5%h of manufa#%urin* se#%or is e+iden% from %he %a/le /elo5<
Sectoral Distribution of FDI during !334-13.
Sl 0o! Sector 0o! o$
%nit
Investment
In %S
million
Percentage
?A8
4mplo"ment
opportunities
?person8
1 :*ro )ased CE 1C4.2E 2.2&6 2474'4
2 (hemi#al 6C 17EDC.E4 2D.'26 67147
' "n*ineerin* C7 'D.E6 &.C66 47'DD
4 Food & :llied 1' 1E.11 &.276 17662
C Glass &(erami# ' D.1E &.126 '2D
6 -ain%in* & -a#8a*in* 7 2.27 &.&'6 '2C
7 Tannery & ;u//er
produ#%
4 4.&1 &.&66 6&2
D Te3%ile 11C 221.26 '.166 D47C7D
E $er+i#e E1 47C7C.E& 6C.2C6 1D77CD
1& Mis#ellaneous 7 2.D' &.&46 7'C
To%al 421
77&12.77
1&&6
1417EC7
Source investment Implementation &onitoring $ell *II&$,1 2oard of Investment.
$our#e< )an*ladesh )an87 2&12
Te3%ile is %he hi*hes% re#ipien% of F! 1'.1662 follo5ed /y #hemi#als 12D.'262. The *armen%s in
"-Ks lar*ely #on%ri/u%e %e3%ile se#%or. Ao5e+er7 $er+i#e se#%or is lar*ely #on%ri/u%ed /y 16C.2C62.
"ner*y and *as se#%or has sharply de#lined 1only &.462 %o a%%ra#% F! durin* %his period. Gi+en %he
presen% u%ili%y infras%ru#%ure si%ua%ion of %he #oun%ry and pro.e#%in* fas%er *ro5%h of indus%ry in
#omin* years7 ener*y and *as #ould /e a%%ra#%i+e se#%or for in+es%men% in fu%ure.
: %remendous *ro5%h in %he manufa#%urin* se#%or indi#a%es prospe#%i+e *ro5%h of %he indus%ry in %he
up#omin* years. !% 5ill also fa#ili%a%e #rea%in* .o/ oppor%uni%ies and $M" de+elopmen%.
Tele#ommuni#a%ion has emer*ed as %he 1
s%
lar*es% se#%or ha+in* hu*e *ro5%h po%en%ial in %he reformed
en+ironmen% of %ele#om se#%or.
FDI I0F/O< B; .O#PO040S
This analysis is /ased upon %he performan#e of %he %hree #omponen%s of F! inflo57 namely e9ui%y7 rein+es%men%
and in%ra4#ompany /orro5in*. F! flo5 %o )an*ladesh in %he form of e9ui%y #api%al has /een sho5in* an erra%i#
mo+emen% and i% 5as diffi#ul% %o es%ima%e %he fu%ure %rends of %his. Ao5e+er7 if 5e /an8 upon %he %rends af%er
2&&E7 i% #an /e assumed %ha% %here #ould /e posi%i+e %rend of F! flo5 in e9ui%y form7 if %he #urren% en+ironmen%
5ould pre+ail in %he #omin* years. Whils% rein+es%men% is sho5in* some s%eady %rends7 %he in%ra #ompany loan
inflo5 re+eals a do5n5ard %rend.
4Buit" .apital
"9ui%y #api%al refers %ha% an in+es%or #an /uy share of an en%erprise in a forei*n #oun%ry7 i.e. o%her %han %he
home #oun%ry. "9ui%y #api%al %ou#hed i%s hi*hes% amoun% in FF 2&&74&D a% ?$ C4C.6E million. Ao5e+er7 in
ne3% %5o su##essi+e fis#al years7 %his amoun% /e#omes ?$ C'C.42 million and ?$ C1C.14 million. ?nder
%he /usiness as usual s#enario %he amoun% of e9ui%y #api%al mi*h% in#rease %o ?$ 2D&.1C million in FF
2&1441C.
7einvested 4arning
;ein+es%ed earnin*s imply %he in+es%or=s share of earnin* from %he dire#% par%i#ipa%ion. ;ein+es%men% earnin*
is in#reasin* a% a de#reasin* ra%e o+er %he years. !n FF 2&1&4117 %he amoun% of rein+es%ed earnin*s %o%als
?$ 44C.1E million. !f %he flo5 of rein+es%men% earnin* #on%inues7 %he amoun% of rein+es%men% earnin*
mi*h% rea#h a% ?$ C2'.C7 million in FF 2&1441C.
Intra-.ompan" /oan
!n%ra4(ompany loan means shor% and lon* %erm lendin* and /orro5in* /e%5een forei*n in+es%or and
affilia%ed #ompany. There is no re*ular shape in %he flo5 of in%ra4#ompany /orro5in* loans. !n FF 2&&E41&7
%his amoun% 5as ?$ 66.7D million /u% in FF 2&1&4117 %his amoun% in#reased %o ?$ D'.E million.
(on%inua%ion of %he #urren% %rend su**es%s %ha% %his amoun% mi*h% rea#h a% ?$ DC.24 million in FF 2&1441C.
FDI I0F/O< B; 4PC A0D 0O0-4PC
0o5 la/or #os% is of%en #i%ed as %he mos% impor%an% fa#%or /y %he pri+a%e as 5ell as %he pu/li# se#%ors in
)an*ladesh. For e3por%4orien%ed a#%i+i%ies7 %he *o+ernmen% has se% ei*h% "3por% -ro#essin* Kones 1"-Ks2. The
ad+an%a*es of "-Ks in#lude fa#ili%a%ion ser+i#es and a +arie%y of fis#al and non4fis#al in#en%i+es. Ao5e+er7 %he
inflo5 of F! in "-Ks has no% in#reased ye% in #omparison %o non4"-Ks.
!n FF 2&&D4&E7 F! in non4"-K areas rea#hed i%s ma3imum amoun% a% ?$ D'1.2C million a*ains% ?$
12E.'4 million of "-Ks. F! in non4"-K areas does no% #rea%e as mu#h employmen% oppor%uni%ies %ha% are
#rea%ed in "-K areas. ?n%il :u*us% 2&117 %o%al in+es%men% in "-K areas is ?$ C'.1D million and %o%al lo#al
employmen% is 17D2. !n FF 2&1&4117 non4"-K areas re#ei+ed ?$ CE7.CE million %ha% is 76.71 per#en% of
%o%al F! and 21.C7 per#en% less %han %ha% of %he FF 2&&E41&. ?$ 1D1.4C million 5as in+es%ed in "-K areas
in FF 2&1&411 %ha% is 2&.&D per#en% more %han %ha% of %he pre+ious fis#al year and only 2'.2E per#en% of %o%al
F!. ?nder %he /usiness as usual s#enario7 F! in "-K areas mi*h% in#rease %o only ?$ 217.C4 million in
FF 2&1441C7 5hi#h 5ill /e only 24.47 per#en% of %o%al F!. :% %he same %ime7 F! in non4"-K areas mi*h%
in#rease %o only ?$ 671.61 million %ha% 5ill a/ou% 7C.4D per#en% of %o%al F!.
FI0A0.IA/ A..O%0 BA/A0.4S
F! plays a si*nifi#an% role for a #ompara%i+ely lo5er amoun% of ne*a%i+e finan#ial a##oun% /alan#e in any
e#onomy. Finan#ial a##oun% defi#i% is in#reasin* a% s%a**erin* ra%e in re#en% fis#al years and mi*h% #on%inue
fur%her due %o %he lo5 in#remen%al *ro5%h of F! inflo5 and ne*a%i+e share of /o%h por%folio and o%her
in+es%men%.
!n FF 2&1&4117 %here 5as a lo5er share of ne% F! of ?$ 76D million %ha% is 1C.DD per#en% lo5er %han %he
pre+ious fis#al year 5hile i% 5as ?$ E1' million in FF 2&&E41& in finan#ial a##oun% /alan#e. Finan#ial
a##oun% defi#i% in FF 2&1&411 5as ?$ 1CD4 million 5hile por%folio and o%her in+es%men% 5i%nessed a
shor%fall of ?$ 2D million and ?$ 2'24 million respe#%i+ely.
(on%inua%ion of %he #urren% %rend su**es%s %ha% %here mi*h% /e an F! inflo5 of ?$ D&6 million in FF 2&114
12 5hile por%folio and o%her in+es%men% mi*h% 5i%ness shor%fall of ?$ '&.&2 million and ?$ 2CCC.D
million in FF 2&11412. !% re+eals %ha% %here mi*h% /e a defi#i% of ?$ 17&'.' million in finan#ial a##oun%
/alan#e. ?nder %he /usiness as usual s#enario7 finan#ial a##oun% defi#i% in FF 2&1441C7 mi*h% in#rease %o
?$ 2&61.2 million 5hile %he share of ne% F! inflo5 mi*h% /e a% ?$ E1E million.
.onclusion:
F! is no% only a s%ra%e*i# op%ion for a #oun%ry7 /u% also a 8ey fa#%or in %he na%ional e#onomi# de+elopmen%. !%
is seen in %he s%udy %ha% %here are some in%errela%ed adminis%ra%i+e /arriers %ha% resul% inferiori%y in poli#y
formula%ion and implemen%a%ion7 #ompe%i%i+e dra5/a#8s7 poor 9uali%y of s8ills and infras%ru#%ure7 ineffe#%i+e
ins%i%u%ions7 and /elo5 a+era*e *o+ernan#e 5hi#h dampen po%en%ial of F!. !n +ery re#en% %he 9uarrelsome
poli%i#al en+ironmen% has /een #han*ed and hopefully7 ne5 era of in+es%men% for %he na%i+e and forei*n
in+es%ors has /een s%ar%ed. )esides %he a/o+e i% has also /een found ou% %ha% %he mos% F! in re#en% years
*oes %o Tele#ommuni#a%ions7 ;MGs7 "ner*y and -o5er o%her profi%a/le area. :nalysis of %his papers sho5s
%ha% :*ri#ul%ural7 !ndus%rial and Trade & (ommer#e *e% +ery ne*li*i/le amoun% of F!. Go+ernmen% has
%a8en a lo% of poli#ies on forei*n in+es%men%7 5hi#h are /ein* said li/eral7 suppor%i+e and fo#used7 /u% ye% %he
poli#ies ha+e /een pro+en so. )esides7 %he a/o+e i% has also /een found ou% %ha% )an*ladesh is no% full of
hindran#es of F!7 /u% some oppor%uni%ies and prospe#%s are also a+aila/le in %his hos% #oun%ry.
-! Global 4nvironment o$ #0.:-
Political 4nvironment
he Political 4nvironment affe#%s oppor%uni%ies a% a lo#al or in%erna%ional le+el. The #ri%i#al #on#ern
-oli%i#al en+ironmen% has a +ery impor%an% impa#% on e+ery /usiness opera%ion no ma%%er 5ha% i%s siGe7 i%s
area of opera%ion. Whe%her %he #ompany is domes%i#7 na%ional7 in%erna%ional7 lar*e or small poli%i#al fa#%ors of
%he #oun%ry i% is lo#a%ed in 5ill ha+e an impa#% on i%. :nd %he mos% #ru#ial & una+oida/le reali%ies of
in%erna%ional /usiness are %ha% /o%h hos% and home *o+ernmen%s are in%e*ral par%ners. ;efle#%ed in i%s poli#ies
and a%%i%udes %o5ard /usiness are a *o+ernmen%s idea of ho5 /es% %o promo%e %he na%ional in%eres%7
#onsiderin* i%s o5n resour#es and poli%i#al philosophy. : *o+ernmen% #on%rol=s and res%ri#%s a #ompany=s
a#%i+i%ies /y en#oura*in* and offerin* suppor% or /y dis#oura*in* and /annin* or res%ri#%in* i%s a#%i+i%ies
dependin* on %he *o+ernmen%. Aere s%eps in in%erna%ional la5. !n%erna%ional la5 re#o*niGes %he ri*h% of
na%ions %o *ran% or 5i%hhold permission %o do /usiness 5i%hin i%s poli%i#al /oundaries and #on%rol i%s #i%iGens
5hen i% #omes %o #ondu#%in* /usiness. Thus7 poli%i#al en+ironmen% of #oun%ries is a #ri%i#al #on#ern for %he
in%erna%ional mar8e%er and he should e3amine %he salien% fea%ures of poli%i#al fea%ures of *lo/al mar8e%s %hey
plan %o.
/egal 4nvironment
/egal is %he mee%in* re9uiremen%s under la5. The le*al sys%em may/e deri+ed from #ommon la57 #i+il la57
so#ialis% la57 or Muslim la57 and i% is a refle#%ion of %he #oun%ry,s #ul%ure7 reli*ion7 and %radi%ions.
he legal environment in#ludin* 0e*al $u/.e#%s 1in%erna%ional la57 #ons%i%u%ional and adminis%ra%i+e la57
#on%ra#% la57 e%#27 0e*al Theory7 0e*al !ns%i%u%ions 1 Judi#iary7 0e*isla%ure7 "3e#u%i+e7 Mili%ary and poli#e 7
)ureau#ra#y 7 0e*al profession 7 (i+il so#ie%y 2 and 0e*al $ys%em. M@(s mus% #arefully e+alua%e le*al
frame5or8 in ea#h mar8e% /efore doin* /usiness. Whe%her 5hi#h #oun%ry of %he $our global $oundations o$
la: 5here %he M@(s run and 5ha% basic principles o$ international la: of hos%,s #oun%ry is.
Four Global Foundations o$ /a:
Islamic /a:: deri+ed from in%erpre%a%ion of Our,an and %ea#hin*s of -rophe% Muhammad. !% founds in
!slami# #oun%ries 4 Middle "as% and #en%ral :sia.
Socialist /a:: i% ori*ins in Mar3is% so#ialis% sys%em %ha% re9uires mos% proper%y %o /e o5ned /y s%a%e or
s%a%e en%erprises. (on%inues %o influen#e re*ula%ions in former #ommunis% #oun%ries are Mem/ers of former
$o+ie% ?nion7 -eoples, ;epu/li# of (hina7 Vie%nam7 @or%h Borea7 and (u/a
.ommon /a:< i% ori*ins in "n*lish la57 and i% is founda%ion of le*al sys%em for ?ni%ed $%a%es7 (anada7
"n*land7 :us%ralia7 @e5 Kealand.
.ivil or .ode /a:< i% deri+ed from ;oman la57 and i% 5as found in non4!slami# and non4so#ialis%
#oun%ries< Fran#e7 some 0a%in :meri#an #oun%ries7 0ouisiana in %he ?.$!' Bin*dom of (am/odia.
echnological 4nvironment
Te#hno*lo/alism is %he phenomenon in 5hi#h rapid de+elopmen%s in informa%ion and #ommuni#a%ion
%e#hnolo*ies 1!(Ts2 are propellin* *lo/aliGa%ion and +i#e4+ersa. :n M@(,s ma.or #on#ern is %he
appropria/ili%y of %e#hnolo*y I %ha% is7 %he a/ili%y of %he inno+a%in* firm %o profi% from i%s o5n %e#hnolo*y /y
pro%e#%in* i% from #ompe%i%ors. The %e#hnolo*y has a ma.or impa#% on %he /usiness. !% affe#%s %he /usiness
prospe#%s7 #u%s do5n %he profi%s and for#es %he mana*emen% %o #han*e %he #ourse of /usiness opera%ions. :ny
#han*e in %e#hnolo*y #han*es %he 5or8 #ul%ures7 %he me%hods and %he sys%ems. !% affe#%s %he speed of %he
opera%ions and *i+es a /oos% %o %he produ#%i+i%y of %he produ#%ion sys%em. "3amples of %e#hnolo*i#al #han*es
are seen in a+ia%ion7 ele#%roni#s7 ener*y7 #ommuni#a%ion7 #us%omer *oods indus%ry7 op%i#s7 medi#ines and
manufa#%urin*.
.ultural 4nvironment
0ational .ulture - %he +alues and a%%i%udes shared /y indi+iduals from a spe#ifi# #oun%ry %ha% shape %heir
/eha+ior and /eliefs a/ou% 5ha% is impor%an%. (ul%ural en+ironmen% refers %o %he #ul%ures in 5hi#h a firm
opera%es. (ul%ure is %he pa%%erns of /eliefs and +alues %ha% are manifes%ed in pra#%i#es7 /eha+iors7 and +arious
ar%ifa#%s %ha% dis%in*uish %he mem/ers of one *roup or #a%e*ory of people from ano%her 1Aofs%ede7 1ED&J Tri#e
& )eyer7 1EE'2. When #onsiderin* #ul%ure in in%erna%ional %ransa#%ions i% /e#omes mos% impor%an% %o spea8
of %he #ul%ural en+ironmen% in %erms of #ul%ural dis%an#e7 5here #ul%ural dis%an#e refers %o %he differen#es
/e%5een #ul%ures. (ul%ural dis%an#e has /een demons%ra%ed %o influen#e %he effe#%i+eness of #ommuni#a%ion
and informa%ion sharin* /e%5een or*aniGa%ions7 %herefore /ein* appli#a/le %o %he s%udy of %e#hnolo*y %ransfer
/e%5een an M@( and i%s su/sidiaries.
Global rade Institutions
<orld rade OrganiDation ?<O8 - a *lo/al or*aniGa%ion of 1C' #oun%ries %ha% deals 5i%h %he rules
of %rade amon* na%ions. The World Trade Or*aniGa%ion 1WTO2 is %he only *lo/al in%erna%ional
or*aniGa%ion dealin* 5i%h %he rules of %rade /e%5een na%ions. :% i%s hear% are %he WTO a*reemen%s7
ne*o%ia%ed and si*ned /y %he /ul8 of %he 5orld,s %radin* na%ions and ra%ified in %heir parliamen%s. The
*oal is %o help produ#ers of *oods and ser+i#es7 e3por%ers7 and impor%ers #ondu#% %heir /usiness.
International #onetar" Fund ?I#F8 - an or*aniGa%ion of 1DC #oun%ries %ha% promo%es in%erna%ional
mone%ary #oopera%ion and pro+ides ad+i#e7 loans7 and %e#hni#al assis%an#e. The !MF promo%es
in%erna%ional mone%ary #oopera%ion and e3#han*e ra%e s%a/ili%y7 fa#ili%a%es %he /alan#ed *ro5%h of
in%erna%ional %rade7 and pro+ides resour#es %o help mem/ers in /alan#e of paymen%s diffi#ul%ies or %o
assis% 5i%h po+er%y redu#%ion. Throu*h i%s e#onomi# sur+eillan#e7 %he !MF 8eeps %ra#8 of %he
e#onomi# heal%h of i%s mem/er #oun%ries7 aler%in* %hem %o ris8s on %he horiGon and pro+idin* poli#y
ad+i#e. !% also lends %o #oun%ries in diffi#ul%y7 and pro+ides %e#hni#al assis%an#e and %rainin* %o help
#oun%ries impro+e e#onomi# mana*emen%. This 5or8 is /a#8ed /y !MF resear#h and s%a%is%i#s.
<orld Ban& Group - a *roup of fi+e #losely asso#ia%ed ins%i%u%ions %ha% pro+ides finan#ial and
%e#hni#al assis%an#e %o de+elopin* #oun%ries. The <orld Ban& Group 1<BG2 is a family of fi+e
in%erna%ional or*aniGa%ions %ha% ma8e le+era*ed loans %o poor #oun%ries. !% is %he lar*es% and mos%
famous de+elopmen% /an8 in %he 5orld and is an o/ser+er a% %he ?ni%ed @a%ions e+elopmen% Group.
The /an8 is /ased in Washin*%on7 .(. and pro+ided around >'& /illion in loans and assis%an#e %o
Pde+elopin*P and %ransi%ion #oun%ries in 2&12. The /an8=s mission is %o redu#e po+er%y. The World
)an8=s 1%he !); and !:=s2 a#%i+i%ies are fo#used on de+elopin* #oun%ries7 in fields su#h as human
de+elopmen% 1e.*. edu#a%ion7 heal%h27 a*ri#ul%ure and rural de+elopmen% 1e.*. irri*a%ion7 rural
ser+i#es27 en+ironmen%al pro%e#%ion 1e.*. pollu%ion redu#%ion7 es%a/lishin* and enfor#in* re*ula%ions27
infras%ru#%ure 1e.*. roads7 ur/an re*enera%ion7 ele#%ri#i%y27 lar*e indus%rial #ons%ru#%ion pro.e#%s7 and
*o+ernan#e 1e.*. an%i4#orrup%ion7 le*al ins%i%u%ions de+elopmen%2. The !); and !: pro+ide loans a%
preferen%ial ra%es %o mem/er #oun%ries7 as 5ell as *ran%s %o %he poores% #oun%ries. 0oans or *ran%s for
spe#ifi# pro.e#%s are of%en lin8ed %o 5ider poli#y #han*es in %he se#%or or %he #oun%ry=s e#onomy as a
5hole. For e3ample7 a loan %o impro+e #oas%al en+ironmen%al mana*emen% may /e lin8ed %o
de+elopmen% of ne5 en+ironmen%al ins%i%u%ions a% na%ional and lo#al le+els and %he implemen%a%ion of
ne5 re*ula%ions %o limi% pollu%ion7 or no%7 su#h as in %he World )an8 finan#ed #ons%ru#%ions of paper
mills alon* %he ;io ?ru*uay in 2&&6.
OrganiDation $or 4conomic .ooperation and Development ?O4.D8 - an in%erna%ional e#onomi#
or*aniGa%ion %ha% helps i%s '& mem/er #oun%ries a#hie+e sus%aina/le e#onomi# *ro5%h and
employmen%. The mission of %he Or*aniGa%ion for "#onomi# (o4opera%ion and e+elopmen% 1O"(2
is %o promo%e poli#ies %ha% 5ill impro+e %he e#onomi# and so#ial 5ell4/ein* of people around %he
5orld. The O"( pro+ides a forum in 5hi#h *o+ernmen%s #an 5or8 %o*e%her %o share e3perien#es
and see8 solu%ions %o #ommon pro/lems. They 5or8 5i%h *o+ernmen%s %o unders%and 5ha% dri+es
e#onomi#7 so#ial and en+ironmen%al #han*e. They measure produ#%i+i%y and *lo/al flo5s of %rade and
in+es%men%. They analyGe and #ompare da%a %o predi#% fu%ure %rends. They se% in%erna%ional s%andards
on a 5ide ran*e of %hin*s7 from a*ri#ul%ure and %a3 %o %he safe%y of #hemi#als. They also loo87 %oo7 a%
issues %ha% dire#%ly affe#% %he li+es of ordinary people7 li8e ho5 mu#h %hey pay in %a3es and so#ial
se#uri%y7 and ho5 mu#h leisure %ime %hey #an %a8e. ra5in* on fa#%s and real4life e3perien#e7 %hey
re#ommend poli#ies desi*ned %o ma8e %he li+es of ordinary people /e%%er.
.O0./%SIO0
Mul%ina%ional #orpora%ions are +ery /i*7 5i%h /ud*e%s %ha% e3#eed some na%ional G-s. Mul%ina%ional
#orpora%ions #an ha+e a po5erful influen#e in lo#al e#onomies7 and e+en %he 5orld e#onomy7 and play an
impor%an% role in in%erna%ional rela%ions and *lo/aliGa%ion. The presen#e of su#h po5erful players in %he
5orld e#onomy is reason for mu#h #on%ro+ersy.
To su##ess in doin* /usiness as Mul%ina%ional (orpora%ion7 %herefore7 %he poli%i#al7 le*al and %e#hnolo*i#al
en+ironmen% is %he ma.or fa#%or mus% /e #onsidered and #on#erned. Means7 in+es%ors should unders%and 5ell
a/ou% 112 %he /asi# poli%i#al sys%ems %ha% #hara#%eriGe re*ions and #oun%ries around %he 5orld su#h as (hina7
@:FT:7 :$":@7 "urope7 ;ussia7 (en%ral4"as%ern "urope and hos% #oun%ries in par%i#ularly7 122 %he
o+er+ie5 of %he le*al and re*ula%ory en+ironmen% in 5hi#h M@(s opera%e 5orld5ide and 1'2 %he 8ey
%e#hnolo*i#al de+elopmen% as 5ell as %heir impa#% on M@(s no5 and in %he fu%ure.
M@( in+es%men% ma8es /enefi%s for 0(s 10ess e+elopin* (oun%ry2 4 M@(s used %o /e #onsidered
e3ploi%a%i+e and de+elopin* #oun%ries used %o adop% poli#ies %o 8eep %hem ou% and na%ionaliGe %heir asse%sJ /y
%he 1EE&s7 ho5e+er7 de+elopin* #oun%ries 5ere #ompe%in* 5i%h ea#h o%her %o a%%ra#% M@(sJ e+en %hose
#oun%ries %ha% used %o #omple%ely 8eep M@(s ou% 1MoGam/i9ue7 :n*ola7 (hina7 Vie%nam7 (am/odia7 e%#.2J
To sum up7 %he ad+an%a*es of M@( in+es%men% are employmen%7 /alan#e of paymen%s7 %e#hnolo*y %ransfer
and %a3 re+enues. Wor8in* %o*e%her7 %here are some disad+an%a*es of M@( in+es%men% su#h as un#er%ain%y7
po5er and #on%rol /y %he M@( o+er %he hos%7 %ransfer pri#in*7 and %he en+ironmen%.
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