Bangladesh receives 2nd highest FDI in its history in 2022: Unctad

Foreign direct investment (FDI) in Bangladesh rose by 20.2% to $3.48 billion in 2022, the second highest in the country's history, according to Unctad's World Investment Report 2023.

The country received the highest FDI of $3.61 billion in 2018, according to the World Investment Report 2023 prepared by the United Nations Conference on Trade and Development (Unctad) released recently (05 July).

As of 2022, the total FDI inward stock stood at $21.1 billion, said the report.

Unctad mentioned that a recent law "Bangladesh Patents Bill 2022" extended the duration of patent protection from 16 to 20 years, to promote FDI in 2022. This law could have had an influence on the increase in FDI inflows.

"Bangladesh Patents Bill 2022" was enacted to make a century-old patent law more time-befitting and to attract foreign investment as it protects intellectual property rights.

Also, Unctad hailed Bangladesh for taking sustainability measures. It said Bangladesh along with some other Asian countries China, Egypt, India and Malaysia introduced measures to require financial institutions and companies to report on sustainability, including carbon emissions as a Sustainability disclosure.

However, disclosure measures at the product level remained rare in 2022.

Meanwhile, outward FDI from Bangladesh declined by about 43% to $52.6 million in 2022. In 2017, the outflow of FDI was the highest – $142 million – since 1990.

After a strong rebound in 2021, global FDI fell by 12% in 2022 to $1.3 trillion, due mainly to overlapping global crises – the war in Ukraine, high food and energy prices, and soaring public debt, shows the report.

The decline was primarily felt in developed economies, where FDI fell by 37% to $378 billion. But flows to developing countries grew by 4% – albeit unevenly, with a few large emerging countries attracting most of the investment while flows to the least developed countries declined.

It highlights that developing countries need renewable energy investments of about $1.7 trillion each year but attracted only $544 billion in clean energy FDI in 2022.

On a positive note, greenfield investment project announcements were up 15% in 2022, growing in most regions and sectors. 

Sector- and product-specific measures

Unctad acknowledges the growing interest of Bangladesh in putting in place necessary requirements, standards and incentives to encourage the issuance of sustainability-dedicated products in key sectors. These requirements are crucial for sustainable development.

In 2022, different economies continued rolling out sector- or products-specific measures to support the growth of sustainable banking, insurance, investment and sustainable financial products such as sustainable bonds and green debt.

Developing economies, including Bangladesh, Brazil, China, Colombia, Egypt, South Africa, and Türkiye released most of these measures. This shows the growing interest of these countries in putting in place necessary requirements, standards and incentives to encourage the issuance of sustainability-dedicated products in key sectors that are crucial for sustainable development.

A number of developing economies, including Bangladesh, China, Egypt, India and Malaysia, also introduced measures to require financial institutions and companies to report on sustainability, including carbon emissions. However, disclosure measures at the product level remained rare in 2022. The EU and Singapore were among the few economies that implemented new regulations on sustainability disclosure for financial products such as sustainable investment funds.

The current architecture of sustainable finance policy and regulation is built around seven areas identified by UNCTAD: national strategy, national framework and guidelines, taxonomy, product standards, sustainability disclosure, sector-specific regulations and carbon pricing.

FDI in South Asia

South Asia as a region received more than $57.3 billion in FDI in 2022,

FDI flows to India rose by 10% to $49 billion, making it the third-largest host country for announced greenfield projects and the second-largest for international project finance deals. Bangladesh received the second highest FDI after India in South Asia.

The United States remained the largest recipient of FDI in 2022. The country attracted foreign investments of $285 billion, a 26.5% fall from 2021.

China and Singapore received $189 billion and $141 billion claiming the second and the third-highest amount of FDI.