Pakistan saw a 27.69 percent increase in FDI inflow, causing Bangladesh to lose its second position in South Asia
Bangladesh saw a record drop in foreign direct investment (FDI) in 2019, with FDI inflow falling by 55.8 percent to $1.6 billion.
This was unveiled in a United Nations Conference on Trade and Development (UNCTAD) annual report on the prospects of FDI named "World Investment Report 2020" published on June 16.
FDI inflow to developing Asian economies is projected to plunge by 30 percent to 45 percent in 2020 due to the pandemic, says the report.
Particularly in South Asia, FDI is expected to contract sharply this year. Mergers and acquisitions (M&A) declined by 56 percent in this region.
With the help of major M&A sales – more than $1.5 billion – Bangladesh received $3.6 billion in FDI in 2018. The effect faded the following year and caused a recorded drop in FDI.
Additionally, Pakistan saw a 27.69 percent increase in FDI inflow. As a result, Bangladesh lost its second position in South Asia to Pakistan.
The growth of Pakistan was driven by equity investments in the energy, financial, and textile industries, with major investors from China and the United Kingdom, according to the report.
FDI flow to South Asia increased by 10 percent, which was $57 billion in 2019. India, which has the largest share of FDI inflow in the region, saw a 20 percent increase. With a rapidly growing ICT sector, India successfully attracted many international investors, especially in e-commerce.
Besides Bangladesh, Afghanistan and Sri Lanka also saw a decline in FDI inflow.
According to the report, global FDI flows are forecast to decline by up to 40 percent this year from their 2019 value of $1.54 trillion – with a decrease of as much as five percent to 10 percent next year while recovery is not expected before 2022.
This would be for the first time that global FDI declines below the $1 trillion-mark since 2005, the report reads.
UNCTAD Secretary-General Mukhisa Kituyi said, "The outlook is highly uncertain. Prospects depend on the duration of the health crisis and on the effectiveness of policies mitigating the pandemic's economic effects."
The report highlights that the pandemic and its economic consequences will hit the 47 least developed countries (LDCs) hard.
FDI inflows to nine Asian LDCs dropped for the first time in eight years, by 27 percent, to $8.6 billion.