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Chapter 6

Edition
International Business, 6th
International Investment in Bangladesh

Griffin & Pustay

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Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
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Types of International Investments

 Does the investor seek an active management role

in the firm or merely a return from a passive
investment?
Foreign Direct Investment
Portfolio Investment

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FDI policy of Bangladesh—a review

 Bangladesh received $3.61 billion FDI last year (World Investment Report 2019). According to
the report FDI in Bangladesh went up by 67.94% in 2018 compared $2.15 billion in 2017.
Bangladesh has reached the country’s highest-ever level in its history. While China became the
leading investor with $1.03 billion in Bangladesh. On the other side, the traditionally top
investor United States dropped to fourth with $174 million in investment report of FDI. The
Netherlands invested the second-largest amount of $692 million, and the United Kingdom was
the third-highest at $371 million. Clearly, investor confidence in Bangladesh has improved.

 For attracting the FDI, Bangladesh have to develop infrastructure. Currently licenses are given
to 11 private Special Economic Zones(SEZs). The government is also establishing public SEZs.

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Top investors in FDI report

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Foreign Direct Investment(South Asia scenario)

 FDI inflows in South Asia grew by 4% in 2018 to $54 billion. FDI to India, which
accounted for 70 to 80% of inflows in sub-region, increased by 6 % to $42 billion.

 Inflows in Sri Lanka also reached a record level of $1.6 billion, pushed by robust Asian
investments, including those from China, India and Singapore.

 Pakistan, the fourth largest recipient of FDI in the sub-region, registered a 27%
decrease in investment to $2.4 billion. Nepal FDI received $1.6 billion and the Maldives
received $0.55 billion. Bhutan’s FDI inflow declined by 160% year-on-year to record at
$0.5 billion last year.

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International Investment Theories

 Ownership Advantages
 Internalization
 Dunning’s Eclectic Theory

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Ownership Advantages

 A firm owning a valuable asset that creates a

competitive advantage domestically can use that
advantage to penetrate foreign markets through FDI.

Copyright © 2002 by Harcourt, Inc. All rights reserved.

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Internalization Theory

 Why FDI and not other methods?

 FDI is more likely to occur when transaction costs with
a second firm are high.
 Transaction costs are costs associated with
negotiating, monitoring, and enforcing a contract.

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Dunning’s Eclectic Theory

 Three conditions for FDI:

Ownership advantage
Location advantage
Internalization advantage

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Factors Affecting the FDI Decision

 Supply factor:
Production cost
Logistics
Resource availability
Access to technology

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Factors Affecting the FDI Decision

 Demand factors:
Customer access
Marketing advantage
Exploitation of competitive advantage
Customer mobility

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Factors Affecting the FDI Decision

 Political factor:
Avoidance of trade barriers
Economic development incentives

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Factors Affecting the FDI Decision

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