Foreign investment trend in South Asia

South Asia is the least-integrated part in the universe. If on the political plane, there is considerable misgiving between neighboring states, particularly India and Pakistan, in the economic sphere, all states in South Asia adopted extremely interventionist trade governments in the early old ages of their growing.

If the state of affairs of intra-regional trade flows in South Asia is dissatisfactory, the image of intra-regional investing flows is far worse. The engagement of South Asiatic states in other signifiers of foreign direct investing ( FDI ) projects such as Bilateral Investment Treaties ( BITs ) and Double Tax Avoidance Treaties ( DTTs ) is negligible. Although South Asiatic states are involved in 109 BITs overall, there are merely four BITs in the part. Similarly, DTTs are in force chiefly among India, Pakistan, Bangladesh and Nepal. Bhutan and the Maldives are non members of any such pacts

FDI IN SOUTH ASIA

In line with the much higher degree of planetary investing flows in recent old ages ( except last twelvemonth when they fell dramatically following the planetary fiscal crisis ) , FDI to South Asia has besides been increasing over the old ages. Harmonizing to the United Nations Conference on Trade and Development ( UNCTAD ) , from an norm of US $ 2.5 billion per twelvemonth during 1990-2000, FDI to the part increased to an unbelievable US $ 51 billion in 2008 ( Table 1 ) .Surprisingly, despite the planetary meltdown, all states ( with the exclusion of Bhutan, Nepal and Pakistan, the latter two perchance because of political instability during the twelvemonth ) received more FDI in 2008 than in the old twelvemonth

Within these overall tendencies, single states performed extremely unevenly ( Table 2 ) . The drive force behind the reception of most FDI from developed-country beginnings is related to the industrial edification of the host state, handiness of inexpensive accomplishments, the size of the place market and of class, substructure. It is no surprise, hence, that India, which is the most advanced state in the part industrially, should pull most of the FDI influxs from the developed universe to the part. An UNCTAD study ranks India among the five-most attractive topographic points for FDI globally.

The beginnings of FDI are extremely diversified in most SAARC states. Though the dominant inclination is still for the FDI to arise in developed states, the portion of developing states is besides fairl important ( Table 3 ) . During 2006-2007, Organisation for Economic Co-operation and Development ( OECD ) states contributed merely 27 per centum of the entire FDI to India. However, this ignores the fact that the FDI which is routed through Mauritius and Singapore for revenue enhancement grounds and histories for 49 per centum of FDI influxs to India besides originates chiefly in developed states.

In Sri Lanka, a middle-income state, the major investors are from the United States ( US ) , the United Kingdom ( UK ) and Australia. The portion of the non- OECD investing in Pakistan, during 2006-2008 was 60.5 per centum, and it was 51.2 per centum in Bangladesh during 2005-2006. In Nepal, until 2005/06, of the 50 states that had their commercial presence in the state, 33 were developing states, accounting for 66 per centum of the FDI in the state. Very few FDI undertakings have been commissioned in Bhutan.

Determinants OF FDI

If merely geographical propinquity is considered an of import determiner of FDI flows into developing states, one should anticipate big intra-regional FDI flows in South Asia. Although intra-regional FDI flows in South Asia have increased in the post-2000 period, with a few exclusions, they remain instead little. Regional FDI flows into the three largest receivers of FDI, viz. India, Bangladesh and Pakistan, are negligible. However, Nepal, and since 2002, Sri Lanka, have been pulling significant FDI from India ( Table 4 ) .

hypertext transfer protocol: //www.sawtee.org/publications/issue_paper_FDI_South_Asia.pdf

FDI in Bangladesh

In the instance of Bangladesh, during the period 1995-2006, regional FDI accounted for an norm of 2.25 per centum of the entire FDI flows into the state. But, in the past two old ages, it increased to 2.82 per centum, chiefly owing to increased FDI from Pakistan. Investing from Sri Lanka has besides increased to some extent. In Nepal, until the terminal of 2006, there were a sum of 1,067 foreign undertakings. Of them, more than one third were from the part itself, with India accounting for the king of beasts ‘s portion.

Inflows of foreign direct investing

There was an influx of $ 666m foreign direct investing in 2007 which raised significantly in 2008 to $ 1086m. As of June 2009, influxs of foreign direct investing recorded to $ 358m.

Inflows of foreign direct investing during 2001-2009*

*As of June, 2009

Beginning: Bangladesh Economic Review-2010 ( Bangla version ) , Ministry of Finance

Private investing statistics

Year

Proposed local investing

Proposed foreign investing

Sum proposed investing

Growth %

Undertaking

US $ m

Undertaking

US $ m

Undertaking

US $ m

2005-2006

1,754

2,662.31

135

3,621.15

1,889

6,283.46

125 %

2006-2007

1,930

2,848.98

191

1,728.26

2,121

4,577.24

( -27 % )

2007-2008

1,615

2,833.76

143

787.39

1,758

3,621.15

( -21 % )

2008-2009

1,336

2,480.72

132

2,137.53

1,468

4,618.25

27 %

2009-2010*

876

1,831.44

92

617.68

968

2,449.12

* February, 2010

Beginning: Bangladesh Economic Review-2010 ( Bangla version ) , Ministry of Finance

Foreign and joint venture investing

In the twelvemonth 2009-10 ( February ) , there were 89 new foreign and joint venture investing undertakings registered to BOI which sum to $ 590m. The undertakings were invested to chiefly in the service, technology, vesture and agricultural sectors.

Sectorwise foreign and joint venture investing during 2009-2010*

* As of February, 2010

Beginning: Bangladesh Economic Review-2010 ( Bangla version ) , Ministry of Finance

Countrywise foreign and joint venture investing during 2009-2010*

State

No. of undertakings

Proposed investing ( US $ m )

Saudi Arabia

3

478,652.17

Australia

4

2,036.23

USA

5

2,990.33

Suomi

2

3,023.89

India

9

8,451.53

South Korea

12

33,768.91

Malaya

3

3,056.52

Nederlands

5

8,544.76

China

12

21,000.36

United Kingdom

5

3,507.76

Pakistan

2

990.91

Japan

8

2,624.85

Danmark

1

1,217.39

Sri Lanka

2

646.23

Canada

2

1,017.23

Taiwan

1

502.97

Singapore

4

1,929.62

Turkey

1

150.94

Greece

1

156.81

Italy

2

1,039.95

Hong Kong

5

14,805.94

Entire

89

590,114.91

As of February, 2010

Beginning: Bangladesh Economic Review-2010 ( Bangla version ) , Ministry of Finance

hypertext transfer protocol: //www.boi.gov.bd/about-bangladesh/investment-and-trade/foreign-direct-investment-in-bangladesh

Though new investing chances are emerging in South Asia and intra-regional FD flows are increasing, the gait of growing is really slow, particularly when compared to the potency that exists. Neither many-sided liberalisation nor regional integrating has succeeded in doing a important impact on intra-regional FDI flows. South Asia could larn from the experiences of other regional axiss such as the Association of Southeast Asiatic Nations and the European Union, and alternatively of restricting itself to understandings on goods trade, expand their range to cover investings as good.