The Impact of Foreign Direct Investment on the Economic Growth of Bangladesh

Abstract

This study empirically investigated, first, the trend of the Foreign Direct Investment (FDI) inflow in Bangladesh and, second, the impact of the overall FDI inflow on the economic growth of the country, analyzing fiscal data from the years 1996/1997 to 2011/12. The study further examined the impact of three sub-sectors of FDI, namely agriculture, industry, and service, on Gross Domestic Product (GDP). FDI inflow in Bangladesh has evolved cyclically over the years. The Annual Development Program (ADP) of Bangladesh had a significant positive impact on GDP. Overall, although FDI inflow in Bangladesh was low, it had a significant positive impact on GDP. Sectorial analyses, however, revealed that, while FDI in both the agriculture and service sectors had statistically significant positive impacts on their corresponding GDP, FDI in the industry sector did not have a significant impact on the GDP growth in that sector