Prime Minister Sheikh Hasina’s Visit to India: A Renewed Call to Indian Businesses for Investment in Bangladesh

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Prime Minister Sheikh Hasina, who is on a two-day state visit to India, has invited Indian businesses to invest in Bangladesh. She made this call during a meeting with CEOs of the Confederation of Indian Industry (CII) at her New Delhi residence on Friday, June 21. Salman Fazlur Rahman, the Prime Minister’s adviser on private industry and investment affairs, informed reporters that the Prime Minister welcomes investments from Indian businesses in Bangladesh. The prime minister consistently emphasizes the importance of prioritizing neighboring countries for trade, business, and investment. He highlighted that Bangladesh is developing 100 special economic zones, where PM Hasina encouraged the CEOs to take advantage of the available facilities and invest.

Bangladesh’s economy is rapidly growing, with over 7% GDP growth in the past decade and steady positive growth for 30 years. The country offers political stability, low inflation, low energy costs, and a business-friendly environment. The 1980 Foreign Private Investment Act protects investments against expropriation, ensuring fair treatment and profit repatriation. The government is reforming policies to create a competitive investment climate. Bangladesh’s competitive position in the global value chain is strengthened by over 30 bilateral and free tariff agreements with the EU and other developed countries, several Treaties with Investment Provisions (TIPs), and 20 intergovernmental and multilateral agreements. The global economic and legislative environment is favorable for business in Bangladesh. The government provides various incentives, including tax exemptions and policy reforms, to create a positive business environment and attract more foreign investment.

The following table illustrates a progressive trend in Foreign Direct Investment (FDI) inflows from India into Bangladesh over the years, demonstrating a growing economic partnership between the two countries. Starting with modest investments in the late 1990s, the inflows show consistent growth, especially notable from the mid-2000s onwards. The last decade marks significant peaks in investment, reflecting robust economic ties and increasing confidence in Bangladesh’s business environment. In 2023, Bangladesh received 133.24 million USD in Foreign Direct Investment (FDI) from India, constituting 4.4% of Bangladesh’s total FDI inflows. This positive trajectory underscores India’s sustained interest in Bangladesh’s market opportunities and economic potential, contributing to bilateral economic development and cooperation.

Year FDI Inflows from India (in million USD)
1996 1.01
1997 1.70
1998 1.66
1999 No Data
2000 8.50
2001 2.08
2002 4.30
2003 3.63
2004 6.80
2005 2.67
2006 6.09
2007 1.67
2008 11.29
2009 7.99
2010 43.19
2011 25.74
2012 28.43
2013 45.01
2014 70.59
2015 102.70
2016 79.20
2017 114.65
2018 121.46
2019 115.99
2020 134.59
2021 101.14
2022 126.22
2023 133.24

Source: FIED Management Cell, Statistics Department, Bangladesh Bank

However, during the meeting, the CEOs expressed a strong interest in investing and doing business in Bangladesh. Salman Fazlur Rahman mentioned that those already engaged in business with Bangladesh are eager to expand their operations within the country. The CEOs from the Confederation of Indian Industry (CII) conveyed to Prime Minister Sheikh Hasina their desire to collaborate with the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) across various sectors. The Indian business leaders stressed the importance of developing joint ventures, particularly in the agriculture, IT, and logistics sectors. They shared their successes in India, especially in the IT sector, and expressed a keen interest in replicating these achievements in Bangladesh to enhance bilateral business relations. The aim is to leverage their experience and expertise to contribute to Bangladesh’s economic growth, particularly in high-potential sectors.

The discussion included an overview of the successes Indian businesses have achieved, particularly in the technology sector. The Indian CEOs believe that by applying their successful models from India, they can help foster similar growth and innovation in Bangladesh. This approach is anticipated to not only boost business but also facilitate the transfer of technology and knowledge, which would be beneficial for Bangladesh’s economy. Bangladeshi business representatives also participated actively in the discussion, highlighting various business opportunities available in the country. They underscored the favorable conditions for investment and business operations in Bangladesh, aiming to attract more interest from Indian investors. The Bangladeshi businesspeople presented a compelling case for why Bangladesh is a lucrative destination for investment, citing the country’s steady economic growth, strategic location, and supportive government policies.

The meeting showcased a mutual eagerness to enhance economic cooperation. Both sides recognized the potential benefits of stronger economic ties and expressed a commitment to overcoming obstacles that might impede business growth. The discussions highlighted the significance of government support in creating a conducive environment for business, including the need for regulatory reforms and the reduction of trade barriers.

The potential for collaboration in agriculture was particularly noted, given its importance to both countries. Indian CEOs expressed interest in sharing advanced agricultural technologies and practices with Bangladesh to improve productivity and sustainability. This collaboration could help Bangladesh modernize its agricultural sector, leading to increased efficiency and better yields, which would benefit both countries economically. In January 2023, Indian High Commissioner Pranay Kumar Verma announced plans to facilitate Indian companies, including Mahindra and other agricultural machinery manufacturers, to establish factories in Bangladesh for local manufacturing and assembly of agricultural machinery. This initiative aimed to bolster investment in Bangladesh’s agricultural sector. HC Verma also expressed interest in formalizing cooperation through a memorandum of understanding (MoU) between agricultural research institutes of both countries.

In the IT sector, the Indian business leaders discussed the possibilities of creating IT hubs and innovation centers in Bangladesh. By leveraging India’s advanced IT infrastructure and expertise, they aim to establish a strong IT industry in Bangladesh. This would not only create jobs but also position Bangladesh as a competitive player in the global IT market. The Indian CEOs believe that such initiatives could lead to significant economic benefits and strengthen the technological capabilities of Bangladesh. According to recent projections from Gartner, spending in the Indian information technology (IT) sector is expected to reach $138.9 billion in 2024, up from $122.6 billion last year, representing a growth rate of 13.2 percent. This growth is anticipated across all major segments, including software, devices, IT services, and data center systems. Among these segments, software spending in India is projected to see the highest growth rate at 18.6 percent in 2024, followed by devices, which are expected to grow by 13.8 percent.

Logistics was another sector highlighted for potential collaboration. Efficient logistics are crucial for trade and business operations, and Indian companies offered their expertise in developing robust logistics networks. Improved logistics infrastructure would enhance Bangladesh’s trade capabilities, reduce costs, and improve the overall efficiency of business operations. This sector is seen as a vital area for joint efforts to streamline processes and enhance connectivity between the two countries. In January 2021, Ecom Express, an Indian logistics startup, made its initial investment outside India by investing USD 11 million in Paperfly, a Dhaka-based full-stack logistics startup. Ecom Express, supported by Warburg Pincus and CDC Group, operates extensively across 29 states in India and is among the country’s largest logistics firms. This marked the first instance of an Indian logistics startup investing in a Bangladeshi counterpart. Following this, Ecom Express continued its investment in Paperfly with an additional USD 12 million in 2022. Delhivery, another Indian logistics startup, entered the Bangladesh market earlier in 2022, highlighting contrasting strategies between the two Indian companies as they expand into Bangladesh.

The discussions also touched on the development of special economic zones (SEZs) in Bangladesh. Prime Minister Sheikh Hasina mentioned that Bangladesh is in the process of developing 100 SEZs, which offer numerous incentives and facilities for investors. These zones are designed to attract foreign investment, provide employment opportunities, and boost industrial growth. The Indian CEOs expressed interest in exploring these SEZs as potential sites for their investments, recognizing the advantages these zones offer.

The CEOs noted the importance of creating a supportive regulatory framework to facilitate business operations. They stressed the need for policies that promote ease of doing business, protect investments, and ensure a stable economic environment. Such a framework would encourage more Indian companies to invest in Bangladesh, fostering a stronger economic partnership between the two countries.

The meeting between Prime Minister Sheikh Hasina and the CEOs from the Confederation of Indian Industry was marked by a shared enthusiasm for strengthening economic ties between Bangladesh and India. Both sides acknowledged the vast potential for collaboration across various sectors, including agriculture, IT, and logistics. The Indian CEOs highlighted their successes and proposed ways to replicate these in Bangladesh, aiming to boost business and economic growth. There was a mutual commitment to addressing the issues and fostering a conducive environment for business. The discussions underscored the importance of government support and regulatory reforms in enhancing economic cooperation, with the ultimate goal of achieving shared prosperity for both nations.

– Syed Raiyan Amir is a Senior Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA).

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