LONG TERM IMPACT OF FOREIGN DIRECT INVESTMENT (FDI) ON ECONOMIC GROWTH OF BANGLADESH

Abstract

In the context of developing countries such as Bangladesh, Foreign Direct Investment (FDI) is an essential factor in the acceleration of economic growth. Besides narrowing down the gap between national savings and net investment, it is facilitating the growth of various sectors such as manufacturing, infrastructure, trade, telecommunication and energy. This paper aims to analyze the status quo of FDI in Bangladesh along with its long term impact on GDP growth, associated problems as well as possible remedies. Empirical analysis of time series data from 1981 to 2011 indicates a long term positive relation between FDI and GDP growth rate in Bangladesh. The relation between FDI inflow in various sectors and the consequent contribution to GDP growth has been tested for as well, yielding expected results. Encouragement of FDI is vital for the long run growth of the Bangladesh economy.