Economic Affairs: Trade and Investment

 

2. Information for Dutch Companies

2.2 Bilateral economic relations between Bangladesh and the Netherlands
 

The Netherlands has a structural trade deficit with Bangladesh (see table 3). This trade pattern is common for Bangladesh with most of the European Union countries and the USA. On the other hand, Bangladesh has a huge trade deficit with India (both formal and informal).

 

Table 3 Bilateral trade NetherlandsBangladesh (2002 -2005) in mln Euro (source: CBS)

 

 

2002

2003

2004

2005

Import

243.5

250.3

272.7

234.7

Export

76.7

43.9

54.7

45.2

Balance

-166.8

-206.4

-217.5

-189.5

 

When looking at the composition of the bilateral trade figures, the Netherlands mainly imports various manufactured good from Bangladesh, while exporting mostly machinery, transportation and chemicals (see table 4).

 

Table 4 Compostion of Dutch import from and export to Bangladesh (source CBS)

Import

SITC code

Description

2002

2003

2004

2005

 

 

Total

243.5

250.3

272.2

234.7

 

Total agriculture

22.0

14.2

10.8

11.3

 

Total industry

221.5

236.1

261.4

223.4

0

Food and live animals

22.0

14.2

10.8

11.3

6

Manufactured goods

12.0

10.9

13.1

14.9

7

Machinery and transportation

7.3

5.2

4.8

3.0

8

Various manufactured goods (particularly RMG)

201.8

219.5

242.1

202.8

Export

SITC code

Description

2002

2003

2004

2005

 

 

Total

76.7

43.9

54.7

45.2

 

Total agriculture

11.9

5.1

7.0

6.0

 

Total industry

64.8

38.8

47.7

39.2

0

Food and live animals

11.7

5.0

6.7

5.9

5

Chemicals

15.6

14.1

5.7

10.6

6

Manufactured goods

10.0

4.9

4.9

7.9

7

Machinery and transportation

37.1

17.6

35.3

11.7

8

Various manufactured goods

1.7

1.7

1.5

8.5

 

 

 

 

 

 

Foreign Direct Investment (FDI) inflow to Bangladesh6

FDI inflow to Bangladesh in 2005 was USD 845.3 million registering 83.6% growth over the previous year. The top investor countries in 2005 were UK (USD 152.8 million), USA (USD 141.8 million), Singapore (USD 97.5 million), UAE (USD 55.4 million) and Norway (USD 543.5 million). The Netherlands FDI was USD 15.4 million, making the Netherlands the 14th biggest FDI source in Bangladesh (17th place in 2004). Recently a lot of large conglomerates have shown interest to invest in Bangladesh, for example Indias Tata which expressed to invest up to USD 3 billion in Bangladesh. For more details see table 5 and figure 1.

 

Table 5 - FDI inflow in Bangladesh during 2005: Distribution by Source (in million USD)

 

FDI Sources

2004

2005

2005 Share (%)

2005 Rank

FDI-2004

Rank 2004

Jan-Jun

Jul-Dec

FDI-2005

Canada

0.4

23

-

0.7

0.7

0.08%

25

China

0.4

24

1.4

0.2

1.6

0.19%

22

Denmark

18.8

9

6.4

11.8

18.2

2.15%

13

Egypt

19.9

7

22.2

26.2

48.4

5.73%

7

France

0.7

22

0.9

0.8

1.7

0.20%

20

Germany

6.8

15

0.1

1.5

1.6

0.19%

21

Hong Kong

13.9

11

27.2

25.9

53.1

6.28%

6

India

6.8

16

0.8

1.9

2.7

0.32%

18

Indonesia

-

28

-

1.3

1.3

0.15%

23

Japan

30.0

5

33.8

12.7

46.5

5.50%

8

Luxembourg

3.0

19

-

0.4

0.4

0.05%

27

Malaysia

38.9

4

24.9

8.2

33.1

3.92%

9

Nepal

-

29

0.1

-

0.1

0.01%

30

Netherlands

8.8

13

8.4

7.0

15.4

1.82%

14

Norway

59.6

3

24.6

28.9

53.5

6.33%

5

Pakistan

3.8

17

18.0

7.5

25.5

3.02%

12

Saudi Arabia

-

30

0.5

0.4

0.9

0.11%

24

Singapore

2.3

20

97.4

0.1

97.5

11.53%

3

South Korea

18.4

10

18.1

11.7

29.8

3.53%

11

Sri Lanka

3.5

18

2.1

2.0

4.1

0.49%

17

Switzerland

7.1

14

1.6

0.7

2.3

0.27%

19

Taiwan

1.3

21

10.5

0.9

11.4

1.35%

16

Thailand

0.1

27

0.1

0.1

0.2

0.02%

29

UAE

12.9

12

2.2

53.2

55.4

6.55%

4

UK

91.1

1

92.4

60.4

152.8

18.08%

1

USA

61.8

2

58.1

83.7

141.8

16.78%

2

Vanuatu

0.2

26

0.1

0.2

0.3

0.04%

28

ADB

29.5

6

6.1

6.6

12.7

1.50%

15

IFC

19.9

8

23.5

8.2

31.7

3.75%

10

Others

0.4

25

0.3

0.3

0.6

0.07%

26

Total

460.3

30

481.8

363.5

845.3

100.00%

30

 

Source: Bangladesh Bank Enterprise Survey, 2006

 

Figure 1 Distribution of FDI inflow by source

 

The sources of FDI in Bangladesh during 2004 are quite diversified involving 30 countries from amongst all region of the world. Exhibit 3 and Table 4 presents detail of FDI sources and their ranking.

 

bullet

Developed economies: Almost two-third (63.30%) of FDI in 2004 was originated from the developed economies, while the share of developing countries is 36.70%

  • Western Europe is the largest regional source (45.22%) of FDI in Bangladesh during 2004, which could be sub-divided into two - European Union (18.00%) and other Western Europe (27.22%).

  • North Americas investment amounts to 13.33% and other developed economies share is 4.75%.

 

bullet

Developing economies: The developing region consists of Asia (33.61%) - the second largest source - that includes South, East and South East Asia (31.47%) and West Asia (2.14%). Africa also contributes 3.02% of FDI in 2004.

 

Distribution of FDI Inflow by Sources

bullet

Source versus sectors: In general, investments from the developing countries are manufacturingoriented. On the other hand, developed countries' investments are mostly service-oriented.

 

In 2005 the main sectors that received FDI were Telecom (33%), Manufacturing (26%), Energy (Power, Gas & Petroleum) 24.6%. The sectors are the same as in 2004 with slight variation in the shares. For more details see table 6.

 

Table 6 FDI inflow in Bangladesh during 2005: Distribution by Sector (in million USD)

 

FDI Sectors

2004

2005

2005 Share (%)

Jan-Jun

Jul-Dec

FDI-2004

Jan-Jun

Jul-Dec

FDI-2005

a. Agriculture & Fishing.

1.3

0.4

1.7

1.6

0.7

2.3

0.3%

b. Power, Gas & Petroleum

38.7

85.3

124.0

113.1

95.2

208.3

24.6%

      b.1. Power

13.4

16.9

30.3

12.7

14.5

27.2

3.2%

      b.2. Gas & Petroleum

25.3

68.4

93.7

100.4

80.7

181.1

21.4%

c. Manufacturing

41.7

97.7

139.4

137.9

81.5

219.4

26.0%

      c.1. Food Products

5.6

3.7

9.3

-

-

-

0.0%

      c.2. Textile & Wearing

14.7

23.0

37.7

52.0

44.5

96.5

11.4%

c.3. Chemicals & Pharma

1.2

2.9

4.1

2.8

1.1

3.9

0.5%

      c.4. Metal & Machinery Prods.

0.7

-

0.7

-

0.1

0.1

0.0%

      c.5. Vehicle & Transport

            Eqp.

-

-

-

0.7

0.9

1.6

0.2%

      c.6. Fertilizer

11.9

4.4

16.3

46.7

14.5

61.2

7.2%

      c.7. Cement

2.2

57.1

59.3

29.6

15.7

45.3

5.4%

      c.8. Leather & Leather

            Prods.

-

0.4

0.4

0.7

-

0.7

0.1%

      c.9. Other Manufacturing

5.4

6.2

11.6

5.4

4.7

10.1

1.2%

d. Trade & Commerce

24.7

41.9

66.6

59.9

70.6

130.5

15.4%

e. Transport, Storage & Comm.

30.9

96.6

127.5

167.4

114.5

281.9

33.3%

      e.1. Telecommunication

30.9

96.6

127.5

165.3

113.5

278.8

33.0%

      e.2. Others (TSC)

-

-

-

2.1

1.0

3.1

0.4%

f. Services

1.1

-

1.1

2.0

1.0

3.0

0.4%

g. Others

-

-

-

-

-

-

0.0%

Total

138.4

321.9

460.3

481.9

363.5

845.4

100%

Source: Bangladesh Bank Enterprise Survey, 2006


6Source: BOI