Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.9, No.9, 2018 25 Foreign Direct Investment in Bangladesh: Prospects and Challenges Roksana Akhter* Lecturer Department of Economics, Mawlana Bhashani Science and Technology University, Santosh, Tangail-1902, Bangladesh Sabiha Binta Hasan Lecturer Department of Economics, Mawlana Bhashani Science and Technology University, Santosh, Tangail-1902, Bangladesh Abstract Foreign Direct Investment (FDI) plays a vital role in developing country all over the world. It is an part of the industrial development, economic transition, business liberalization and macro economic growth story in Bangladesh over the last decade.FDI plays a dominant role in the economy of Bangladesh through accelerating Gross Domestic Product (GDP), export and domestic investment. So it is vital for a developing country like Bangladesh to carry out effective measures in protecting the prospective foreign investors so that they can get a congenial atmosphere to invest their capital.The present scenario of FDI in Bangladesh is not still satisfactory enough, because of some recognizing barriers but Bangladesh has some competitive advantages also i.e., that are abundant natural resources, human recourses, cheap labor forces, sectors for prospective investment are textile, frozen foods, leather, agro-based industries and information technology, a stable political atmosphere, monetary and fiscal policy, improvement of infrastructure and long term strategic planning to stimulate FDI might be able to make the condition favorable to attract foreign investment in Bangladesh. This paper recommends some guidelines that can be used to foreign investment in Bangladesh. This paper also investigates the state of the business environment in Bangladesh, identifies determinants affecting the FDI and the benefit that the country may derive from it. Keywords: FDI, GDP, prospects, and problem of FDI. Introduction Foreign direct investment (FDI) is one of the vital ingredients and a potent weapon for overall development process of a developing country like Bangladesh. Industrial development is an important pre-requisite for economic growth of a developing country. FDI inflows help to increase the surplus of capital account, improving balance of payment and macroeconomic stability of the economy. The poor countries usually have low rates of capital accumulation and thus, FDI is regarded as a vital supplementary source of capital to support domestic investment, to achieve economic growth.FDI provides the poor countries better access to modern technology, easier technology transfer, improving managerial and labor skills, etc the phenomenon, usually referred to as spillover effect of FDI , which contribute to the increase labor productivity of domestic enterprises and ultimately to economic growth. In Bangladesh, FDI plays a significant role in GDP acceleration and economic growth (Mottaleb 2007). So, Government of Bangladesh is trying to create a favorable investment environment through introducing economic policies, incentives for investors, and so on. Various positive attributes of Bangladesh is now drawing the attention of the investors from both developed and developing countries. In Bangladesh, it is available to get skilled labor and relatively stable macroeconomic environment. These two important factors can make Bangladesh an alluring destination for foreign investors. Lowest wage among the Asian countries, tolerable inflation rate, investment friendly, customs regulations and attractive incentive packages make Bangladesh is a favorable investment destination. According to A.R.Chowdhury (2012), Foreign Direct Investment (FDI) has been an important part of the economic transition, business liberalization and macro-economic growth story in Bangladesh over the decade. According to the 2012 World Investment Report (WIR) of the UNCTAD, the garment sector attracted the highest amount of FDI following by the banking, energy and telecommunication sectors, respectively. So for this reason, FDI is very much helpful for Bangladesh economy. Objectives of the study: The Objectives of this paper are: 1. To evaluate the FDI status in Bangladesh. 2. To find out the prospects and problems of FDI in Bangladesh. brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by International Institute for Science, Technology and Education (IISTE): E-Journals