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64 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA Table 8.3 FDI inflow in Bangladesh during 2005: Distribution by Source (in million US$) Sources 2004 2005 2005 2005 FDI-2004 Rank 2004 Jan-Jun Jul-Dec FDI-2005 Share (%) Rank Canada 0.4 23 – 0.7 0.7 0.08 25 The People’s 0.4 24 1.4 0.2 1.6 0.19 22 Republic of China Denmark 18.8 9 6.4 11.8 18.2 2.15 13 Egypt 19.9 7 22.2 26.2 48.4 5.73 7 France 0.7 22 0.9 0.8 1.7 0.20 20 Germany 6.8 15 0.1 1.5 1.6 0.19 21 Hong Kong, China 13.9 11 27.2 25.9 53.1 6.28 6 India 6.8 16 0.8 1.9 2.7 0.32 18 Indonesia – 28 – 1.3 1.3 0.15 23 Japan 30 5 33.8 12.7 46.5 5.50 8 Luxembourg 3 19 – 0.4 0.4 0.05 27 Malaysia 38.9 4 24.9 8.2 33.1 3.92 9 Nepal – 29 0.1 – 0.1 0.01 30 Netherlands 8.8 13 8.4 7 15.4 1.82 14 Norway 59.6 3 24.6 28.9 53.5 6.33 5 Pakistan 3.8 17 18 7.5 25.5 3.02 12 Saudi Arabia – 30 0.5 0.4 0.9 0.11 24 Singapore 2.3 20 97.4 0.1 97.5 11.53 3 South Korea 18.4 10 18.1 11.7 29.8 3.53 11 Sri Lanka 3.5 18 2.1 2 4.1 0.49 17 Switzerland 7.1 14 1.6 0.7 2.3 0.27 19 Taipei,China 1.3 21 10.5 0.9 11.4 1.35 16 Thailand 0.1 27 0.1 0.1 0.2 0.02 29 UAE 12.9 12 2.2 53.2 55.4 6.55 4 UK 91.1 1 92.4 60.4 152.8 18.08 1 USA 61.8 2 58.1 83.7 141.8 16.78 2 Vanuatu 0.2 26 0.1 0.2 0.3 0.04 28 ADB 29.5 6 6.1 6.6 12.7 1.50 15 IFC 19.9 8 23.5 8.2 31.7 3.75 10 Others 0.4 25 0.3 0.3 0.6 0.07 26 Total 460.3 30 481.8 363.5 845.3 100.00 30 Source: Bangladesh Bank Enterprise Survey, 2006 FDIs in the total inflow has shown upward trend during the last decade, increasing from 1.55% (US$ 1.4 million) in 1995 to 1.60% (US$ 9.3 million) in 2000 and reaching 3.82% (US$ 32.3 million) in 2005. From South Asian countries, Pakistan had the largest share in FDI in Bangladesh in 2005 (3%) and ranked 12th biggest investor followed by Sri Lanka (17th) and India (18th) (Table 8.3). Indian investment to Bangladesh was only US$20.42 million as compared to world investment of US$10,656.05 million during 1996 to May 2004 cumulative. In 2003, the very meager inflow of US$1.39 million investment into Bangladesh ranks India 16th in terms of such inflows from different countries. New avenues of investment are being explored by India and Bangladesh in recent times. Indian investors are now Table 8.4 FDI inflow in Bangladesh from South Asian Sources (in million US$) FDI Source 1995 2000 2005 2006 India 0.3 (19) 8.4 (91) 2.7 (8) 1 (47) Pakistan 1.2 (81) 0.8 (9) 25.5 (79) 0.6 (28) Sri Lanka 0 0.1 (1) 4.1 (13) 0.5 (25) Nepal 0 0 0.1 (0.2) 0 Bhutan 0 0 0 0 Maldives 0 0 0 0 South Asia Total 1.4 9.3 32.3 2.1 Global Total 92.3 578.6 845.3 490.3 Share of South 1.55 1.6 3.82 0.43 Asia in Global Total of Bangladesh (%) Source: Bhattacharya, 2007, paper presented in ICRIER in March and Source. Compiled from enterprise survey conducted by Statistics Department, Bangladesh Bank.
I MPACT OF SAFTA ON INWARD AND OUTWARD FOREIGN DIRECT INVESTMENTS 65 more eager to invest in Bangladesh than before. TATA’s US$ 2 billion investment proposal is such an example. State-controlled Bangladesh Power Development Board will implement the project and the ADB has said it will provide a $110 million loan for the project. The government also formed an expert committee to explore the possibility of a power purchase. Within the total investment coming from the South Asia region to Bangladesh, Pakistan was the single largest source (79%) in 2005 (US$ 25.5 million), while Indian investment of US$ 1 million was the single largest source (47%) in 2006 (Table 8.4). Sri Lanka Examining the bilateral trend in FDI between the SAFTA member countries we find that India is an important source of FDI to Sri Lanka and ranks amongst the top five investors with 164 projects valued at Rs 32 billion as of 2006 according to the Board of Investment (BOI). Most of the FDI (over 60%) from India has been in the services sector. Comparatively small investments have been made by Bangladesh in the services sector. In fact, Sri Lanka has long been a priority destination for direct investment by Indian businesses within the SAARC region. Over 50% of Indian joint ventures and wholly owned subsidiaries in the region are located in Sri Lanka. Of the total equity invested by Indian companies in regional joint ventures, 54% are located in Sri Lanka. The number of approved projects which stood at 23 in 1991 with an estimated investment of SLRs 740 million was mainly confined to small and medium steel rolling mills, chemicals, rubber products and service sector projects. By the end of June 2000, however, the number of projects had leaped to 120 with an estimated investment of SLRs 12.5 billion. The principal sectors which have attracted Indian investment are steel, cement, rubber products, tourism, computer software, IT-training and other professional services. During the past three years, leading Indian companies such as Gujarat Ambuja, Asian Paints and Larsen and Toubro have committed substantial investments, while existing companies – CEAT and Taj Hotels, for example – have expanded their operations. Sri Lanka’s Board of Investment has given approval for India’s largest publicly-listed telecom firm, Bharti Airtel, to be the island’s fifth mobile phone operator with an investment of 150 million dollars in May 2007. Some illustrations have been given in Table 8.3. Even Sri Lankan firms are interested in investment in India. Brandix Lanka (Sri Lanka’s largest exporter with shipments exceeding US$ 320 million), and MAS Holdings (which together with its joint venture partners has a turnover of around US$ 700 million) are setting up textile and apparel industrial parks offering a one-stop-shop to potential investors. These parks will enjoy all the benefits of operating in one of India’s SEZs, which operate as duty-free enclaves treated as a foreign territory. Brandix foresees Sri Lanka as the hub for all front-end and product development activities, while exploiting the scale advantages offered by India. India India is one of the SAARC countries where overseas investment policy has been substantially liberalised in recent years. Indian companies can invest up to US$ 100 million (US$ 150 million SAARC countries, excluding Pakistan and Myanmar and up to Rs 7000 million by way of rupee investments in Nepal and Bhutan) in a year without approval of RBI or GoI provided the overseas investment is not real estate-oriented. Funding of such investments can be out of balances held in Exchange Earners Foreign Currency Account (EEFC) of the Indian Company or 100% of ADR/GDR proceeds or withdrawal of foreign exchange from an authorised dealers in India up to 200% of the not worth of the Indian company India’s investment in South Asian countries was US$ 164.53 million during the period 1996–2002, being no more than a little over 2% of its overseas world investment. Nepal was the most important destination of Indian investment followed by Sri Lanka. Since 2002 however Sri Lanka has overtaken Nepal as India’s largest investment destination in South Asia (Raihan 2006). By virtue of its proximity and the Trade Treaty with India, close economic linkages between India and Nepal have manifested themselves, inter-alia, through Indian investment and joint ventures in Nepal. Government of India has established a special ‘Nepal Window’ to facilitate approvals for Indian investment in Nepal and the limit for ‘fast track’ approval by Reserve Bank of India for investments in Nepal has been raised in July 2000 to Rs 350 crore (Indian currency). In 2000 there were over 265 approved Indian joint ventures in Nepal of which over 100 are operational, with a cumulative total Indian investment amounting between 36 and 40% of the total FDI in Nepal. In 2004 there were 114 operational Indian joint ventures in Nepal with authorised capital of NR 14.33 billion. Of these, 22
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QUANTIFICATION OF BENEFITS FROM ECO
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QUANTIFICATION OF BENEFITS FROM ECO
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Preface Our consultations with seni
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viii CONTENTS 7. Revenue and Welfar
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Executive Summary OBJECTIVE This st
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EXECUTIVE SUMMARY xiii Table 1 EAMA
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EXECUTIVE SUMMARY xv India A full S
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EXECUTIVE SUMMARY xvii indicates th
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EXECUTIVE SUMMARY xix ments on basi
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Part I BENEFITS FROM TRADE, INVESTM
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4 QUANTIFICATION OF BENEFITS FROM E
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10 QUANTIFICATION OF BENEFITS FROM
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15 Prospects for the Telecommunicat
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APPENDICES
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Appendix 8 Intra SAARC FDI Collabor
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Appendix 11 Table A11.1 On an Emplo
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Appendix 12 Original Commitments/In
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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