Investments, both domestic and foreign, nosedived in 2020 with little hope of recovery before the second half of 2021 amid the COVID-19-induced global economic slowdown and the fear of a second wave of the pandemic.

A persisting stagnation in domestic and foreign direct investment caused by long-standing constraints worsened in 2020 due to the COVID-19 shutdown in the first half of the year and the slow pace of recovery in the second half for low demand and restrictions on physical movement across the world.

The performance of all private investment-related indicators, including net FDI inflow, registration of new investment proposals, private sector credit growth and capital machinery import, has so far remained negative as businesses refrained from making fresh investments and taking business expansion decisions.

Investors and experts predict that the situation may start improving by April if the consequence of the second wave of COVID-19 doesn’t become deadly and vaccination is effective.

If everything remains under control, the global economy will regain its momentum, restrictions on international movement will end and the demand for products will rise normalising the investment situation, they hoped.

They, however, feared that it might take another few months, until June, to have a desirable investment pace in in the country depending on the overall progress of the coronavirus control measures, including vaccination.

The net FDI in the country declined by 33 per cent or $696 million to $1.44 billion in January–November of 2020 from $2.14 billion in the same period of 2019, according to Bangladesh Bank data.

Bangladesh Investment Development Authority data shows that the amount of proposed local and foreign investments declined by a staggering 72.16 per cent to Tk 13,952 crore in July–September of the current 2020–21 fiscal year compared with Tk 50,117 crore in the same period of the FY2019–20.

The number of FDI proposals plummeted by 92.61 per cent and that of local investment proposals by 61.28 per cent in the period.

The private sector credit growth came down to 8.21 per cent in November from 8.4 per cent the previous month due to lower a demand for bank loans for investments and business expansion, according to the latest central bank data.

Capital machinery import, the major indicator of private investment, declined by 41.68 per cent in the July–October period of the FY21 compared with that of the same period of the FY20.

Foreign Investors’ Chamber of Commerce and Industry president Rupali Haque Chowdhury last week told New Age that the investment situation recovery would depend on internal and external factors like reopening of western markets, availability and effectiveness of COVID-19 vaccine and success in containing the infections in coming months.

Investment may see an up to 70–80 per cent recovery after March and then the situation would gradually become normal if the second pandemic wave does not become deadly, she said.

Public spending and expected GDP growth will also prop up private investment to some extent, she added.

Planning ministry data, however, shows a dismal situation in public expenditure as the implementation of the annual development programme stood at a five-year low at 17.93 per cent in July–November of the current FY21.

A restoration of consumer confidence is also important for the domestic market, Rupali said, emphasising proper fiscal and policy support to small and medium enterprises.

The FDI to GDP ratio is 1.1 per cent in Bangladesh, much lower than in its competitor countries, including Vietnam where the ratio is over 6 per cent, mainly due to long-standing problems over ease of doing business.

Bangladesh will have to expedite reform processes to draw a portion of the FDI amount to be relocated from China, and funds from other countries to its economic zones, she added.

Policy Research Institute executive director Ahsan H Mansur said that the current investment situation was not unexpected at all as investors were still waiting for a favourable environment for taking decisions about business expansion and fresh investments.