In recent years, policymakers, especially in the developing countries, have come to

the conclusion that foreign direct investment (FDI) is needed to boost the growth in
their economy. It is claimed that FDI can create employment, in-crease technological
development in the host country and improve the economic condition of the country in
general.
Foreign Direct Investment (FDI) concept as advocated by the Breton
institutes is considered necessary for economic growth in developing
countries. The co nc ep t was tied t o overarching goal of poverty reduction
hence justification for poor countries to implement the policy.
Subsequently, the e n g i n e e r s of FDI insisted on creation of conductive
environment for investor including the r e m o v a l of nuisance taxes. In
spite of the fact that from contributions under review one can see
varying degrees of depth and understanding of the issue at hand; the
notion that FDIs create employment, impart skills, bring in technology,
expand tax collection base and bring in capital has been met with
divergent views from the contributors. This is partly due to individual
understanding of the subject concerned. That n o t w i t h s t a n d i n g ,
contributions have been generally constructive. In some cases, thought
provoking.
In the developing courtiers have been competing with generous policy
packages to attract inward flow of FDI as they believe FDI accelerates
economic growth in the host countries. And we do agree, because In most
developing countries, inadequate resource to finance long-term investment is a major
problem. This lack of investing funds is a big setback to economic growth and this is
making it increasingly difficult to achieve the millennium development goals (MDGs)
by 2015 as set by the United Nations. Foreign direct investment is seen as a major
source of getting the required funds for investments hence most African countries offer
incentives to encourage FDI In most African countries, inadequate resource to finance
long-term investment is a major problem. Foreign direct investment is seen as a major
source of getting the required funds for investments hence most African countries offer
incentives to encourage FDI.
FDI comprises of basically three components: equity capital, reinvested earnings and
intra-company loans. Equity capital is the foreign direct investor’s purchase of shares of
an enterprise in a country other than its own. Reinvested earnings equal the direct
investor’s share of earnings (in proportion to direct equity participation), not distributed
as dividends by affiliates, or earnings not remitted to the direct investor. Such retained
profits by affiliates are reinvested. Intra-company loans are intra-company debt
transactions, and refer to short or long-term borrowing and lending of funds between
direct investors (parent enterprise) and affiliated enterprise

As a developing country, Bangladesh needs FDI for its ongoing development process.
Since independence, Bangladesh is trying to be a suitable location for FDI. Special zones
have been set up and lucrative incentive packages have been provided to attract FDI.
However, the total inflow of FDI has been increasing over the years. The magnitude of
FDI played a minor role in the economy of Bangladesh until 1980, a crucial year of
policy change. The Government of Bangladesh (GOB) enacted the ‘Foreign Investment
Promotion and Protection Act, 1980’ in an attempt to attract FDI. Except five industries,
which are reserved for the public sector: defense equipment and machinery, nuclear
energy, forestry in the reserved forest area, security printing and minting, and railways,
FDI is allowed in every sector of the economy?

The essential administrative and infrastructural supports, the market potential also
determines the flow of FDI. For investors who come to Bangladesh with a goal to export
the products to a third market usually invest in manufacturing sector and are encouraged
by the facilities provided by export processing zones (EPZs). On the other hand, investors
who are encouraged by the potential size and growth of our domestic market are mainly
attracted by the market potentials in our health, energy and telecommunication sectors.
The FDI can undoubtedly play an important role in the economic development of
Bangladesh in terms of capital formation, output growth, technological progress, exports
and employment

As it stands, almost two-thirds of FDI comes in the service sector whereas less than a
third comes in the manufacturing sector. In order to encourage FDI without
compromising the competitiveness of the local industries, government is encouraging
export oriented FDI in EPZ while inviting FDI in non-EPZ sectors on Build Operate and
Transfer (BOT) basis (in few cases on Build Operate Own basis too).

FDI was an important source of developing country external finance for about 25 years
after World War II but they did not get benefit but in last two decades and especially
during the last ten years FDI has been at the heart of globalization, trade, development
trade. The effects of FDI become more become positive. Enhanced competition,
knowledge and technology spillovers, financial stability of income investor can bring
externalities that are more positive in the developing or host countries like African, South
Asia etc. Through the report, research, analyze we can find that actually FDI accelerates
economic growth in the host countries in general. Also most of the economists agree that
foreign direct investment inflows (FDI) lead to an increased rate of economic growth in
host countries by using their labors, technology etc. As FDI invest in host countries, for
this reason the local investors are more aware and they all time try to better than the FDI.
So grow more competitors. For that reason economic growth of host country are
increased and by booming economy, domestic producers in advanced economies are
strong enough not to be forced out of business by foreign competitors and they have
possibility to become a developed country from developing countries. We give an
example such as: De Mello (1999) found that whether FDI contributes to the economic
growth depends on primarily host country characteristics, especially the quantum of
skilled labour. FDI should not stop to invest in host countries. They should exert positive
effects on economic growth, particularly in developing countries which suffer from low
productivity and capital stock deficiencies.