Foreign direct investment

FDI is both a source of capital and an index of a country's economic environment, as perceived by foreigners or nationals holding investable assets overseas. Of the countries in the sample, Bangladesh attracted the least amount of FDI as a percentage GDP in 1985 (0.008) and although the flow had risen in the early 1990s, it was still only a quarter of that of India-the next highest country on the list. Compared with Bangladesh's ratio of 0.04 in 1992, Sri Lanka had reached 1.2 and Malaysia 7.7 (table 7).

The picture looks a shade brighter when the focus shifts to aggregate net resource flows, which include development assistance and other grants. On average, Bangladesh has fared better than other highly populous countries during 1980-92. Its per capita flows of US $10.5 in 1985 and nearly US $15.0 in 1991 put it well ahead of China and India, and slightly higher than Pakistan. But, by 1992 both China and Pakistan had overtaken Bangladesh-Pakistan by a fairly wide margin following the surge in capital flows drawn by a widening of investment opportunities brought about by reform (table 8).