a firm invests directly in foreign facilities which Involves ownership of entity abroad for production, Marketing/service, R&D and Access of raw

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4 a firm invests directly in foreign facilities which Involves ownership of entity abroad for production, Marketing/service, R&D and Access of raw materials or other resources. Foreign direct investment (FDI) is a direct investment into production or business in a country by an individual or company of another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds. firm that engages in FDI becomes a multinational enterprise (MNE).

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7 Licensing and tech transfer have been essential in promoting collaboration between the academic and business communities. Ever since legal hurdles were removed that allowed universities to hold title to research and development done in their labs, licensing agreements have helped turned raw technology into finished products that are viable in competitive marketplaces. With some help from a variety of government agencies in the form of grants for R&D as well as other financial assistance for such things as incubator programs Licensing agreements allow companies to take full advantage of new and exciting technologies while limiting their overall risk to royalty payments until a particular technology is fully developed and thus ready to put new products into the manufacturing pipeline.

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9 The current issue of the Bangladesh Economic Update focuses on the magnitude, dynamics, sectoral distribution, and country-wise sources of FDI inflow in the country. The flow of foreign direct investment is of utmost importance in the current backdrop of overall slump in investment in the economy in recent days. If FDI falls, it will reduce investment, which in turn will shrink employment generation. These may lead to decline in consumption level and savings will face a downward trend. There would be, as a result, a contagious pressure on the GDP growth of Bangladesh. Foreign Direct Investment (FDI) is considered as one of the crucial ingredients for fostering economic development of a developing country.

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13 A German multinational engineering and electronics conglomerate company headquartered in Munich and Berlin. It is Europe's largest engineering company and maker of medical diagnostics equipment and its medical health-care division, which generates about 12 percent of the company's total sales, is its second-most profitable unit behind the industrial automation division. Siemens' principal activities are in the fields of industry, energy, transportation and healthcare. It is organized into four main divisions: Industry, Energy, Healthcare, and Infrastructure & Cities. Siemens and its subsidiaries employ around 360,000 people across nearly 190 countries.

14 Siemens has been active in Bangladesh since 1956, primarily in the fields of energy and healthcare. Siemens Healthcare Sector has supplied over half the medical diagnostics equipment used in the country s hospitals and clinical laboratories. Siemens offers a wide range of solutions and services in Bangladesh, where its Energy, Healthcare, Industry and Infrastructure & Cities Sectors occupy leading positions. In fiscal 2013, Siemens Bangladesh scored major successes in Technology Transfer in all four Sectors:

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19 Eclectic paradigm of FDI (John Dunning) Combines ownership specific, location specific, and internalization specific advantages Explains FDI decision over a decision to enter through licensing or exports

20 Ownership advantage: creates a monopolistic advantage to be used in markets abroad Unique ownership advantage protected through ownership e.g., Brand, technology, economies of scale, management know-how Location advantage: the FDI destination market must offer factors (land, capital, know-how, cost/quality of labor, economies of scale) that are advantageous for the firm to locate its investment there Internalization advantage: transaction costs of an arms-length relationship --licensing, exports-- higher than managing the activity within the MNC s boundaries

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22 Profit Generation (i.e taxes) Proper use of national resources Employment Technology Transfer/ spillover Upgrading Living Standard Overall Development of a country

23 For a green field investment of a foreign company. Initial Investment ( including..land, factory, building, infrastructure development ) (+) Import machineries (-) Import raw materials (-) in bangladesh 10% increase of FDI imports increases 1.3% Hire employees (-) Exports /sales the products (+!) in bangladesh 10% increase of FDI imports increases 1.6% Exports profits!!!! ( ) What will be the balance on BOP in long future?? Capital inflow flooded by capital outflow So some policy needed!!

24 Adverse effects on the BOP -Capital inflow followed by capital outflow + profits -Production input importation Threat to national sovereignty and autonomy Loss of economic independence Threat to local firms Increase of inflation

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