Potential Impact of LDC Graduation and the Role of Foreign Direct Investment (FDI) in Bangladesh

The United Nations Committee for Development Policy (CDP) recommended that Bangladesh’s graduation from the LDC will take place in 2026. The LDC graduation brings many benefits and opens up new opportunities to a graduated country. However, to realize benefits from LDC graduation can be challenging to a country as it comes with some costs, such as higher borrowing costs after graduation. Foreign direct investment (FDI) can play a crucial role in this context to support ongoing growth and economic development and to reap potential benefits from the LDC graduation. The purpose of this article is to understand the impact of LDC graduation on Bangladesh and the role of FDI in this context. For this purpose, this report analyzes historical FDI data for Bangladesh, identifies the factors that determine FDI flows as predicted by theories and empirical literature, critically analyzes Bangladesh’s performance against the FDI determinants, and provides few recommendations on how Bangladesh can make further progress to attract more FDI and to reap benefits from LDC graduation