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KDI 경제교육·정보센터

ENG
  • 경제배움
  • Economic

    Information

    and Education

    Center

전망·동향
Do preferential trade agreements facilitate FDI? Insights and policy implications for Bangladesh
UNESCAP
2026.07.27
Bangladesh has liberalized its investment framework over the past few decades to attract foreign direct investment (FDI). However, its FDI inflows remain limited, averaging around 0.6 per cent of GDP. Among the various factors influencing firms’ investment decisions, this paper examines the potential role of preferential trade agreements (PTAs). While other regional developing countries, such as Viet Nam, with extensive PTA formation, have attracted investment from multinational enterprises, empirical findings generally do not suggest that PTAs alone are a cause of FDI inflows. Nevertheless, this paper argues that these PTAs, particularly their investment chapters and investment-relevant provisions, which are increasingly incorporated into PTAs, can serve as an enabling factor if properly designed, and represent an area where trade negotiators can contribute to enhancing the attractiveness of the country for foreign investors. The paper aims to support the work of trade negotiators by identifying three conditions that may be conducive to facilitating FDI: (1) prioritizing forming PTAs with major FDI source economies; (2) covering a broader range of policy disciplines across WTO-X and WTO-plus areas; and (3) including and committing to deeper provisions within the investment chapter. It further provides recommendations, including prioritizing negotiation partners, strengthening institutional collaboration within the Trade Negotiators Pool, enhancing capacity through development partners, and advancing complementary domestic investment climate reforms