China's outward foreign direct investment to Bangladesh: Perspectives of the host country stakeholders

• Published date: 01 September 2018
• DOI: http://doi.org/10.1002/jsc.2230
• Author: Mizan Rahman,Mohammad Shakil Wahed
• Date: 01 September 2018

RESEARCH ARTICLE

China's outward foreign direct investment to Bangladesh:

Perspectives of the host country stakeholders*

Mohammad Shakil Wahed

1

| Mizan Rahman

2

1

Henley Business School, University of

Reading, Henley-on-Thames, United Kingdom

2

Lincoln International Business School,

University of Lincoln, Lincoln, United Kingdom

Correspondence

Mizan Rahman, Lincoln International Business

School, Brayford Pool Campus, University of

Lincoln, Lincoln LN6 7TS, United Kingdom.

Email: mrahman@lincoln.ac.uk

Abstract

For Chinese FDIenterprises in Bangladesh, the business community has emerged as a “dangerous

stakeholder”group, while both the labor community and policymakers have emerged as “domi-

nant stakeholder”groups under the broad class of expectant stakeholders. In many countries,

there have beencritical reactions to the emergenceof Chinese multinationalsas foreign investors.

1|INTRODUCTION

Since the launch of opening up policies in 1978, China has success-

fully transformed itself into the “factory of the world.”In order to do

so, the country has mainly taken advantage of its abundantly available

low-cost labor force to achieve export-led growth. China is, at pre-

sent, the number one exporter of ready-made garment (RMG) items

followed by Bangladesh (Islam et al., 2013, p. 3). Low-end manufactur-

ing sectors including RMG and textile, leather, light engineering,

assembly of electronic items, etc. mainly depended on China's abun-

dant supply of cheap labor Ironically, the country, which had been a

target for foreign direct investment (FDI) inflow, until recently, will

probably experience significant FDI outflow, especially to developing

economies like Bangladesh, for the same reason: cheap labor (Islam,

2013). This type of shift in an economy has been known as the “Lewis

Turning Point,”named after Sir Arthur Lewis. The International Mone-

tary Fund (IMF) has suggested that due to rising labor costs and

changes in its demographic structure, China will probably reach the

Lewis Turning Point sometime between 2020 and 2025 (The Econo-

mist, 2013).

Bangladesh, as of today, is neither the exclusive nor the major

destination of Chinese outward FDI to neighboring countries. In fact,

Vietnam, Cambodia, Laos, and Myanmar are attracting much larger

FDI inflow from China. However, among the economies with lower

wages in the South, Southeast, and East Asian region, Bangladesh

could possibly have become a preferred destination for Chinese FDI

for a number of factors apart from just lower wages. For instance, the

country's strategic location (neighboring China and India), preferential

access to key markets, entrepreneurial private sector, untapped

domestic market, etc. could have made it a more attractive destination

(UNCTAD, 2014). Bangladesh also has one of the highest growth rates

for 2018 and this is set at 6.9% as per the verdict by The World in

2018. Climbing farm output and rural incomes will help growth further

though the country suffers from a budget deficit and some risk to

political stability. A lack of infrastructure, higher cost of doing busi-

ness, political instability, widespread corruption, etc. may have been a

few of the likely reasons for the relatively lower FDI attracted to

Bangladesh (UNCTAD, 2013a). Despite certain positive influences like

capital inflow, employment generation, technology spillovers, and so

forth, there have been growing concerns among a broad set of stake-

holders surrounding Chinese FDI especially in developing countries in

Africa, Latin America, and Asia. These concerns are primarily related

to the negative impact on local businesses, labor community, and

environment. Amidst the recent trend of growing Chinese FDI in

Bangladesh, it is worthwhile to enquire whether the key stakeholders

of the country also have any such concerns.

Initially, this article presents the research question. Afterwards,

a literature review has been presented covering—(a) empirical stud-

ies on FDI related issues, and (b) stakeholder theories in the field

of strategic management. An overview of Chinese outward FDI to

Bangladesh follows where available published data regarding Chi-

nese FDI in Bangladesh has been analyzed in order to portray the

current scenario. Then the methods of this research have been

elaborated. In the main section, the findings of this research have

been presented in three parts—(a) perspective of the business com-

munity, (b) perspective of the labor community, and (c) perspective

of the policymakers. Finally, some concluding remarks have

been made.

*JEL Classification codes: E44, F40, M10

DOI: 10.1002/jsc.2230

Strategic Change. 2018;27:455–467. wileyonlinelibrary.com/journal/jsc © 2018 John Wiley & Sons, Ltd. 455