FDI-driven sustainability transitions in emerging economies:a triple bottom line analysis of Bangladesh (2014–2024)

Résumé

This study examines the multidimensional impact of Foreign Direct Investment (FDI) on sustainable economic growth in Bangladesh during 2014–2024. Employing a mixed-methods approach integrating quantitative econometric analysis with qualitative stakeholder insights, the study evaluates FDI’s contribution across economic performance, environmental impact, and social development dimensions, guided by the Triple Bottom Line (TBL) analytical framework. The research analyses comprehensive macroeconomic data from the Bangladesh Bureau of Statistics, Bangladesh Bank, World Bank Development Indicators, UNCTAD World Investment Reports, and the International Monetary Fund, examining relationships between FDI inflows and key sustainability indicators including GDP growth rate, unemployment rate, CO₂ emissions per capita, and the United Nations Human Development Index (HDI).

The quantitative analysis reveals a statistically significant positive relationship between FDI and economic growth. Regression results indicate that every $1,000 million increase in FDI inflows corresponds to approximately 0.70 percentage points of additional GDP growth (R² = 0.76, p < 0.01). A critical methodological contribution of this study is its explicit treatment of the 2020 COVID-19 pandemic year as a structural break and exogenous outlier: including this observation alongside normal-year data risks distorting the estimated FDI-growth coefficient and artificially compressing the correlation between FDI and GDP. The robustness check excluding 2020 yields an FDI coefficient of 0.74 (p < 0.01) and an FDI–GDP correlation of 0.921, confirming the stability and reliability of the baseline estimates. The full-sample specification (including 2020) is reported alongside the restricted sample for complete transparency.

During the study period, Bangladesh experienced remarkable economic expansion. FDI inflows grew from $1,553 million in 2014 to a peak of $3,481 million in 2022, representing a Compound Annual Growth Rate of 10.6% over 2014–2022. GDP growth ranged from 5.8% to 8.2% in non-pandemic years and unemployment declined from 4.2% in 2014 to 4.0% in 2019, before pandemic disruption temporarily elevated it to 5.3% in 2020. CO₂ emissions increased from 0.40 metric tons per capita in 2014 to a peak of 0.58 tons in 2022, raising important environmental sustainability concerns. The HDI improved consistently from 0.562 in 2014 to 0.638 in 2024, reflecting positive social development outcomes even during periods of economic turbulence.

The COVID-19 pandemic of 2020 exposed deep structural vulnerabilities in Bangladesh’s FDI-dependent growth model. FDI declined to $2,562 million, GDP growth collapsed to 3.5%, and unemployment rose to 5.3% as export markets contracted and global investment flows froze. Post-pandemic recovery was strong in 2021–2022 but moderated in 2023–2024, suggesting that underlying structural challenges remain unresolved. Sectoral analysis demonstrates significant heterogeneity: while the manufacturing and energy sectors generate high employment and economic growth, they also carry the heaviest environmental burdens; the telecommunications sector demonstrates that FDI can simultaneously achieve high economic value, low environmental impact, and strong social outcomes.

Based on comprehensive Triple Bottom Line analysis, the study develops five interconnected evidence-based policy recommendations: quality-focused FDI attraction emphasizing sustainability criteria; environmental governance strengthening through enhanced EIA enforcement and green investment incentives; social inclusion and labor standard enhancement with particular attention to gender equity; institutional capacity building to close implementation gaps; and strategic economic diversification to reduce pandemic-type vulnerabilities. The findings contribute to sustainable development theory by providing empirical validation of the TBL framework in a South Asian emerging economy context, extending the pollution haven versus pollution halo debate, and offering a methodological model for small-sample time-series analysis in the presence of pandemic-induced structural breaks. The results carry significant policy implications for Bangladesh’s Vision 2041 development strategy and for comparable lower-middle-income economies navigating the FDI-sustainability nexus.